EFFECT OF IP TELEPHONY
BUSINESS IN MOBILE
OPEARTORS IN BANGLADESH
Tasnuva Alam Mim
ID: 063 426 556
NORTH SOUTH UNIVERSITY
As the trend of All-IP is making its way through the telecom industry, new ways of using IP networks
are found. Transporting voice over IP (VoIP) has risen as one of the most promising applications.
Today there are no doubts, despite technical challenges, that the VoIP technology will have major
impact on both business models and implementation of services in future networks, regardless if
they are fixed, mobile, private or public. Most threatened by the development are traditional PTTs
who see their cash cow business from the fixed access network infrastructure being challenged by
cable TV providers and broadband service providers entering the last mile market. Long distance
calls are also made over the Internet bypassing the per-minute charges of fixed operators. The
technology opens clear opportunities for new entrants on the market. Not as clear are the impacts
for mobile operators. Here outlines the opportunities and the threats that mobile operators are
faced with from the emerging VoIP technology. Mobile operators need to understand these aspects
to better position themselves in the increasingly competitive mobile market.
The brief VoIP history
The idea of transporting voice in IP packets was introduced in the mid 90’s, leading to early
product attempts by e.g. Vocaltec for free PC-to-PC calls over the Internet. The uptake was
modest, at best, since the performance of modems and the Internet was poor, as was the
penetration of Internet enabled computers. Later, networking companies started to show
interested in VoIP and the primary target was to use the technology within enterprises. For
years, large players like Cisco have been heavily pushing the technology primarily in the
enterprise field, but also expanding to other areas including carriers and service providers.
Today, the technology has spread into most markets. The prerequisites have changed
considerably in many aspects, including broadband Internet access, PC penetration,
technology maturity etc. Along with fulfillments of the prerequisites, the amount of innovation
around VoIP has grown enormous. There is a steady flow of companies providing more or
less unique offerings to the industry based on the underlying VoIP technology.
VoIP is a service enabler for mobile operators
The VoIP technology is the foundation and enabler for many new service offerings specifically
targeted to mobile operators’ customers.
Push-to-Talk over Cellular
In parallel with the massive rollouts of 3G services, Push-to-Talk services are now reaching
the European and Asian markets. The role model has been the American operator Nextel
Communications. With the performance of Nextel in mind, it is of little surprise that mobile
operators around the world are eager to tap the opportunities this new service brings. Push-
to-Talk can be implemented as a circuit switched service. Most implementations, including the
upcoming standard, however use VoIP over packet data networks like GPRS.
Nextel’s Push-to-Talk service has been available since 1993. It is based on Motorola’s
proprietary network architecture called iDEN. Nextel’s churn rate is the lowest on the US
market and their ARPU is the highest (23%, or 13 USD higher than the nation’s average).
Nextel has been heavily focused on small business customers, where the Push-to-Talk
service has been attractive. The impressive figures of ARPU and churn cannot only be
recognized to the Push-to-Talk service but also the targeted market segment. CDMA 1X.
Packet data networks are argued to be ideal for the Push-to-Talk behaviour where users
have scattered conversations over long periods. Operators are also interested in finding
better ways to utilise their packet data investment due to limited success with non-voice
The US has been showing the way in Push-to-Talk services. Asian and European
operators are about to follow, with numerous launches already announced. Despite the
promising benchmarks from the US, a variety of potential hurdles need to be overcome and
the uptake on the new markets is far from certain. First of all, the technology is immature – or
rather the standards are not yet ready – and products will most likely not be interoperable
until early 2006. Secondly, the impressive figures from the Nextel service are based on Push-
to-Talk being a differentiator for the service provider. What will the figures look like when all
operators offer the service? Finally, cultural and social differences might affect the uptake of the
service, e.g. exemplified by that the walkie-talkie like service typically uses the loudspeaker in
the phones for communication and is thus not overly discreet
IP Multimedia Subsystem
Future Push-to-Talk solutions will be based on the upcoming OMA Push-to-Talk over
Cellular (PoC) standard. It is designed to make use of the future IP Multimedia Subsystem
(IMS) architecture for realtime applications, as is the hope for many other new services.
IMS specifies a framework on which new services can be developed. The IMS architecture
utilises most of the protocols that are associated with VoIP for realtime communication. Such
protocols are SIP (Session Initiation Protocol) and RTP for media streaming. Many new
services based on IMS are foreseen. Examples are combinational services (combinations of
video, messaging and telephony), Instant Messaging, interactive games etc. As the technical
framework is in place, the challenge will be to create user friendly services with true customer
value and high adoption rates.
VoIP in mobile core networks
The future success of mobile operators does not only lie in the customer embracement of
new services. Operational excellence will be more and more important as competition
continues to intensify. The VoIP (and IP) technology is an opportunity for savings on both
CAPEX and OPEX for service providers, most notably in the mobile core networks. By
adopting VoIP in combination with a soft switch architecture in the mobile operator’s core
networks – where voice and signaling are transported over one IP network – a more flexible
and cost efficient operation could be achieved. The use of VoIP in mobile core networks is not
a new concept and the value proposition has been questioned, particularly the argument of
transport efficiency, since many MNOs have over capacity in their transmission networks. The
long term move to a soft switched architecture is however not debated, although the timing is
uncertain. New services, as those based on IMS, will eventually benefit from such
The battle of mobile minutes
Although the VoIP technology provides new opportunities for mobile operators, the
development could also pose substantial threats. The VoIP technology, if not understood and
addressed correctly, could considerably hurt the mobile operator’s voice business.
VoIP used over unlicensed spectrum
The use of mobile phones is increasing in all geographical markets. The trend that mobile
phone calls cannibalize fixed phone calls is clear and many customers choose to keep only
one subscription: the mobile one. As a natural result, many of the calls made on a mobile
phone are made from a fixed location like an office or a home. Merrill Lynch reports indicate
that as much as 80% of mobile-originated calls are made from either the office or from the
home. A fixed operator observing this evolution may feel threatened. VoIP over unlicensed
spectrum opens an opportunity for a fixed operator to add mobility to its service portfolio.
Wireless LAN and Bluetooth are both wireless technologies that make use of unlicensed
spectrum. These technologies can be used to provide telephony with limited mobility, using
VoIP. The ambitions vary and technology evangelists are promoting the use of unlicensed
spectrum to cover metropolitan areas.
Obstacles to overcome to use VoIP over unlicensed spectrums in Code work shows that there
are several obstacles to overcome before a mass roll-out and adoption of VoIP over
unlicensed spectrum can take place:
• Availability of handsets at reasonable prices
• Fixed operators’ ability to subsidise handsets
• Creation of a bundled service offering
• Technical obstacles at end user premises outside the control of the operator
• Quality of the service
• Usability and user interfaces
Others see the technology as a replacement for DECT cordless phone systems at specific
locations. However, correctly implemented and with the appropriate handset support, a
service that combines licensed and unlicensed spectrum could be achieved. A fixed operator
could operate a VoIP over wireless service that is used when within coverage of specific
access points. Once outside the coverage, the mobile network is used. This way, the fixed
operator could capture parts of the 80% of calls mentioned above that are placed at home
or in the office. The approach appears compelling to some and threatening to others.
The area is intricate and both fixed and mobile operators should carefully consider their
options in expanding their business while protecting their own assets. The technology
provides opportunities but without an appropriate analysis the risks cannot be reliably
The Skype service is a peer to peer telephony service created by the inventors of Kazaa. It
provides free VoIP telephony between the users without relying on central infrastructure.
The Skype client has been downloaded by more than 50 million users. The voice quality
and simplicity has impressed on many users and industry experts.
VoIP over Cellular Packet Data
The well known Skype service visualizes how the innovative Internet community quickly
adopts to new rules. What would the mobile operator’s business model look like if a similar
service was implemented on 3G phones, totally bypassing the per minute charges and
termination fees. Since the charging models for 3G data are often flat fee (with high caps),
phone calls could be placed without any marginal cost to the user. Mobile operators and the
mobile community can influence the future business models, but developing and controlling
the evolution of services put very high requirement both on technology and more importantly
business (interconnect) agreements. The services have to be defined and interoperable, and
charging schemes has to be developed and agreed upon throughout the industry. It is not
impossible, but the fresh experiences from GPRS roaming agreements and MMS
interoperability in mind are not forecasting a smooth development. If the mobile industry fails
in controlling the evolution, the “Calling Party Pays”-paradigm could collapse and mobile
operators would have to rely on revenues from data. Unleashed would also be the Internet
community’s innovative forces in providing new services – which could become the ultimate
success to mobile data services.
VoIP – another hyped technology?
The strive for new revenues and opportunities within the telecom industry leads most often to
over-expectations of new technologies. This hype-phenomenon can be illustrated by the Hype
Curve as defined by Gartner (see Figure 1); VoIP is no exception. The relevant question is to
what extent the VoIP tech- no logy is hyped, and based on that, what expectation should we
put on the new opportunities.
Treating VoIP as one single technology is misleading and we thus need to consider various
applications differently to understand where on the Hype Curve they reside. In the Hype
Curve we have plotted the different VoIP applications discussed in this paper, based on their
maturity and visibility. The position is motivated in Figure 1.
The Hype Curve, as defined by Gartner, maps the technology along a typical path with respect to visibility and maturity. In
the Hype Curve a technology passes through four different stages before reaching the final stage where the real benefits
of the technology have been confirmed and widely accepted. From this stage, broad adoption can take off. The hype
occurs earlier where the visibility of the technology is very high but the maturity is still low. The expectations are heavily
inflated which leads to a steep decline in attention as the expectations are not met. Different technologies can move along
the time axis in
Figure 1 - The Hype Curve with different VoIP applications plotted
VoIP over cellular packet data –
This illustrates a possible future service deployment based on VoIP rather than a technology
itself. Due to lack necessary support in handsets etc, high industry attention has not yet
IP Multimedia Subsystem –
The technical framework for IMS is defined and some initial sales announcements have been
made. The PR activity is however more visible than actual implementations. IMS is therefore
immature and years from wide scale deployment.
VoIP over unlicensed spectrum –
Slightly more mature than IMS, the use of VoIP in unlicensed spectrum is soon seeing its first
deployments. There is however a high chance the technology is still immature and unable to meet
the set expectations.
Push-to-Talk over Cellular –
Second to 3G launches, Push-to-Talk over Cellular is the service that creates most interest
among analysts in the GSM community. With immature products, no real-world experience, and a
lack of implemented standards, there is a great risk that the expectations are inflated and that
visibility will eventually drop. Mobile operators could however attempt to bridge this gap through
careful service design and by communicating reasonable expectations to customers. Mass
adoption of Push-to-Talk over Cellular cannot start prior 2006 due to time required for technology
and in particular for terminal base rollout.
VoIP in mobile core networks –
Equipment for softswitched architecture based on VoIP has been around for many years, but
expectations have been inflated. The hype wave has now passed and adoption could be
expected, although in a slow pace.
Figure 2 - Threat/opportunity to mobile operators vs. technology maturity of different VoIP
Applications. The exact layout of this matrix depends on market specific inputs and should
be recomposed for each operator before acting based on the information.
This paper has outlined the different possibilities and threats that the VoIP technology offers to
mobile operators. Figure 2 summarises the different VoIP applications and their relative
threat/opportunity to mobile operators. Fortunately for mobile operators, the threats posed to their
business are all less mature than the opportunities. VoIP over unlicensed spectrum is the clearest
threat, but also VoIP over cellular packet data could become a considerable threat unless
managed correctly. Push-to-Talk proposes the most important near-term opportunity. VoIP is an
evolution in the way service providers implement the services rather than a revolution in user