Voice on the Internet
In an earlier post, I discussed a comment AT&T made contemplating allowing VoIP on the cellular data channel. Today AT&T wrote a letter to the FCC saying that they have decided to go ahead with it.
This will make international calls much cheaper for people who are willing to put up with the latency issues of the data channel.
ARCchart has just published a report summarizing the data from a “test your Internet speed” applet that they publish for iPhone, Blackberry and Android. The dataset is millions of readings, from every country and carrier in the world. The highlights from my point of view:
The BlackBerry download average across all carriers is 515 kbps versus 1,025 kbps for the iPhone and Android – a difference of half. Difference in the upload average is even greater – 62 kbps for BlackBerry compared with 155 kbps for the other devices.
Source: ARCchart, September 2009.
The Rethink Wireless newsletter is always worth reading. An article in today’s edition says that according to ABI dual mode handset shipments are on track to double from 2008 to 2010, and more than double from 2009-2011 (144 million units to 300 million units).
Rethink’s Matt Lewis cites improved performance and usability as driving forces, plus a change in the attitudes of carriers towards hot-spots. Wireless network operators now often have captive Wi-Fi networks and can use them to offload their cellular networks.
The upshot is a prediction of 300 million dual mode handsets to ship in 2011: 100% of the smartphone market plus high end feature phones.
The attach rate of Wi-Fi will continue to grow. By 2011 the effects of Bluetooth 3.0 will be kicking in, pushing Wi-Fi attachment towards 100% in camera phones and music phones in ensuing years.
Getting rid of your land-line phone and relying on your cell phone instead is called Fixed Mobile Substitution (FMS).
A report from the National Center for Health Statistics of the Centers for Disease Control (CDC) shows a linear increase in the number of households that have a cell phone but no land-line, starting at 4.4% in 2004 and reaching 16.1% in the first half of 2008.
These numbers match those in a recent Nielsen report on FMS.
FMS will most likely accelerate in 2009 because of the recession. It will be interesting to see by how much. We will reach a tipping point soon. 13% of households have a landline that they don’t use.
There are about 112 million occupied housing units in the US, and about 71 million broadband subscribers.
So what does this mean for Wi-Fi VoIP? One of the primary reasons for FMS is to save money; it is more prevalent in lower income households. There are two kinds of phone that do VoWi-Fi, smartphones and UMA phones. Smartphones are expensive, and probably less common among the cord-cutting demographic – except that that demographic is also younger and better educated as well as having a modest income – many are students.
Wi-Fi VoIP in smart phones is still negligible, but the seeds are planted: vigorous growth of smart phones, Wi-Fi attach rate to smart phones trending to 100%, a slow but steady opening up of smart phones to third party applications, broadband in most homes, Wi-Fi growing in all markets.
Admob periodically publishes numbers on the mobile Internet and its usage. The numbers are badly skewed because of Admob’s customer mix. For example Indonesia lists as the second largest mobile Internet market in the world. But if you make your own mental adjustments for this, the numbers are informative.
Admob’s latest report highlights Wi-Fi use in the USA.
Of the ad requests fielded by Admob, in August 2008 9% came from Wi-Fi capable devices: dual-mode phones, iPod Touches and Sony PSPs. In November this number doubled to 19%. Since the numbers for August aren’t broken down, it is uncertain which devices drove this growth, but my guess is that it is due to the booming sales of the iPhone.
Of the requests from Wi-Fi capable devices, the proportion that came over Wi-Fi varied radically. For the iPod Touch and the Sony PSP, 100% of the requests were over Wi-Fi. No surprise there. But on the phone side, a very interesting discrepancy between the iPhone (42% of requests by Wi-Fi) and the HTC phones (16% of requests by Wi-Fi). Since each of the phones uses the same browser for cellular data and Wi-Fi connections, it can’t be an ease of use of the Internet issue. Two other possibilities come to mind: the Wi-Fi may be easier to set up on the iPhone than it is on the HTC phones, or the cellular data speed may be worse on the AT&T network, driving the users to Wi-Fi, while users on T-Mobile (where all the HTC phones listed in the report are) get acceptable performance from their cellular data connection.
The Blackberry data casts a similar light on the question. The two Blackberries in the report were the 8820 and the 8320. The 8820 had the same profile as the iPhone – 40% of the requests came by Wi-Fi. The 8320 had even less Wi-Fi use than the HTC phones – only 8% of the requests came by Wi-Fi. These two phones are both on the same carriers (AT&T and T-Mobile), they have the same Wi-Fi chip (from TI), and their specs are similar.
The clue is in their release dates. The 8320 has been out on T-Mobile for a year, but was not yet released on AT&T in November when AdMob collected their numbers. The 8820 was released by AT&T a year ago, but by T-Mobile only 6 months ago. There are obviously a lot of other variables at work – like 3G versus 2G, for example, and pricing structure, but this looks like evidence that the T-Mobile data network has a more acceptable performance than AT&T’s.
The Verizon Storm may be heading for failure in more than one way. A raft of reviewers, led by David Pogue of the New York Times are trashing its usability. This means that even with the marketing might of Verizon behind it it may not fulfill its goal of being a bulwark against the iPhone in the enterprise.
But the Storm was an experiment in another way by Verizon. The other three major American mobile network operators have capitulated to Wi-Fi in smartphones. Against the new conventional wisdom, Verizon decided to launch a new flagship smartphone without Wi-Fi. The Storm looks like a trial balloon to see whether Wi-Fi is optional in modern smartphones. If the Storm is a success, it will demonstrate that it is possible to have credible business smartphones without Wi-Fi. But if it turns out to be a flop because of other factors, it will not be a proof point for Wi-Fi either way.
But Wi-Fi is a closed issue by now for all the network operators, perhaps even including Verizon. Phones have lead times of the order of a year or so, and controversies active back then may now be resolved. Verizon covered its bets by launching three other smartphones around the same time as the Storm, all with Wi-Fi (HTC Touch Pro, Samsung Omnia, Samsung Saga).
Before its launch, AT&T hoped that the iPhone would stimulate use of the cellular data network. It succeeded in this, so far beyond AT&T’s hopes that it revealed a potential problem with the concept of 3G (and 4G) data. The network slows to a crawl if enough subscribers use data intensively in small areas like airports and conferences. Mobile network operators used to fear that if phones had Wi-Fi subscribers would use it instead of the cellular data network, causing a revenue leak. AT&T solved that problem with the iPhone by making a subscription to the data service obligatory. T-Mobile followed suit with the Google phone. So no revenue leak. With the data subscription in hand, Wi-Fi is a good thing for the network operators because it offloads the 3G network. In residences and businesses all the data that goes through Wi-Fi is a reduction in the potential load on the network. In other words, a savings in infrastructure investment, which translates to profit. This may be some of the thinking behind AT&T’s recent acquisition of Wayport. The bandwidth acquired with Wayport offloads the AT&T network relatively cheaply. AT&T’s enthusiasm for Wi-Fi is such that it is selling some new Wi-Fi phones without requiring a data subscription.
The enterprise market is one that mobile network operators have long neglected. It is small relative to the consumer market, and harder to fit into a one-size-fits-all model. Even so, in these times of scraping for revenue in every corner, and with the steady rise of the Blackberry, the network operators are taking a serious look at the enterprise market.
The device manufacturers are way ahead of the network operators on this issue: the iPhone now comes with a lot of enterprise readiness Kool-Aid; Windows Mobile makes manageability representations, as does Nokia with its Eseries handsets. RIM, the current king of the enterprise smartphone vendors also pitches its IT-friendliness.
Wi-Fi in smartphones has benefits and drawbacks for enterprises. One benefit is that you have another smart device on the corporate LAN to enhance productivity. A drawback is that you have another smart device on the corporate LAN ripe for viruses and other security breaches. But that issue is mitigated to some extent if smartphones don’t have Wi-Fi. So it’s arguable that the Storm may be more enterprise-friendly as a result of its lack of Wi-Fi. Again, if the Storm becomes a hit in enterprises that argument will turn out to hold water. If the Storm is a flop for other reasons, we still won’t know, and it will have failed as a trial balloon for Wi-Fi-less enterprise smartphones.
I wrote about the vast array of ways to bypass international tolls in my Internet Telephony column a while back. Now there is an interesting web site, LowCostMob.com, that gives a listing of the services available and technical explanations of how they work.
If you go to the “contact us” link on the website you can type in “user feedback” with mini-reviews of the services. I presume that over time the database of user comments will become an additional helpful resource on the site.
All these services work to make calls to international destinations cheaper, but if you actually travel abroad you still have to pay exorbitant roaming charges for using the cellular network. The benefit of dual-mode (Wi-Fi plus cellular) phones is that with some of them you can use the Wi-Fi connection to make VoIP calls and completely bypass the cellular network, avoiding international roaming charges. Not all the listed services support this feature, and not all dual mode phones do either.
CSR released its 2Q08 results today. Quarterly revenues are 13% down year on year ($188.4m vs. $215.9m), but in line with expectations and up 17% on Q1. The CEO blamed the decline on “macro economic pressures.”
The press release says that CSR has completed “repositioning the business around the Connectivity Centre.”
What CSR calls the “Connectivity Centre” was the topic of a report I wrote with the Linley Group last year and which we are in the process of updating for 2008. The idea of the connectivity chip is that cell phones have a multiplicity of radios in them these days: several cellular standards and frequencies, Bluetooth, FM radio, GPS, Wi-Fi and some other minor ones. The way it has shaken out so far is that cell phone OEMs have implemented each of the non-cellular radios separately on their phone motherboards, or with two or more of them mounted together on a multi-chip module, or “connectivity chip.” Recently many vendors have started doing single-die implementations of connectivity chips, like Bluetooth plus FM, or Bluetooth plus Wi-Fi.
CSR with its BlueCore 7 is the first to combine Bluetooth (plus Bluetooth LE, formerly Wibree), FM (transmit and receive) and GPS on a single chip. This looks like a winning combination, because these three technologies are the ones with the highest attach rates to cell phones, and CSR has managed to implement the GPS with a sufficiently modest silicon footprint that CSR doesn’t charge for it if the OEM doesn’t want to use it.
Also mentioned in CSR’s results release is the news that the low-power Wi-Fi chip that CSR announced in 2004, the UniFi 2, is finally shipping in phones: “our embedded Wi-Fi product will be shipping in six smart phones by the end of the current quarter.” Actually, one of their analyst presentations appears to indicate that it is already shipping in the Mio A702.
CSR says it is “the only ‘pure play’ connectivity company.” This is passably true, but each of the major cellular baseband companies except Freescale now has, or is in the process of putting together a suite of connectivity products. CSR also says it “is moving fast to create and lead this market.” It will have to move fast. Qualcomm has already swept multiple connectivity technologies into its latest cellular baseband offering. This is the likely end-game for all the cellular baseband vendors. The questions are: is this what the handset OEMs want, and if so, how long will it take?
There’s a good article in Slate giving numbers on Fixed-Mobile Substitution in the US, and suggesting that a recent acceleration is due to the ailing economy:
…this year, the rate of decline of land lines has accelerated sharply. AT&T, which provides wired service in 22 states, just reported its second-quarter results. The wireless sector (72.9 million subscribers) continued to grow, adding 1.3 million net subscribers in the quarter. But revenues in the land-line voice services were down 7.8 percent from the first quarter of 2007. The number of retail consumer lines fell from 37.12 million in 2006 to 35.05 million in 2007, off 5.6 percent. In the first quarter of 2008, the company lost another 870,000 consumer land-line subscribers, or another 2.5 percent.
Verizon is suffering similar land-line declines. By the 2008 first quarter, its wireless unit had added 1.5 million customers since the 2007 first quarter. But the number of residential lines fell from 27.06 million to 24.11 million, a 10.9 percent decrease.
Qwest has seen its number of primary and additional consumer lines fall from 8.63 million in March 2006 to 7.17 million in March 2008, a decline of 17 percent.
Rethink Research has published an interesting article relating the new Wi-Fi voice certification to the outlook for femtocells.
The idea of the article is that voice over Wi-Fi for cell phones is competing with femtocells, and that femtocells may win out. The article distinguishes between business voice and consumer voice, saying that service providers see femtocells as “an important stalking horse for greater control of corporate customers. ” This gives a hint of why femtocells may be unattractive to businesses: many of them would rather not yield this control.
Consumer voice service is controlled by service providers. They have three options in this space: do nothing, deploy femtocells or deploy Wi-Fi. Do nothing is the obvious best choice, since neither of the other options carries a revenue upside. But poor coverage in a home discourages usage and risks cancellations of subscriptions. So in areas of poor coverage something like femtocells or UMA (voice over Wi-Fi) is attractive to service providers. For both technologies the service provider subsidizes the wireless router, but femtocells will remain more expensive than Wi-Fi routers because of their lower sales volumes, so Wi-Fi is more attractive on this count. But UMA requires phones with Wi-Fi, while femtocells will work with any phone in the service provider’s line-up, including legacy ones. So the customers’ experience of femtocells is better – they can choose or keep the phone they want and still get improved coverage at home. This benefit of femtocells clearly outweighs the marginal price advantage of Wi-Fi routers. Femtocells may help subscriber retention in another way: a Wi-Fi router is not tied to any particular cellular service provider, while a femtocell only works with the carrier that supplied it.
The situation in businesses is different. They generally prefer to control their own voice systems, which is why they have PBXs. But a substantial number of business calls are now made on cell phones, even on company premises. These calls don’t go through the PBX, so they are not least-cost-routed and they are not logged or managed by the IT department. Femtocells don’t fix these problems, but Voice over Wi-Fi does. Not service provider Voice over Wi-Fi, like UMA, but SIP-based Voice over Wi-Fi from companies like DiVitas and Agito. What about phone choice though? Won’t corporate customers be stuck with a limited choice of handsets? The answer is yes, only a limited number of phones have Wi-Fi: less than 10% of those sold in 2008. But in the category of enterprise smart phones, like the Nokia Eseries and Blackberries, the attach rate of Wi-Fi will soon be close to 100%.
So femtocells are a good way for service providers to remedy churn caused by poor residential coverage for consumers, but Wi-Fi may be the better option for businesses that want to regain control over their voice traffic.