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Wednesday, October 08, 2014

Mobile IMS/VoLTE is just for cost-saving. WebRTC & Telco-OTT are for new revenue

A question to readers: what is the overall penetration of carrier VoIP lines into the installed base of broadband connections, both fixed and mobile?

The answer may surprise you. It's currently just 8% overall.

It's that low partly because of the huge volumes of 3G devices and connections that now exist, which all use circuit telephony and SMS. It's also because carrier VoIP use is still only creeping up slowly in consumer broadband, to around 30-35%,12 years after the first such service launched. Finally, although LTE is now cracking through the 250m user barrier, only a tiny fraction currently have VoLTE.

Another question: how do you think that number will change over the next 5 years?

The answer - it will grow pretty fast. In fact, it will double, to a huge 16% penetration of carrier VoIP into the global broadband base. That will be pretty variable by country - some markets like South Korea, Japan, France and the US will be disproportionately high.

Well actually, that's not huge. Only about sixth of the world's broadband lines will have undergone "IP transition" by the end of the decade.

Why so low? Well, again 3G is largely to blame. While advanced users will upgrade to 4G, even more previous 2G users will move up to 3G in their place. But also, many LTE users will not use VoLTE, but will stick with circuit fallback. Only operators with great coverage, high ARPU and predominantly post-paid, contract user bases will tend to invest in all the complexity of IMS in the medium term, given the lack of any obvious new revenues. We see this today - even established operators in markets in Europe are dragging their heels on VoLTE, or perhaps only talking about using it in rural areas.

Why is this all so slow?

The reason is that it's ultimately all about cost-savings, maybe with a tiny veneer of new services. 

Fixed-line carrier VoIP is about reducing OpEx on clunky old switches, and in some case releasing assets tied up in big, old, phone exchanges. Property refarming, if you like. There's a small amount of enterprise hosted UC and a handful of other products/features, but they don't move the needle enough to enhance telcos' overall fixed-line revenues.

In mobile, IMS is being driven by VoLTE - either because operators are being forced into it (end-of-life CDMA moving to LTE) or in order to chase cost-savings again, from OpEx with older core networks, or with the ultimate hope of refarming spectrum assets. There is very little obvious additional benefit - VoLTE will not increase revenues and there are no obvious major new revenue-earning IMS applications.

(Some are arguing that RCS might save money compared to old SMS infrastructure, but I'm unconvinced, especially as it brings the value-negativity of joyn and the pain of getting people to use RCS applications. I'm increasingly hearing of telcos finally coming to their senses about RCS, fed up with 7 years of wasting money, resources & opportunity to vendor wishful-thinking and GSMA cluelessness).

Will WebRTC help IMS thrive? My regular line is that "IMS needs WebRTC much more than WebRTC needs IMS". It can help extend IMS-based VoIP onto a greater number of endpoints, more cheaply and quickly - for example, onto PCs and tablets that don't have native IMS capabilities and likely never will. This is indeed valuable, as it amortises the costs over a wider base, and helps accelerate beyond normal upgrade cycles. 

I am less convinced that long-tail developers will be interested in IMS capabilities exposed via WebRTC APIs - I have not seen (m)any use-cases that make sense and can't be replicated more quickly and easily via other platforms, especially given low device-side penetration and fragmentation of operators. More interesting is the potential for the reverse - accessing IMS-based services using a 3rd-party login rather than being a "subscriber" to a given operator. This allows (for instance) log-on with Facebook to an IMS-based conferencing system.

Some other innovations will also help tip the balance slightly - Metaswitch's open-source cloud IMS Clearwater is a cheaper, more flexible way for operators or developers to experiment with IMS as a platform, or create niche or prototype services and mashups. But I would argue that reducing the costs and vendor-led rigidity of IMS is necessary but not sufficient here - it may enable some new telco-cloud offers, but it still confines developers to some rigid raw ingredients like "calls" and E164 numbering. A lot of growth and value in IP communications will come from fragmentation and "de-lamination" (a theme I'll pick up on in another post).

Overall, IMS is slowly increasing its presence in mobile. But the keyword is slow. Despite the few recent launches of VoLTE, it is important to remember that devices running mobile IMS services are still incredibly rare. Apart from Korea & the US, few countries will quickly migrate 3G user bases to very high % of LTE anyway. 

Like fixed IMS, we will see mobile IMS used either for cost-savings, or to replace obsolete end-of-life core networks. There are still no clear additional sources of revenue or differentiation. WebRTC will help extend it and implicitly reduce per-user costs, and enable a few enhanced use-cases, but it is not a magic bullet.

IMS will not disappear - it will likely still exist as legacy even in the future post-IMS cloud/web telco world. But it will certainly not dominate the mobile landscape - despite its creeping growth, it will never account for more than a small fraction of total mobile-user communication events, whether measured in messages/minutes, or more modern metrics of perceived value, engagement and relevance.

Telcos need to maintain a strong and growing emphasis on non-IMS forms of communication if they are going to find new revenues from voice, video or messaging, rather than merely slowing the decline. These can be sales of major vendors' UC systems to businesses, Telco-OTT applications like Telenor appear.in, WebRTC platform plays like Telefonica Tokbox & NTT Skyway, or numerous other forms of innovative "embedded communications". While WebRTC will be a critical component here, it is not the only approach. 

Organisationally, this all remains a challenge. It is very hard for telcos to reconcile the conservative, traditional IMS mentality with the more software-centric world of modern communications capabilities. Yet that is the challenge which needs to be managed by telco CEOs and CFOs. If they allow future "communications services strategy & architecture" to be dominated by IMS, they will stifle true innovation and potential sources of value and competitiveness. 

It is right that most mobile operators continue to work on IMS, but that must be seen as just one of the paths to future services and capability exposure. Protected fiefdoms and entrenched groups must not be allowed to delay or distract other units working on non-IMS options. I hear too many examples of the "white blood cells" mistaking a beneficial (but fragile) initiative as a pathogen and trying to kill it. 

Mobile IMS is not a "special flower". C-level operator execs must make sure that it is matched by investment in other forms of communication platform & capability as well. 

IMS is for cost-saving. WebRTC and Telco-OTT is for new revenue. By the end of 2019, only 11% of global mobile broadband users will be reached by IMS/VoLTE.

If you are interested in the future role of IMS and its links to WebRTC and service innovation, it is covered in depth in the new 2014 WebRTC Strategy Report & Forecasts from Disruptive Analysis. Details are here


Martin Geddes said...

The irony is that IMS doesn't even necessarily result in assured application performance! IMS solves a problem of billing, not networking.

So there's a market for something better, simpler and cheaper than IMS for making real-time comms "just work".

My bet is there's also a market for something less than full assurance, but better than "best effort". Could think of it as "enhanced" voice.

Anonymous said...

What could that something be?