Toujours Voice
By David James, Wed Feb 25 10:00:00 GMT 2004

Mobile data services are getting all the attention these days, but operators, providers and developers should not overlook the opportunities in value-added voice services.

The French have a favorite saying: Plus ça change, plus c'est la même chose - The more things change, the more they stay the same. So the French would be among the first to recognize that voice services, fixed-line and mobile, will remain a basic source of telecom revenue for years to come.

Strength in Numbers

The global voice market is huge, and mobile voice is grabbing a larger and larger share of the market, especially in developing countries. In 2003 the market for fixed and mobile voice services combined was about $858 billion, and it is expected to grow to about $979 billion by 2007. However, growth is anemic in developed markets such as Western Europe and North America, where it is forecast to grow only around two percent per year over the period 2002-2007, with fixed voice revenues actually declining around one half of one percent per annum. In developing markets such as parts of Asia, Africa and Latin America, total voice revenues are forecast to grow at a rate of 8.7 percent per year during the period, with the fixed voice share growing at about 3 percent.

These voice numbers don't take the breath away, but they would be much higher were it not for competition from other communications media: email, SMS, instant messaging, Voice over IP, leased circuits and other telecom-related services. SMS alone generated global revenues of $36 billion in 2002.

Swapping Service

For the mobile community, the important factors in these statistics are the continuing strong growth of mobile voice revenues and the unrelenting substitution of mobile phones for fixed-line phones. In developed markets, mobile voice revenues are forecast to grow 4.5 percent per annum over the 2002-2007 period and to account for 49 percent of total voice revenues by 2007. In undeveloped markets, they are forecast to grow at a strong 16 percent rate and to account for 53 percent of total voice revenues by 2007.

The substitution effect - mobile phone connections replacing fixed-line connections - is occurring in developing countries largely because wireless networks can be built out rapidly and efficiently to supplement or replace inadequate fixed networks. In developed countries, it is occurring because more and more telecom customers are demanding mobile services. In all markets, substitution is also occurring because mobile operators, providers and developers have been more creative than their fixed counterparts in delivering value-added services that customers find they need and enjoy. The limitations on substitution are cost (mobile services and equipment tend to cost more than fixed) and the reluctance of customers to relinquish their fixed lines.

Vocal Values

Given the significant growth of mobile voice, providers need to give special attention to developing value-added voice services. The technologies to do so are already available and the revenue potential is evident.

Computer Telephone Integration (CTI) is a core technology for deploying various voice-related and content-based value-added services. CTI enables providers to integrate computer-based content with voice traffic, allowing them to charge additional service fees. In addition, many CTI solutions are often linked with data services, such as WAP portals and SMS, thereby increasing data revenues.

One of the most successful CTI services to date is SK Telecom's "ColorRing," which enables subscribers to select a music piece (a pop song, a film music theme, or an entertainer's voice), or create a short message, that a caller will hear instead of a ring signal until the subscriber picks up. SKT introduced the service in March 2002, and within 15 months the service had produced revenues of $100 million and was used by 35 percent of SKT's subscribers. Other examples of content-based voice services are MusicPhone (songs are sent to a phone and the person called is asked to leave a message, which the caller later retrieves), location-based voice-services (e.g., information about merchants identified by location), voice portals using voice recognition menus, and voice chat rooms.

Another successful value-added service involving CTI technologies is telephone conference calling that can be set up and launched from desktop computers and mobile devices. Conference calls no longer require time-consuming and expensive connections using a telco's conference call operator. They can be arranged by the user in minutes and can connect to mobile phones as easily as fixed-line phones. An example is the conference call service of BestNet Communications.

Like CTI, Push-to-Talk is a value-added mobile voice service is that has been around for a long time. Nextel Communications introduced the service several years ago and in 2003 rolled it out as a national U.S. service (they call it "Direct Connect"). It is a walkie-talkie-type service, enabling two callers to connect immediately without dialing and waiting for a connection. Only one person can speak at a time, and most operators once believed that users would spend less time on such calls, lowering voice revenues. However, Nextel's service has resulted in a broadened customer base, lower churn rates and higher revenues. As a result of Nextel's success, similar services are now offered by about twenty operators worldwide, including operators in Europe, the Middle East and Africa, and other operators are rushing to introduce the service, including Sprint and Verizon Wireless in the U.S.

Fixing Fixed

If the mobile industry takes full advantage of the value-added opportunities in voice markets, mobile telecommunications will continue to take away business from fixed-line, and mobile data services will benefit in the process. However, don't expect fixed-line operators to cede these opportunities to mobile carriers, as they too can provide value-added services that will compete for customers' attention and money. Indeed, a number of the CTI solutions mentioned here can also be implemented for fixed voice. But the mobile success of these solutions serve as reminders to mobile operators, providers and developers that voice services continue to be a vital source of mobile revenues, often complementary to data services and spurring the relentless substitution of mobile communications for fixed-line communications.

Vive la voice!