Lowenstein's View: More innovations in voice service ahead

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem.With all the hype and growth in wireless data, "voice" has become that good ‘ol (not always) reliable service that has remained essentially untouched for many years. But the Microsoft acquisition of Skype is one of several developments that might fundamentally change how we think of voice in the near future.

Let's look at where we are today. You sign up for a service plan, or prepay for some minutes, and off you go. Smartphone users are required to have a voice plan in order to buy data services. The main innovations in voice service have mainly been in pricing perambulations: IN, Rollover, family plans and "unlimited." Visual voicemail has been a nice improvement to the user experience, but those under the age of thirty consider voicemail decidedly un-cool while for the rest of us it's become downright quaint.

There's been very little incentive to change the basic voice service proposition or price structure, since it has become much more profitable to wireless operators, especially when compared to data (except text).

But change is in the air. With the widespread industry move to a more tiered pricing structure for data services, and options for multiple users or devices sharing in "buckets" of bytes, users are going to grow tired of today's antiquated voice/text/data plan structure. And starting next year, Verizon and other operators will start offering "Voice over LTE" (VoLTE), which will allow them to route calls over the data network, rather than today's data over LTE/voice over 1x framework. Verizon has recently indicated that VoLTE phones will not hand off to CDMA. This is significant: "All LTE All the Time" means that voice could be just another "application" riding over the data network.

There are a few possible scenarios here. I think we'll start to see "access plans" that focus more on the data component.  For example, a consumer may decide how many GB of data he or she wants and voice service will be included for users spending a certain amount per month. Sprint's "Simply Everything" is an early example of what this might look like, although its current iteration is a little "one size fits all." Ironically, as we move toward more metering for data, it makes less sense to meter for voice. The vast majority of landline voice plans are distance and time agnostic (with the exception of international), particularly when they are on VoIP (Vonage, cable broadband). As we move to all IP for wireless, the only reason for operators to maintain the current structure is because it is a cash cow. But users will start questioning why wireless still looks like telephony, circa 1980.

The other dynamic here is that the alternatives are going to become more attractive. Until recently, Skype on cell phones has been largely a science experiment. Voice quality is unreliable and service unpredictable over garden-variety 3G, especially when one is "moving."  But it is more acceptable on HSPA+, WiMax, and LTE, or with a good Wi-Fi link. I would imagine wireless is one of the major opportunities Microsoft sees in Skype, debate what you will about what they paid for the company.

Tablets represent another fertile opportunity for VoIP, and voice applications. With a good speakerphone or Bluetooth headset, why wouldn't one use a tablet for voice calls, occasionally?  The seven-inch tablet seems to me an especially rich form factor to experiment around a hybrid phone and computing device that is always with you, especially if there are some good options for voice.

There are also some great opportunities to take voice beyond the wireless equivalent of POTS that has characterized the first quarter-century of this industry. I have had some interesting discussions, and seen some excellent demonstrations, of "HD Voice." There is certainly an opportunity for service providers to differentiate on voice quality. And if we're going to be doing more video over wireless networks, we should start paying greater attention to audio quality.

Finally--and don't shoot me now--there are some excellent opportunities to offer value-added services/unified communications incorporating voice. This has historically been a challenging area because it has required significant hardware purchases, integration of disparate networks, complex user interfaces, and lack of compelling applications that appeal to a broad market. But things are different now. With smartphones, app stores, and  IP networks, the complexity, barriers to entry, cost structure, and path to market are significantly lowered. Unified communications means a lot more today than it did five years ago. The need to unify services across the multiple devices a typical user or group will have is a new dimension of the UC opportunity. IP networks and a cloud-based framework will allow services to be deployed more cheaply, flexibly, and in stages.

For application developers, voice is an under-explored area. Mirosoft-Skype, Google Voice, and Apple's expected cloud service will be major catalysts. There will be opportunities for innovation on top of these services. Wireless operators could lose a cash cow if they allow over-the-top to muscle in. Verizon's partnership with Skype and Sprint's with Google Voice show that this does not have to be a zero-sum game. As operators deploy LTE more broadly over the next couple of years, the time is now for them to think strategically about: how to evolve the pricing framework; how voice services can be differentiated; and how they can add value to a service that still represents 70 percent of their revenues and the core of their relationship with subscribers.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.

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