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Customer Relationship Management (CRM) Today - Experts Corner Customer Relationship Management (CRM) Today - Highlights

Vincent Poulbere,Senior Consultant, Ovum

You Asked
Voice over WiFi: VoIP's first steps into the wireless area
 
The Expert's Answer

VoIP is already having a powerful effect on the fixed telephony markets. It is now slowly moving into the wireless space, thanks to the development of solutions enabling voice over WiFi (VoWiFi) networks. This brings the prospect of third parties offering cheap voice services to mobile subscribers located in areas covered by WiFi, thus partly cannibalising the mobile operators' voice revenues. But how big will the effect on mobile markets actually be?

Becoming a reality in 2005

Whether it is at work, at home or in public places, most customers have the opportunity to be within the range of a WiFi network. This opportunity is growing over time with the implementation of more and more WiFi access points by end users or operators.

The other force driving the development of VoWiFi is the availability of mobile handsets integrating WiFi. We are still in the very early phase of the development of these handsets, but several signs clearly show that a significant share of mobile handsets will integrate WiFi in a few years time.

The first VoWiFi services are already commercially available. There are small operators already offering commercial services such as Phone Systems in France or TeliPhone in North America, and also a major operator, NTT DoCoMo in Japan. More service providers, such as Vonage, plan to launch commercial services in 2005.

These first services are still not managing the mobility between the cellular and the WiFi networks. In addition, most of them rely on WiFi-only phones, without cellular capabilities.

The next phase will be the availability of dual-mode WiFi/cellular phones and the implementation of mobility management between networks. The first pre-commercial services are expected in 2005, and the first mass-market launches are likely to be in 2006, when more handsets become available.

Mobile operators are still in control - but for how long?

The threat for mobile operators is that the cellular traffic generated indoors could be cannibalised by third parties' voice over WLAN applications. We estimate that typically 30-40% of cellular voice calls in Western European countries are generated in environments where there could be WiFi coverage. However, we expect mobile operators to limit the impact of WiFi phones by:

• controlling the specifications of their subsidised phones so that their customers cannot buy cheap handsets enabling them to bypass their cellular network

• implementing their own WiFi/cellular solutions, and providing seamless mobility to their own customers. This is also an opportunity for mobile operators to reduce network costs, as the use of the WiFi network to carry indoor voice traffic will reduce the load on the cellular infrastructure

•adopting voice tariff strategies that reduce customers' interest in adopting VoWiFi services from other providers. In particular, many operators in Europe are already offering unlimited voice plans during evenings and weekends, when more customers are at home.

A more long-term and disruptive development is the introduction of VoIP transmission through the cellular networks, driven by the implementation of broadband mobile networks. VoWiFi is probably not going to reshape the mobile market in the short term, but the introduction of VoIP in the wireless area creates great challenges for mobile market players to address in the future.


Vincent Poulbere is a Senior Consultant, specialising in radio communications and the mobile services market. He can be directly contacted on vincent.poulbere@ovum.com.

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