Why 3G VoIP Is No Big Deal – For Now

When fring and iCall announced recently that they were introducing iPhone 3G VoIP calling apps, it seemed a turning point for mobile VoIP. The apps, which recent changes in the Apple SDK made possible, made it clear that there's no turning back: VoIP over cellular data connections will soon become commonplace. What was less obvious was that, at this point, 3G VoIP won't have major impact, at least in the U.S. That's because under existing major mobile pricing plans, it won't produce significant savings for most users.

In fact, data pricing plans such as AT&T's personal and enterprise offerings seem expressly designed to prevent such savings. The most obvious giveaway is that data plans for smart phones and PDAs that could support VoIP calling require users to buy voice plans as well, reminiscent of the days when it was impossible to buy so-called "naked" DSL, meaning DSL without phone service. And even the cheapest voice and data plans, when combined, cost at least as much as unlimited voice plans for individuals. Data-only plans that could support 3G VoIP services at prices undercutting voice plans are for laptops only.

Heavy business users could conceivably save some money by using VoIP. Buying the cheapest enterprise voice plan, at $40 for 450 minutes, and a $60 data plan that could support almost unlimited VoIP calls would be cheaper than the $200 enterprise voice plan for 6,000 minutes. On the other hand, business users obviously aren't a key target for cellular VoIP. Saving $100 per month would require such users to make more than 90 percent of their calls over VoIP connections. Given that cellular voice quality itself can be bad enough, enterprises are no more likely to depend on 3G VoIP for most of their mobile calls than they would on Skype for most of their office calls.

The situation could change if pricing were to become more flexible and suitable to cellular VoIP. For example, 200 MB per month of cellular data could support some 1,500 minutes of iPhone VoIP, according to fring's figures. Since that would amount to only a small fraction of the volume of 4 GB and 5 GB data plans, it might seem reasonable to think that the price too would be a mere fraction of the $30 to $60 that AT&T charges for those high-volume plans. Combined with a bare-bones voice plan, a cheap data plan along these lines might save users money. But the only 200-MB data plan AT&T offers costs $35 per month by itself, and is only available for laptops.

It's not as if it's impossible to deliver mobile data for cheap rates. In fact, AT&T recently announced a 250-MB plan for $14.99 per month that doesn't even require a contract. The only condition is that the plan is only available for the new Apple iPad. That just about eliminates the possibility it will be used mostly for mobile VoIP.

The key question for the future is whether pressure will mount for cellular providers to offer more flexible pricing plans that allow VoIP services to truly compete with cellular voice. One possibility is that competition will in and of itself bring about such changes. But with just two major competitors dominating the U.S. market, it's not clear if and when that will happen. Similarly, pressure from regulators along the lines of the investigations into the cost of SMS text messaging could have some effect. But until one or the other or both of these scenarios occur, it's unlikely that cellular VoIP will have the impact in the U.S. that many expect. In markets with different pricing and regulatory structures, of course, the impact could be more substantial.

Comments

[Ian Lucas]

While more and more people are taking up smart phones, many Organizations still require their field or travelling staff to "call-in" for voice messages that are left on their (legacy PBX) office phone systems. The number of voice call minutes thus consumed, just to retrieve/listen to voice messages is significant. Add to that the inconvenience and call minutes consumed in asking assistants and colleagues to deal with these messages, and you have a measurable expenditure to consider. For the (very large) number of Nortel Norstar and BCM PBX Customers with this problem, VoiceBridge Software Solutions has a simple to deploy Voice Message Management Suite that automatically delivers and enables management of Voice Messages using data bandwidth only, immediately reducing call minutes consumption when away from the office. The economics are compelling.