View source for Will VOIP slowly take over the traditional mobile phone carriers?

Why would VoIP service providers not disrupt the mobile telecoms industry? On the fixed telecoms side, most landline connected households and offices in the Western world already have either narrowband or broadband internet. If a family or business is paying a monthly fee for its internet connection, it can "upgrade" to some VoIP based phone service and get essentially voice calls for free. If that household or office currently spends money on the fixed wireline phone based voice calls, this becomes a very compelling offering. Why pay a monthly charge of say 10 or 20 dollars to the telephone company for the fixed wireline phone, if a cheap headset etc can be connected to the PC and suddenly internet based free calls become possible. 

However in Finland and Sweden, already 40% of all homes have abandoned the fixed phone line completely, and use only mobile phones. It doesn't matter how inexpensive or free there would be a Skype or Vonage -type VoIP service on the fixed internet connection, when the home does not have a wired connection of any kind anymore! The same trend is happening in all advanced mobile markets, following the Finnish and Swedish example with a short delay.


Now lets examine the threats by VoIP to the mobile telecoms voice business. In September 2005 Skype made its first announcement of a mobile telecoms operator launching Skype on its network. E-Plus in Germany became the first mobile operator to offer Skype (and thus VoIP) openly and officially on its network. Did it crash the revenue model of mobile operators in Germany? Actually, the Skype service is offered at a monthly flat fee of 39.95 Euros !!!  Not at all "free calls."  In fact the exact opposite. Skype costs about DOUBLE what voice calls cost in Germany on average. The average voice revenues on German mobile networks, are about 24 Euros per month. At 40 Euros, Skype will not even be attractive to any users who don't spend more than twice the national average on voice calls alone. 


Here we now come to the fundamental truths why VoIP will not disrupt the mobile telecoms business model. On fixed wireline telecoms networks, mostly capacity is not an issue. There is enough fibre cable connectivity between connecting points of the network that the actual cost of delivering a bit of data (such as a bit of a voice call) is almost zero. However, the radio spectrum is not built to excess capacity; quite the opposite. The radio spectrum is a very sparse natural resource. We are already at capacity during rush hour in most major western cities. There is no excess capacity. No provider can offer you voice calls on mobile networks for free or near-free because they have a capacity ability to do so. Where some new entrant operators, such as 3/Hutchison in some markets, have done that, it is only because their network is so new it has not yet reached any meaninful utilization levels. Once they are approaching normal user numbers, they will be equally constrained.



<b>Source:</b> http://communities-dominate.blogs.com/brands/2005/09/economist_falls.html
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