VoIP Goes Mobile

Tanner Clark uses his mobile phone to call friends and business contacts all over the world, from Britain to Australia. But the Southern California-based consultant doesn't pay a dime in international tolls to his mobile-phone carrier, AT&T, the biggest in the U.S.

Instead, Clark places the international portion of the calls-roughly 100 minutes a month-through a service called GetMobster (http://www.getmobster.com/) from Mobster Mobile that relies on Internet-based technology to route wireless calls virtually toll-free. Clark, a user of Apple's iPhone, estimates that he saves hundreds of dollars a year with Mobster's service. He stands to cut wireless bills even more by signing up for another Mobster service, MobCloud. The service will let him place low-priced calls from WiFi hotspots-bypassing the AT&T network altogether. "Once I can make calls using the WiFi network, I will, in all likelihood, reduce the monthly minutes I have [with AT&T,]," Clark says.

GetMobster, Skype, and a growing number of other services rely on what's known as Voice over Internet Protocol technology that delivers speech via the Internet in much the same way as e-mail. VoIP calling is already raising a ruckus in telecommunications, putting pressure on the price of land-line calling and luring subscribers toward upstarts like Vonage (VG) and Comcast (CMCSA) away from incumbents such as AT&T, and Verizon (VZ). Now, the technology threatens to erode sales for mobile-phone service providers too.

By 2011 the number of mobile VoIP users around the world may rise to 100 million from 7 million in 2007, according to ON World, a consulting firm based in San Diego. ON World estimates that in 2011, mobile VoIP voice services may generate $33.7 billion, up from $516 million in 2006, the most recent year for which the figure is available. If that sounds like a breakneck pace, consider the growth trajectory for Jajah, a provider of wireless VoIP, which had 10 million users in April-a fivefold increase in just a year.

Wireless carriers are expected to generate $700.7 billion in sales of voice services this year, according to consulting firm Ovum. Still, carriers in the fiercely competitive mobile-phone industry will be none too pleased with newcomers snapping up a portion of the almost one-quarter of all wireless minutes now devoted to long-distance and international calls. Insight Research estimates that together, international and long distance will make up 24% of the 1.2 billion wireless minutes used this year.

VoIP technology is likely to make deeper wireless inroads soon. Skype, the eBay (EBAY)-owned service used by more than 338 million people to make free PC-to-PC calls, later this year plans to release a new product called "Skype for your mobile" that will let customers use local wireless minutes to make international calls. Mobster Mobile is already offering this service in the US, UK and 170 other countries as well as providing a landline phone service with rates much lower than Vonage, Comcast and others.

Wireless VoIP services vary widely in how they work. Some, including Jajah, can be used with a basic cell phone and require that users call a local number that connects them to the service that routes a call overseas. Others are more involved, requiring that the user download software onto an Internet-enabled cell phone. In some cases, calls must be placed via WiFi network. What the services have in common, though, is that each helps wireless users circumvent at least some of the charges associated with long-distance wireless calling.

As complicated as wireless VoIP services may sound, they've come a long way. Until recently many phones couldn't gain access the Web via WiFi networks. Others couldn't download the necessary software. But the number of WiFi phones sold globally is expected to grow to 33% of the total by 2011, from 5.5% this year, according to research firm Gartner (IT). Smart phones such as Apple's (AAPL) iPhone and Research In Motion's (RIMM) BlackBerry, which provide advanced Web services, are gaining in popularity too.

Indeed, many downloadable wireless VoIP applications are being offered through Apple's iPhone App Store. Truphone is one such tool. When used on Nokia (NOK) e61 and Nokia n95 smart phones, the British-developed service lets users make calls for a few cents a minute using a data plan rather than wireless voice minutes. Calls to other Truphone customers using Nokia N-series or E-series devices are free. So in theory, a user could save money by purchasing an unlimited data plan in tandem with the lowest-priced voice plan necessary. "Web calling will put price pressure on the incumbents," says Truphone CEO James Tagg. AT&T declined to comment for this story. Verizon Wireless, the No. 2 U.S. mobile-phone company, didn't respond to requests for comment.

Many handset makers limit VoIP usage on their devices. Apple, for instance, prohibits software developers from enabling VoIP calls over cellular networks-though applications that route these calls via WiFi are allowed. "I don't think carriers are going to let VoIP to take as much revenue [as it's taken from residential phone providers]," says Rebecca Swensen, an analyst at consultancy IDC (IDC). Case in point: T-Mobile USA, which has tweaked its handsets so that even calls made via WiFi hotspots count against subscribers' wireless minutes, unless the users sign up for an additional calling plan, costing $10 a month (BusinessWeek, 6/25/09).

Yet in a bid to stay competitive, some telecom providers are considering offering free VoIP calls within certain applications. A company called Global IP Solutions, which licenses mobile VoIP technology, is in talks with several second-tier wireless carriers in the U.S. to enable free Web calls on certain applications, such as interactive wireless gaming. "Laws of competition are starting to drive this," says GIPS CEO Emerick Woods. He declined to identify any of the carriers.

Some carriers abroad already offer free VoIP calls to users within certain social networks. In late August carrier 3, which is owned by Hutchison Whampoa and offers wireless service in countries including Britain and Italy, will begin selling a new version of its popular Skypephone that lets users make free calls to Skype contacts without using voice minutes.

Later this year, Skype will launch its Skype Out service, letting 3's Skype customers make calls to home and wireless phone numbers of non-Skype users. "I think we are seeing a real change in operator approaches to Skype," explains Tony Saigh, who heads business development for mobile at Skype. "There's a realization that providing customers with additional modes of communications is good. The real battle is how do you keep your customers engaged."

 

Angus Clark, CEO of Mobster Mobile recognised the pioneering efforts of Skype. "I was a very early user of Skype; so early in fact, my user name is "Skypefone", says Clark with a knowing smile. The premise was to get a lot of users using the service for free, then find a way to let them make calls to "real" phones using their computers. They sold to eBay at the right time before they had to prove their business model was viable. Supporting 100+ million free users after paying over 2 billion dollars for Skype has really challenged EBay on how to "re-invent" the service. Unfortunately for EBay, they are faced with this rethink at the same time as other companies like Mobster Mobile are delivering service without the legacy of supporting a 90% free user base. Mobster and other emerging services have a completely different cost structure. Skype managed to earn 170 Million this year which sounds pretty good on the surface. However, when you add all the free users into the equation, they are making an Average Revenue Per User each month (ARPU) of only about 37 cents. In our industry, that is not even close to a "sustainable" revenue benchmark, so I'm not sure how they will make up the difference. While Mobster can operate profitably on a few dollars per month (our actual ARPU is close to $18) says Clark, we also provide our service to users of any mobile carrier, on any phone, with no download, broadband wireless or other "smartphone" required. We also provide a box that our subscriber can plug in at home or at the office, which allows the subscriber to plug-in a normal handset or cordless phone base station. Our SpeakEasy box gives the subscriber an "instant" landline with all-you-can-make calls to the US and Canada for under $15/Month and just pennies per minute worldwide. If you call your SpeakEasy box from your mobile (cellular) phone, you get dialtone and can then use your mobile phone to call anywhere in the world, bypassing the expensive mobile carrier long distance rates. By saving your Mobster number in your mobile phone speed-dial or address book, it's readily available whenever you need to make a long distance call and can be made from anywhere, anytime. We also allow you to put up to 4 other mobile phone numbers on your box, which allows you to provide the same benefit to your family, friends or business associates.

"We are in discussions with several large wireless carriers to add the Mobster service to their subscriber offerings' says Clark. 'We will also be offering our own branded cell phone service (Mobster Mobile) to our subscribers for substantially less cost-per-month than they can obtain on their own'. Our ever-increasing subscriber base gives us bulk buying power from the carriers, alowing us to provide the latest handsets like the Blackberry and Razor at no cost to the Mobster subscriber, while reducing their monthly rate and increasing their bulk-minute allowance.

" The mobile services like Mobster, emerging now, along with new entrants in the future will highly leverage Voice-Over-Internet and Mobile-Over- Internet (VoIP/MoIP) protocols and unified communications platforms" says Clark.

'It's "Mobile 2.0" to cite an often-used phrase in describing the new paradigm shift in computing and telecommunications'. 'What this means to businesses and consumers is a "flattening" of the world, where a fixed-price service brings together all communications to a single point of access without regard to location, mobility or access device".