Can't happen here?

Despite my best efforts (and those of others) to raise the alarm, one of the issues I think the market is going to have to get to grips with over the next year is that VoIP (or voice on the internet, as some say we should more accurately term it) is not merely an issue for the fixed carriers, as many seem to believe. I would argue that this is where its impact is likely to be visible first, but as Churchill famously stated, this may only be "the end of the beginning." Obviously VoIP is in use today over wireless networks, and we have devoted a lot of time over the past two years to the kinds of interesting things that one can do on a Wi-Fi/1XRTT/Flarion/TD-CDMA/3G connection. However, almost all of this usage is laptop or PDA-based for now, as we await the advent of multimodal handsets in 2005.

Perhaps some of the relatively sanguine views on mobile VoIP in the market stem from the fact that 3G is in go-slow mode at launch, and that an alternative fixed/mobile convergence solution such as UMA, though integrated well into the legacy GSM system, appears fairly inelegant from the IP standpoint (it is incompatible with IMS and doesn't make use of widely-used existing standards). What most people don't seem to have clocked yet is that the technology exists to bring SIP deep into the heart of the traditional cellular network today, irrespective of the availability of multimodal handsets, and offers some potential opportunities and also significant revenue discontinuities for wireless players, depending on how they choose to respond to it.

I sat down last week with pioneers in this area, Bridgeport Networks (which has some interesting investors), to learn more about how this works and how it might happen in practice. Here's a challenging-looking graphic of their NomadicONE solution, debuted at 3GSM in Cannes back in February. The key point of the diagram, and of the product itself, is the interface with the mobile home location register (HLR) via SS7 connection with the NomadicONE convergence gateway. This allows a high degree of visibility as to who and where the user is, what the account permissions and preferences are, and most importantly for the service provider, is a key linchpin in generating a record of a billable event (voice call, SMS, chargeable IP packets). In the world of new multimodal handsets and cognitive radios, the possibilities are there to allow a cellular player to capture categories of voice traffic where they might be out of the mix at present, such as fixed line voice in the home, or access-independent VoIP traffic within a Wi-Fi hotspot, by mapping the mobile phone number to a SIP address, which can then be used across a variety of devices.

Scenarios I see for adoption are as follows. They are entirely my own and are illustrative. I have no knowledge of who Bridgeport has been talking to, but I can only assume that a product such as this must be generating a signficant level of interest among a variety of players, and I fully expect someone to deploy it sometime soon. I should also point out that the technology works fine today on standard GSM phones, though my examples below assume the availability of multimodal phones with Wi-Fi integrated, because this increases usage scenarios dramatically, in my view. However, the fact that the technology works today with "plain old" GSM is another important differentiator from UMA, which will be reliant upon handset replacement cycles, which though shortening to around 18-months according to Carphone Warehouse, are still an impediment to operators gaining traction in the short term.

MVNO - Let's take a player in an increasingly competitive broadband market, say UPC Netherlands. It has the video, broadband and now the voice pieces, but is absent from the mobile market. Rather than go out and create a zero-value-added MVNO using a third party network, UPC could, assuming the hosting network opened up the HLR to it, use Bridgeport's solution to actively move otherwise outgoing GSM minutes to VoIP over a Wi-Fi connection when the user is at home or within range of an accessable AP. This could presumably also include calls made outside UPC's own MVNO footprint, and the fact that the number is a SIP address could be used to eliminate the artificiality of pricing for international calls. The customer may be billed however UPC would see fit, UPC would save money on roaming, interconnect and wholesale minute costs, and perhaps most importantly, could develop a churn-mitigating differentiator beyond its current triple play offering.

PTT - For a PTT with a mature mobile unit (basically everyone in Europe except Eircom and BT Group), the Bridgeport solution could be used to attain many of the same goals as in the cable MNVO example. However, for the handful of PTTs with both broadband and mobile presence outside their home markets, there is probably an opportunity to more closely integrate the marketing of, and to differentiate the features of, the two. Probably the most appropriate example I can come up with is France Telecom, which is making increasingly disruptive forays into the UK and Dutch broadband markets, but is struggling somewhat on the mobile side in both. With NomadicONE, Orange and Wanadoo could play off each other in marketing the product, and offer something which the other key players in the UK market could not easily replicate due to their lack of presence in broadband access.

Pure mobile player - The proposition here, at least in the consumer market, looks somewhat more challenging if the operator lacks a broadband access customer base. However, I suppose it is conceivable that pure mobile operators could employ the Bridgeport approach by putting ATAs or hybrid Wi-Fi routers into the hands of subscribers, though in doing so would create some dilemmas relating to in-home voice usage and also roaming revenues. However, roaming costs would also fall, and with the market saturated, the main issue probably comes down to customer retention in any event. The real advantage of the Bridgeport solution for pure mobile players, as far as I can see, is in bringing all the SIP functionality into the corporate environment in a way that incorporates the mobile element seamlessly, and can save companies money.

Beyond what Bridgeport has done with the NomadicONE gateway, the company also has a partnership with Verisign, which is reselling Bridgeport's solution under the Wireless IP Connect brand. In my view this gives Bridgeport an interesting positioning in an emerging infrastructure which could develop into a new roaming management and settlement system for the VoIP world. The company also has a low-cost active RFID presence detection solution which can enable any existing cellular handset. It seems that the company is adopting a holistic approach in pushing the silicon which makes its gateway product viable, and also teaming up with an emerging player in identity/security/trust/intercarrier compensation management in the VoIP space (which is the sort of thing required if the carriers are to ever become comfortable with the concept).

What interests me most about this development personally is trying to imagine which of the carriers will "get it," and which not. Beyond getting it intellectually, this sort of move will also require some intestinal fortitude. Carriers trapped in a mentality which confuses the application (voice) with the access element (a GSM or CDMA network), or which refuses to see that the two can in fact be disaggregated, may fail to see the value in it.