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Mobile World Congress 2011 represented the debut for voice over long term evolution (VoLTE) technology among leading wireless operators worldwide. Large U.S. players including Verizon Wireless and AT&T Mobility will drive commercial deployment of VoLTE over the next few years, forcing other incumbents and greenfield 4G operators to quickly decide where to invest to stay competitive. Incumbent operators that planned data-only LTE networks are now examining if a data-only offering will be viable.
It takes more than a year for a new network to sustain commercial traffic on a large scale – so a decision now could determine future success or failure. Executives making such decisions should consider both the technological and commercial impacts of their choices.
Technological challenges of VoLTE
VoLTE requires voice calls to traverse an all-IP network. Since LTE coverage is not yet ubiquitous and likely won’t be for the next few years, maintaining a quality experience for consumers will be a significant issue. Operators that address this challenge will have an edge over competitors. AT&T Mobility, for example, plans to incorporate voice over its 3G network as a backup voice capability.
Another issue is how to provide full roaming services across operators. Not all operators will have an IP multimedia subsystems (IMS) infrastructure, which is critical for providing consumers with access to the richness of LTE content, such as streaming video and presence applications. Ensuring end to end quality of service while roaming will also be difficult.
Given the above technology issues, the decision to support VoLTE is sure to keep many greenfield and incumbent operators up at night.
Commercial challenges of VoLTE
The deployment of VoLTE represents a huge commercial investment. The decision of how to fund VoLTE depends on an operator’s unique characteristics. For example, a new network operator may prefer to leverage third-party infrastructure via a managed service, while a mature operator may be able to transfer demand rapidly and justify an in-house solution. Regardless of the type of operator, however, voice traffic will continue to drive average revenue per user for many years. Over the long term, companies must consider whether voice traffic will continue to generate sufficient revenue to justify their VoLTE investment.
There is also the question of branding. The VoLTE standard allows the use of high-definition codecs which enable high quality voice. This raises the question of whether mobile operators can generate incremental ARPU with high-definition branded voice services. Operators must consider how to position VoLTE to maximize value against legacy and competing services.
Finally, pricing of VoLTE services must be viewed in context of the emerging threat from so-called “over the top” mobile voice providers such as Skype Ltd. and Google Inc. Can mobile operators demand a price premium for HD voice? Will they be forced to give it away or bundle it with other offerings? Operating both a VoLTE and a conventional 2G/3G network is a costly proposition for all but the most mature operators. Many LTE providers should consider network leasing as an option to reduce capital expenditure.
The VoLTE decision represents a significant operational strategy challenge for both incumbents and greenfield operators. The winners will be those who balance the costs of their technology choices with their ability to commercialize their investments through pricing, service quality and features that appeal to consumers.
Sudharsan (Sudhar) Govindarajan is an associate in the Services, Electronics and Software business group at PRTM. Govindarajan is an experienced product development professional with a strong track record of launching several multi-hundred million dollar wireless products. He has also led significant efforts in operations improvement including supply chain and product cost reduction. He has consulted for clients in the communications, wireless, industrial and electronics industries. His areas of expertise include operational strategy, product development, new business development and sales effectiveness. Prior to PRTM Govindarajan worked in various engineering, pre-sales and management roles for Motorola. He has an MBA with honors from The University of Chicago Booth School of Business and a master of science in electrical engineering from the Illinois Institute of Technology. He can be reached at [email protected] You can read more from PRTM’s blog at PRTM.com/blog.