Voice Over WiFi – The Change Function Test

In his usual talk-from-experience style, Om Malik points out all of the things that are wrong with Voice over WiFi today.  He is correct when he say that my post yesterday “… looks at the positive side of the trend, but skips over the challenges of today’s Wi-Fi networks and consumer ability to use them as conduits for voice.”

His conclusion: “Let me be even more blunt: WiFi/VoIP combo today is where the MP3 players were before iPod came along. So unless something as gigantic as ‘iPod’ happens, this is just another complex technology for consumers (not the early adopters) to decipher.”  I agree with that.  But I think this more an opportunity than a permanent obstacle.

Right now Voice over WiFi fails Pip Coburn’s test as spelled out in his book The Change Function: the perceived pain of adoption (in fact, the real pain of adoption) far exceeds the perceived crisis that the service is a solution to.  People are willing to pay the outrageous markup for traditional cellular service and, in most cases, would prefer to pay current prices rather than deal with all the hassles of trying to get a dual mode phone to log onto a WiFi network so that it can then be used to make cheaper – even free – calls.  When people aren’t roaming on cellular, they are often using part for a package of minutes they purchased so saving a little airtime doesn’t really save any money.

So why do I think this will change?  What is the iPod of Voice over WiFi?

I believe two things will happen to make WiFi/WiMAX roaming at least as simple as cellular roaming.  The pain of adoption will go to zero.  And, again to borrow Pip’s terminology, I think the perceived crisis will go from moderate to severe.  These are the necessary and sufficient ingredients for disruptive technology to be massively adopted.  But you can never trust me to be right on timing!

First on ease of use:  I believe that several trends including municipal WiFi,  ad-supported WiFi, and WiFi sharing will result in wide availability of WiFi which does NOT require an account to logon.  Similar capabilities may emerge with WiMAX but I’m less sure about that.  The more complex model used by T-Mobile, for example, for paid accounts will tend to die out; and so much of the signon problem will simply disappear.

Second on ease of use: as the phone manufacturers declare their independence from the carriers, they will use a tiny fraction of the ample storage and computing power in the phones to make it simple to store any residual account-related information which is still necessary for signing on to networks.  One way or another, signon to WiFi/WiMAX networks will become as invisible as signon to a traditional cell tower.  Not every user will be able  use every WiFi network.  Not every user can signon on to the radios on every cell tower.  But quickly users will find themselves more often automatically signed onto WiFi networks than to traditional cell.

Perceived pain of adoption (and real pain) goes to zero.

Now for the crisis.  Once it is possible to cut wireless bills dramatically by frequent automatic use of low-cost WiFi, many people will feel stupid paying too much.  Much more importantly but only to a fraction of the market, international roaming charges which are often more than $1/minute will fall to a few cents at most.  This will drain traffic from the prepaid calling card market and displace the cumbersome process of buying country-specific SIM cards that price-sensitive consumers use today.  Calls will be made that simply aren’t made today.

Even more important to the adoption of WiFi capable phones is the convenience of eliminating the last vestige of needs for a landline.  When you’re in your house, your cell phone and any other handsets you have around become VoIP. (Note, I’m still talking futures.  Only nerd early-adopters can make this work well today.). True integration of photo-sharing, text messaging, search, and zillions of other mobile phone apps with voice will only work well when voice is an application over the phone’s IP connection rather than a special use of frequency (that’s what VoIP is all about).  Mobile handsets will seem badly crippled when they are connected via legacy wireless connections rather than through WiFi or WiMAX – just as landline phones with their regulated legacy are crippled compared to mobile phones today.

That’s the perceived crisis which creates the push for this disruption.

Om thinks that, before all this can happen, wireless carriers will use their own broadband capabilities to carve the heart out of these markets: “The bottom line is that before WiFi-on-the-mobile becomes a legitimate way of making phone calls, you would find speedier versions of 3G - EVDO Rev A and HSDPA would come to market. The carriers will use the increased capacities to offer some sort of VoIP plans. What happens then?”

He could be right and the mobile carriers COULD do this.  It would be a good thing if they did since then we’d get all the benefits sooner (except the important integration with home WiFi).  But I don’t think this’ll happen.  I think the carriers will be paralyzed by the incumbent’s dilemma; they won’t want to hasten a drastic decrease in the cost of mobile calling, roaming, and other mobile apps.  They will convince themselves that Voice over WiFi isn’t a threat because they don’t want to react to it.  They won’t want to take a chance of cratering the margins on voice to below what is needed to service the debt on the equipment they’ve already deployed.  They won’t want to take the writeoffs implied by this strategy shift.

Ironically, telco history will repeat.  The debt will be wiped out by bankruptcies which will also reprice the assets.  EVDO and HSDPA will supplement WiFi and WiMax but at flat monthly rates with no or very little premium for voice.

Comments

[Glenn Hagmann]

I work for an organization that has a ton of international roamers and we get killed on roaming rates. How would I get this to work on a corporate phone that has both GSM and WiFi capability? Are their Windows 5.0 add-ons that make this work?

[Jim]

There a few factors at play here when it comes to Wireless VoiceIP services being succesfully deployed.
The rapid deployment of functional Wireless Mesh networks in most major markets, delivering true Broadband (3-10Mbps)links (primarily outdoors)leveraging ubiquitous 802.11a/b/g radios will provide the base.
The re-direction of voice and video links to operate over (Mesh) broadcast 802.11a (5.8GHz)radios with OFDM and QoS (802.11e)will open this market up.
The explosion of Video/Audio and Multiplayer Online Gaming & downloads, plus P2P exchanges will put so much pressure on these Narrowband CellCO that the WiFi/Mesh option will look very attractive and the customer will flock to WiFi based Mesh networks-VoiceIP will follow very quickly.
UMA based convergence (at least in GSM)will make these Dual Mode Phones/PDA/Laptops very attractive.
The emergence of these new Micro PC (Sony Vaio)and handheld Interactive MultiMedia (NOKIA)devices will quickly make VoiceIP functional.

[Rajesh Raut]

I am not not certain what pain a WiFi phone would address. Customers (who don't roam internationally) are relatively happy with their cellular service. The most likely way for WiFi phones to spread is for dual-mode phones (cellular/WiFi) where the cellular phone companies use WiFi as an excuse to not worry about cell reception indoors.

The number one place where people want reception on the cell phones is in their homes (which sounds dumb.) A WiFi access point and broadband give the cellular companies a "free repeater" in the user's home.

The thing that drives the cell phone executives crazy is they haven't figured out how to charge you for making calls on your broadband connection.

[Simon Cast]

What will drive WiFi adoption is unlikely to be VoIP. Instead it will be a combination of IM and Location Based services. VoIP will follow as the number of users with WiFi enable phone grow.