VoLTE (voice over LTE) should see about 20 commercial deployments this year, according to the GSMA, and the slow trickle could become a flood from 2015. However, the platform faces daunting challenges, not least the need to get it right first time, in a world where Skype and Google Voice lurk, and to deploy IMS (in many cases a hammer to crack a nut), not to mention the collapse of voice revenues in general. But at its heart is the last hope for mobile carriers’ voice-based business ‘ to integrate this into a broader, richer communications service that can be firmly differentiated from the web services and can form the basis of a developer ecosystem.
The challenges in its way are daunting however, for three main reasons ‘ the technology itself; the power of the competition; and the decline of voice and messaging revenues overall.
The technology relies on having sufficient LTE coverage to minimize awkward fallback to 2G/3G; and on deploying an IMS (IP Multimedia Subsystem) core, such a significant undertaking that most mobile carriers are still holding off large-scale roll-outs. The need for 4G voice, and simplified routes to IMS, including hosted services, will spur adoption this year but there are other technical barriers too. VoLTE puts considerable strain on elements like Diameter signalling and roaming. Voice quality of service must be significantly higher than that of over-the-top services to encourage user uptake, but this entails investment in RAN functions to prioritize VoLTE packets over other classes of IP data and to schedule variable VoLTE packet sizes. One reason for operator delays in deploying the technology is to avoid delivering a service which is just ‘me-too’, or worse, is an inferior experience to that of 3G voice or Skype.
In addition, all this effort is being made in a market that is delivering a declining share of revenues ‘ the ROI is so questionable that some greenfield LTE operators will remain data-only. But that is not so easy for existing MNOs, which still earn 50% of more of their revenues from voice in many markets. As of the end of 2013, seven countries, including Japan and the US, had seen mobile data revenues eclipse those from voice (in Japan, voice delivers only 30%). The main reasons have been changing user habit ‘ communicating via messaging or social media rather than phone calls ‘ and the competition from Skype and others.
Even these over-the-top providers have not found a convincing business model for IP voice per se. Companies like Skype, like messaging giants such as WhatsApp, rely on making their core service ubiquitous and then building higher value revenue streams around that presence ‘ whether premium add-ons for consumers, or advertising-driven options. The MNOs also need to adjust to a world where voice is a loss leader for a wider platform, and this shift will often coincide with the introduction of VoLTE.
In other words, the cost and risk of deploying IMS-based VoLTE can hardly be justified by just hanging on to some of a cellco’s dwindling voice and text revenues ‘ important as these still are. Some carriers, regarding voice as purely a defensive business now, will indeed decide to hang onto 2G/3G voice (based on circuit-switched fallback technology) for as long as possible, even keeping legacy networks alive for this purpose, and then throw in the towel and form alliances with Skype.
But many believe VoLTE can deliver sufficient differentiation in terms of quality and rich services to underpin a new generation of added value messaging and unified communication services, which would appeal to business users in particular and promise a far better experience than either OTT voice and messaging, or even traditional mobile voice. As such, the technology has to exist as part of a wider communications offering, whether the carrier’s own creation, or based on the GSMA platform, RCS (Rich Communication Services), now rebranded Joyn.
VoLTE and its IMS foundation do provide some important advantages in building a richer and broader communications platform than the over-the-top firms. IMS provides a common framework for voice and messaging, which brings the benefits of a standard, interoperable approach. This will enable rapid development of a device ecosystem once there is a critical mass of carriers with VoLTE deployments, and relatively simple extension of current roaming agreements to include 4G voice.
Just as important, IMS provides many of the building blocks to create a differentiated service platform, via integration with rich media services such as presence and video sharing, which can drive new ways of communicating. The combination of high speed, low latency LTE; an HD voice technology optimized to take advantage of that network (unlike most over-the-top applications); and integration with many multimedia services, does promise to improve call quality and spur new services as well as a third party added value applications.
A growing ecosystem of surrounding technologies to help enable this richer view of VoLTE has encouraged some cellcos, and there should be several high profile launches this year, and a flood in 2015 (see Figure 1). The GSM Association expects about 20 commercial VoLTE deployments this year.
But for all the benefits of VoLTE/IMS, in many situations mobile operators may find themselves launching too little, too late. Not only is the growth of the over-the-top services formidable (WhatsApp reached the half-billion user mark in April and a huge 72% of those log in daily), but they are also acquiring rich media credentials through new standards, notably WebRTC. RCS has seen limited uptake, despite years of effort by the GSMA, partly because it requires interoperability between carriers ‘ which has only been achieved in Spain and Korea so far ‘ and partly because its functionality does not provide noticeable superiority over existing services. Some operators have taken the route of launching their own over-the-top rich communications apps, like Orange’s Libon.
A study of European mobile operators by Maravedis-Rethink’s quarterly RAN Research service, found that there will be steady uptake of VoLTE, as 4G networks expand, and of HD voice (on 3G or 4G, but with LTE the major enabler). By 2018 82% of European cellcos will have VoLTE deployed in at least some regions, and 90% HD Voice. However, there will be parallel interest in experimenting with over-the-top applications, especially to extend the carrier brand into new user groups, such as the youth market, or countries where the MNO does not have its own network. By 2018, 45% of European cellcos will have over-the-top voice and messaging offerings, often alongside VoLTE. By contrast, while these carriers will be building rich media services around VoLTE to help justify the investment and increase revenues, these will increasingly rely on third party developers and inhouse R&D, not on RCS, which will decline in importance after 2016.
For most, success will lie not in trying to cling onto the traditional consumer voice market, but in opening up APIs to encourage a developer ecosystem, which can create new types of services based around VoLTE. These would be likely to target enterprises and verticals rather than taking on WhatsApp head-to-head, and that would be aided by the development of multi-personality handsets, with separate business and personal modes. The former could harness the security and QoS of VoLTE, while the latter was focused on Facebook.
In this way, operators also need to start behaving more like their over-the-top challengers, innovating in digital and network neutral applications and tapping into a broader base of programming talent. Only that radical change of mindset will help them retain a place in the voice market ‘ no longer a dominant place, but at least offering a distinctive service for key user groups, in order to generate new revenue streams based on voice for the first time in a decade.