Two South Korean providers, SK Telecom and LG Uplus, have announced that they will launch high-definition voice service over their LTE networks, making them the first mobile operators in the world to introduce so-called VoLTE (voice over LTE) telecommunications. According to SKT, 4G voice features 2.2 times more bandwidth than 3G voice, and will connect calls in 0.25 to 2.5 seconds rather the average of five seconds required to connect a conventional 3G call. In addition, the company promises that VoLTE will deliver higher-quality voice transmission. SKT will offer the new service at the same rate as its 3G voice service. To use it, customers must have an LTE subscription and an HD-compatible device. SKT is going with the Samsung Galaxy S3 for the purpose, while LG Uplus will offer that smartphone as well as the Optimus LTE 2 phone.
Tarifica’s Take
With the vigorous growth of over-the-top (“OTT”) VoIP calling, mobile providers are looking to defend their revenue and market share in the realm of voice. While we have been arguing in recent weeks that data is the growth engine for both mobile and fixed line telecom, that should not be taken to mean that voice is not important; after all, voice still accounts for a majority of mobile revenue worldwide.
OTT services such as Skype, Google Voice, Fring and others have been scooping up market share by providing free or very inexpensive domestic and international calling from smartphones. We are far from certain that faster connection time and higher-definition audio will be enough to persuade consumers to use VoLTE instead of OTT. Moreover, the OTT players are quite capable and adept competitors and it is not inconceivable that they may yet figure out ways in which to enhance and improve their own services in connection with the roll out of LTE networks. That said, Tarifica sees a way in which VoLTE could potentially help operators to strengthen or at least maintain their position in the voice market.
It is this: By bundling VoLTE with high-speed LTE data, which will be in strong demand for the foreseeable future, operators could induce (some might say force) their subscribers to make use of this new voice service, even though OTT providers still maintain a distinct price advantage. Simply put, if customers are already paying for VoLTE service, we believe they will likely use it, at least until they have reached the limit on the bundled allowance. The faster connection speed and, in particular, the higher quality and reliability of VoLTE compared with current OTT offerings should further reinforce subscribers’ willingness to use the new technology for voice calls. The point is that subscribers want faster and better data services which LTE will surely provide. By making it mandatory that they subscribe to voice services as well, operators will be able to leverage the very desirable data-related characteristics of LTE to protect their still vitally important voice business.
While at this very early stage it remains to be seen what kind of an edge VoLTE will provide to operators, we at Tarifica believe that the enhanced data capabilities associated with advanced LTE networks ironically represent an opportunity for mobile providers to defend their turf in the face of a very real threat to their voice revenue. But that will be possible only if operators take the bold, and we believe necessary, step of “force feeding” voice services in the form of bundled offers to their subscribers. Otherwise, the future could turn far less promising if mobile operators become nothing more than purveyors of “pipes” for carrying data.