In recent years, there’s been a debate about whether or not incumbent operators’ voice revenue is in terminal decline. With the emergence of innovative VoIP companies that compete head-on with operators, many argue that their golden days are over.
On the contrary, revenue from voice is still, and will continue to be, prosperous for operators. Here are three reasons why:
The lack of net-neutrality legislation favors operators. Earlier this month, the Dutch Parliament said in a statement that they intend to become the first nation in Europe to officially legislate in favor of net-neutrality principles. In essence, the law will, among other things, force ISPs (Internet Service Providers) and operators to treat all types of services, including VoIP, equally. This is of course a monumental win for consumers, but also for all Mobile VoIP and IP-messaging targeting users in Holland. However, for ubiquitous net-neutrality to truly become a reality, other countries must adopt similar laws and practices.
Until this becomes a reality, operators are at liberty to block applications from their networks or charge subscribers an additional cost for using third-party VoIP and messaging services to offset the loss of revenue from voice and SMS. Some already resort to the aforementioned measures and others are likely to follow.
Operators sell their services in bundles. A majority of operators, if not all, sell their subscription plans as bundles of different services. This means if you want to have X amount of text messages, you’re likely to get it with X amount of voice minutes, and vice versa. This is unlikely to change in the near future, as operators are facing increasing competition and bundling as a sales strategy is a powerful way to enhance revenue.
Feature-phones are not dead (yet). According to The Yankee Group, the number of active Smartphones worldwide grew by about 40% in the last year: from 429 million to 598 million to be exact. By 2014, the same figure is expected to rise to almost 1.4 billion units. Additionally, Nielsen reported, as recently as March, that with the current adoption rate, Smartphones are set to overtake feature-phones in the U.S. by the end of this year.
Evidently, this is an enormous opportunity for companies such as Viber, Skype and Rebtel to target with disruptive mobile apps. The market is certainly large enough for these players to collectively put a dent in the voice revenue streams of operators. However, it is important to look at device prevalence on a global scale to get the full picture. The fact remains that feature-phones still outnumber their smarter sibling by roughly 4:1.
Operators can, at least for now, breathe a sigh of relief. The need for conventional voice services will without a doubt still be in great demand for some time to come. Although, it’s likely to significantly plummet in the western markets where subscribers are increasingly transitioning to IP-based communication methods.