WiFi / VoIP Wars: Part II

My latest post about the WiFi calls revolution was published in Israel's leading business magazine, TheMarker (Hebrew), and was also syndicated later to Haaretz, one of the leading daily papers here.

This obviously generated a lot of comments from readers on the various sites, and also some from my personal colleagues. So I am going to address a few of those here, but in any case it can clearly be seen that this subject interests a lot of people from across the value chain (including the end consumers...) . Here are the 3 major comments/questions:

1. VoIP subscription - Some noted that calls are not entirely free, since if you want to reach an actual landline/mobile you have to pay to the VoIP provider (Same as with SkypeOut). While that's true for now, think about what happens when most people have a WiFi-enabled phone: We will all be available at least some of the time with our VoIP presence, so everyone can call their friends inside the VoIP network without needing the operators' network (or the PSTN). In that "world" the balance between pure VoIP calls, mixed VoIP/mobile and pure mobile depends on the areas WiFi covers.

2. Quality of service - Some people who use Fring/Truphone said that the current quality of service can be low and they experienced all of the problems new voice services have: poor voice quality, hangups etc. So most still prefer to use regular mobile calls, even if they are more expensive. It's good to get this feedback, however they also agreed that in the long term probably these problems will go away, in the same way we saw Skype improving.

3. WiMAX - Some people asked why I didn't address WiMAX. First off, it should be clear that WiMAX is also a major threat (or opportunity...) to the operators, and in fact it's an extension to the same threat WiFi poses. Anyway, I preferred to focus on WiFi since devices are already in consumers' hands with the relevant software deployed and the infrastructure is here and now. Though several WiMAX networks are already deployed, the full power of WiMAX is still ahead of us (But closer than we think).

That's all for now, I am sure we will hear a lot about this subject. After publishing the post, I also saw that there's quite a "war" in the UK over this issue. Things are about to get interesting...

P.S. - Thanks goes to Guy Grimland who was bugging me for a while to submit an article to TheMarker... Guy is TheMarker's hitech reporter who also covers the Israeli gaming industry and gives it the attention it needs.

Viva la WiFi calls revolution!

Now that WiFi enabled phones are starting to get into the market, it can be easily foreseen that WiFi calls will become a reality for mainstream users in the next 3-30 years. Why this wide range? Well, 3 years if it was dependant purely on technology advancement, 30 years if it's up to the operators...

Yes, though they try to be cool about it, operators are very much afraid of WiFi calls, and it's very easy to understand why: When you have a WiFi enabled phone, whenever you are around a WiFi hotspot you have internet access which means that you can technically make voice calls over the internet the same way you make them with Skype on your PC.

If your phone is Windows mobile based, you can actually run Skype Mobile, simple as that. If it's not, third parties such as Fring and Truphone offer their own solutions. Without getting into details about the solutions and their differences, they enable VoIP calls over WiFi and also over 3G. (BTW - VoIP over 3G is cost effective only if you have a flat/cheap data plan, if you're not roaming and of course provided that your operator doesn't block it...). In addition phones are starting to come with built-in VoIP software.

Now WiFi is not everywhere, and also not always free, but even if you are in the airport, suddenly the outrageous $10/hour rate can make sense when it comes as an alternative to mobile calls while roaming.

Over the past years, operators have been fighting to provide their subscribers a walled garden Internet instead of an open environment in order to route all mobile content through their channels and cut their usual 50% cut. This has been going on despite of legislation and despite of protests of strong content providers such as Google.

How much of their revenues do operators make from data services you ask? Well, it's 7%-20% (Including SMS, browsing and mobile content). Voice accounts for more than 80%, and even 90% of operators revenues. Think how far they would be willing to go in order to protect that.

And this exactly why Vodafone and Orange asked Nokia to disable VoIP on the N95 in such a way that not even possible to use Truphone, and you can see Truphone's video demo comparing an unlocked phone vs. a locked one. (BTW - I perceive the N95 as a breakthrough, since most of the other WiFi enabled phones are far away from mainstream, either the Blackberry-like E61, the Windows bulky smartphones etc.)

Another example is that the all powerful iPhone was released with no WiFi calls support. Apple has done a lot to equip this gadget with all the software needed to enjoy the full experience of a phone/media/Internet, so why not include the one killer app that could have utilized 2 of the iPhone strengths?

But unlike the battle for mobile content which is still waging (With the operators having the upper hand), this is one battle they can't win, and in fact this battle will also make them lose the battle over mobile content. And the reason for that is simple: Up until now, the operators were our ISP as well. Every data packet came through their gateways, and as such they could always block whatever they wanted: By IP address, by file type (ringtones, games), by protocol (SIP) etc.

WiFi phones provide the bypass everyone has been waiting for: You can access the Internet directly whenever you are around a WiFi spot, and the operator can't do anything about it. What it can do, is sell its subscribers blocked phones, but soon everyone will understand that it's better to buy unlocked phones from retail stores.

Knowing that, some operators are embracing the "if you can't beat them, join them" approach. One of those is T-Mobile which is even promoting now a WiFi phone, but still capitalizes on this "generous" offer by taking $10/month from subscribers. Another operator that promises to open up is Hutchison/3.

In any case, operators are going to have to be creative and innovative to turn this situation from a potential disaster to a stage in their evolution. I am sure that in this case openness will be rewarded with customer loyalty, while tricks like locking phones, which is in any case a very temporary "solution", can only have the effect of antagonizing customers.

We should also remember that in any case, that while WiFi is spreading to a lot of places even to the extent of city-wide hotspots, it is still far from the worldwide coverage that operators networks supply (for now...), and this is another reason for operators to act wisely and not block WiFi, so their users stay loyal and use their network when out of WiFi range.

P.S. - For more on the N95 blocking you can read this. Also as a side note, even PSP will support VoIP soon.