3 Reasons Why Calling Over 3G and Wi-Fi Won't Kill Operators' Voice Revenues

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 (Voice over Internet Protocol) companies that compete head-on with operators, many argue that their golden days are over.

The contrary

On the contrary, revenue from voice is all in all, and will continue to be, prosperous for operators. Here are three reasons why:

The lack of net-neutrality legislation favors operators. Previously 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. Essentially, the law will, among other things, force ISPs and operators to treat all types of services, including VoIP, evenly. This is clearly a monumental win for consumers, however also for all Mobile VoIP and IP-messaging targeting users in Holland. Nevertheless, for ubiquitous net-neutrality to in point of fact 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, otherwise 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 nearly 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. 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 nearly 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 possibility for companies just as Viber, Skype and Rebtel to target with disruptive mobile apps. The market is truly large enough for these players to collectively put a dent in the voice revenue streams of operators. Nevertheless, it is important to look at device prevalence on a global scale to get the full picture. Despite everything feature-phones all in all outnumber their smarter sibling by in broad outline 4:1.

Operators can, for the time being for now, breathe a sigh of relief. The need for conventional voice services will without a doubt however be in great demand for some time to come. Even though, it’s likely to significantly plummet in the western markets where subscribers are increasingly transitioning to IP-based communication methods.

The CEO of Rebtel

Andreas Bernström is the CEO of Rebtel, the world's second largest mobile VoIP company. Prior to Rebtel, the Goldman Sachs alum was COO of...