[kictanet] IT DON’T MEAN A THING IF IT AIN’T GOT THAT FRING – VOIP NIGHTMARE FOR MOBILE OPERATORS

[alice]

TOP STORY FROM BALANCING ACT: IT DON’T MEAN A THING IF IT AIN’T GOT THAT 
FRING – VOIP NIGHTMARE FOR MOBILE OPERATORS
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An early adopting reader alerted us last week to the existence of Fring. 
Is it a bird? Is it a plane? No, it’s free Skype-style client 
specifically designed for mobile phones. This South African reader had 
been making use of it to phone friends and business contacts. If the 
Fring thing catches on – particularly in those African countries with 
reasonable broadband capacity – then it looks set to put a hole in the 
revenues of the mobile operators. It does both voice and SMS for the 
cost of the data use from the mobile provider that is much cheaper than 
current voice rates. Russell Southwood looks at the coming VoIP 
challenge for Africa’s new incumbents.

Fring (http://www.fring.com] is an Israeli start-up that has developed a 
software that enables your mobile phone to call your friends at no cost 
using your UMTS or GPRS or WiFi data connection. The software can also 
use your Skype account to make calls to your Skype contacts or call 
landline or other mobile phones using SkypeOut. You can also chat using 
either MSN Messenger or Google Talk. The software is only available for 
Nokia phones at present but will doubtless migrate to other handsets 
before too long.

The existence of mobile VoIP clients like Fring pose a significant 
challenge to mobile operators. It is already possible to use an IP 
client like Skype to make mobile calls over existing data-enabled 
networks. Depending on the data capacity enabled, quality will vary from 
the not very good to the perfectly adequate. African mobile operators 
are vulnerable on network quality issues in many countries (particularly 
on international calling) and therefore VoIP-enabled mobile calling will 
be attractive.

As mobile operators now carry most voice traffic and often operate with 
low levels of competition, it is not unfair to describe them as having 
all the characteristics of the new incumbents. And faced with the VoIP 
threat, a number of operators have reverted to the incumbent’s chosen 
behaviour: try to close down anything new that threatens revenue. MTN 
has already announced in South Africa that it has banned Skype and that 
anyone it catches using it will be charged at its voice rates. This 
position has neither logic nor past experience behind it.

European operators like T-Mobile announced publicly that it was banning 
Skype on its network but in late 2006 it said it was reversing the ban 
and would reach an agreement with Skype. The latter has already 
announced deals with Hutchinson in several markets and said it was 
making available a Pocket PC client that would enable wider user of its 
services.

An example of the Hutchinson deals is 3G mobile operator 3 in the UK. 
Its pitch gives a clear idea of the shift in thinking required to offer 
a mobile VoIP service:”Why should you pay per minute, per message, per 
click, per megabit? In the real world, you buy your PC, pay for 
broadband and that’s it. Our principle is simple – X-Series customers 
will only pay a flat access fee on top of their basic subscription and 
then what’s free to use on the internet should be free to use on mobile 
broadband (subject to fair usage and international roaming conditions, 
of course)”.

The other challenge will be Wi-Fi-enabled handsets. By October 2006 10% 
of hot-spot operator The Cloud’s traffic by kbps was coming from voice. 
It has achieved this by securing alliances with both traditional players 
and news entrants including: Net2Phone, Vonage and Skype. Its Ultra 
Wi-Fi offer allows unlimited use in the UK for US$23.36 a month and it 
has 7,500 hot-spots across Europe. But as it grows it is also doing 
business with existing mobile operators. In 2006 it signed an agreement 
to partner with Vodafone’s German operator D2 to provide WLANs.

So what will African mobile operators do as they come to terms with a 
mobile VoIP future? At present, they have yet to commit but most do not 
yet appear to have come to grips with the implications of this challenge.
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