WHITEPAPER

mVoices of Reason

This whitepaper is an extract from:

Mobile & Tablet Voice & Video Calling

Strategic Opportunities & Business Models 2012-2017

. . . information you can do business with

mVoic ces of Reason

m mVo oices s of f Re easo on

1. Introd ductio on
Voice as a service offered by MNOs M remain ns under pressure. There are two forc ces in particu ular that contin nue to influenc ce the pricing g of voice serv vices: technolo ogy on one ha and (such as m mVoIP and WiFi); W and compe etition on the e other. Never rtheless despiite the rise of f data traffic an nd revenues, v voice continues to be among g the most im mportant elem ments within the broader mobile telec coms mix, pa articularly if it t can be succes ssfully integrat ted into other services and d offered with hout incurring g network cos st to the operator or new e entrant. The new paradigm m represented d by the eme ergence of the smartphone pp store e and the Ap combi ination is allow wing several developments d to occur:

The easy integration of Apps A into the smartphone in the form of o voice and viideo clients to o enable
IP based voice and video calls

The use of WiFi W to carry y both voice a and video traff fic, which curt tails the poten ntial dangers of o traffic
overload on n mobile netw works, but also o potentially reduces r reven nues through loss of traffic to WiFi carriage. These e two factors are perhaps the most im mportant drive ers in shaping g the future landscape for r mobile voice communications. Howeve er other facto ors, such as net neutrality y, increased c competition, and the l of LTE in developed mark kets, will also have an important influence on how the e mobile voice e market arrival will de evelop. US op perator Sprin nts recent de ecision to bu ndle voice in nto a broader r bundle avaiilable across multiple device es, without sp pecific pricing g for the voic ce element, in ndicates the direction d of tr ravel of the industry. There e is no doubt t that voice is gradually l osing its special status as a revenue d driver for op perators. Howe ever, there is still significan nt mileage in v voice as a me eans to achiev ve revenues; indeed, new entrants using n new infrastruc ctures and business models s are succeeding in changing the landscap pe significantly y. The m mobile voice market m will co ontinue to co omprise a larg ge circuit swit tched elemen nt for the fore eseeable future e, particularly in regions where infrastruc cture is less de eveloped. In addition a to thiis market two o further marke ets are develo oping:

The integrat rty services su uch as gaming and social me edia tion of voice into third par The develop pment of the OTT mVoIP m market
desktop side, with its For th he time being, , the integration of voice in nto other ser rvices is happe ening on the d main p proponent, Vi ivox achieving g notable succ cess in the gam ming area. This is expected to start to ha appen in the ne ext five years in the mobil le area with m mVoIP leader rs such as Rebtel preparing g APIs for re elease to third p parties.

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2. T The mVoIP m P Challenge e

2.1 T The Challenge for r Incumb bents
mVoIP does more than challe enge the sta atus quo by undermining g revenues ffrom roamin ng and VoIP changes the power di stribution in the t communic cations indust try; in so man ny ways interconnection. mV he hands of the consumer o or the develop per, said And dreas Bernstr m at Rebtel. power is placed in th s reason, in the short-term m the more e established an operator, the e more the o operator has to t lose For this from m mobile VoIP. UK U operator Vodafone, ow wing to its si ize, is a net beneficiary b off interconnection in terms o of traffic land ding on its ne etwork. 3UK,, with a muc ch smaller network, stands s to lose less from interconnection reve enues, as it has h less traffic c coming into o its network. Partly for th his reason 3U UK has willing to allow w VoIP traffic c on its netw work for som me time, while Vodafone remains again nst the been w prospec ct. Secondly, MNOs mu ust face lower the barrier rs to entry fo or new entran nts that can n now use the mobile t to transfer mobile calls. And these p layers may co ome from unexpected plac ces: MNOs will w see internet increase ed competiti ion from co ompanies like e Apple, Google and Mi icrosoft that offer cloud d-based commu unications that t MNOs have e not adopted d yet. There is s therefore co onsiderable o opportunity fo or large players to move into o the enterpris se space, whic ch is an impor rtant source of o revenue for r MNOs. It is the erefore incum mbent on MNO Os to develo p new strateg gies to counte er the pressur res cited abov ve: As voice becomes more e of an application, there i s pressure for MNOs to create c a simpllified but interesting k Lazzaro at V Vonage, this s could be th hrough cloud-based service es that customer experience, said Nick date all identit ties to one location or dev vice, he adds. . consolid One of f the most im mportant challe enges facing M MNOs will be e to match th he rapid deve elopment cycles that OTT providers are capable of. According A to Andreas Ber rnstrm, CEO O of OTT pro ovider Rebtel, these ccelerated eve en in the last t two years: In 2006 and 2007 developers would e embark on 6 month have ac projects s; development cycles have e become fast ter and it is now n a questio on of developiing new applic cations in a ser ries of weeks, he says. For exa ample, Bernst trm says that a Video OS S plugin would d take a coup ple of months s to develop. Group Video w would take lo onger, due to the challenge es of develop ping the user-interface, how wever both se ervices could come to marke et very quickly.

2.2 T The Challenge for r the New w Entran nt

The cha allenges for th he new-entran nt are very dif fferent from those faced by y the MNO. These c challenges incl lude the possibility of disap ppointing payin ng subscribers s through a se ervice which may m be under p par. It is also worth w noting that t as termin nation rates fo orce MNOs to o lower their pricing, the margins m achievable by OTT providers wil ll come down n, reducing th heir ability to sign up new w subscribers as the al value of sign ning up to an OTT service will be reduce ed. margina "Lower r pricing, and particularly p bu undling of voic ce into data bundles has ma ade VoIP a ba asic necessity for f any commu unications pro ovider, but no longer provid des a competitive advantag ge," says Roy T Timor-Rousso o CEO at Fring g. "A subscrib ber spending $20 $ per mont th on an unlim mited call plan now expec cts to also hav ve free texts, a and use their smartphone's s internet con nection. The OTT opportu unity is thereffore moving toward t more ad dvanced servi ices over IP lik ke group com mmunication, international roaming r and c collaboration." "

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mVoic ces of Reason One important cha allenge for new w entrants is to achieve a level of differentiation that t means that they t will t more custo omers. This means m that O OTT providers s find themse elves in a cyc cle whereby they t are attract progre essively enhan ncing the user experience only to stay in the same position p in th he market, sin nce their rivals a are doing the same. Thirdly, many subsc cribers to an OTT service generate little or no reven nue but never rtheless expec ct a high y service. Fina ally, new entra ants face the c challenge of making m the tec chnology acce essible to the broader quality public rather than technology-sav t vvy individuals s.

4. The Marke M et for Mobile VoIP

Until recently, mobile VoIP had d the reputat tion of bad QoS, Q dropped d calls and an n unsatisfactory userr companies were w damagin ng the reputat tion of mobile e VoIP, as wel l as the reput tation of experience. Smaller market leaders s. In the last two t years qu uality has improved immea asurably and t traditional Te elcos are the m beginn ning to join their rivals in of ffering mobile e VoIP. In som me markets, particularly p in Asia, nearly a all handsets are a sold with mVoIP clients s, and as LTE arrives, the all-IP environm ment means th hat the nature e of how voic ce is carried will change, w with circuit sw witching g to the over r the top mV VoIP model. ceding Fig gure 1: Mobile VoIP Use ers, MNO & Third Party y OTT Services, 2017 (1 .07 billion users)

Sou urce: Juniper Res search

The fi igure above illustrates that mVoIP is a nticipated to reach signific cant levels off take-up, par rticularly throug gh third-party y OTT provide ers, with the t total number of mVoIP sub bscribers reac ching nearly 1. .1 billion subscr ribers at the end e of the for recast period. Subscribers using u third party providers will account for over half of f the global mVoIP m subscrib ber base in 20 017. This repr resents an imp portant rise fr from 2012, wh here the figure lies at nearly 160 million. Fast a and reliable in nfrastructure is key to sub bscriber take-up for both MNOs and t third party pr roviders. Impor rtantly, new mVoIP m deliver ry methods a are emerging with MNOs beginning to o embrace a network n infrast tructure that until now they y have viewed d with suspicio on by the carr rier communiity.

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Order th he Full Rep port

Mobile e & Tablet Voice & Video Callin ng: Strategi ic Opportunities & Bu usiness Mod dels 2012-2 2017
Available in PDF and Exce el Format 37 Pages of Extensive For recasts The Leading g Industry Ref ference Guide e

Key Features of the Report t Include

Juniper delivers benchmark forec casts on the mobile VoIP and video ca alling sectors.. These revise ed and roject key me expande ecasts span 37 7 pages and pr etrics split by 8 key regions s such as: ed 5-year fore Circuit Swit tched Traffic Volumes V and R Revenues Third-Party and MNO 3G G Handset mV VoIP Users an nd Revenues Third-Party and MNO 4G G Handset mV VoIP Users an nd Revenues Tablet mVoIP Users and Revenues Mobile Vide eo Calling Use ers and Reven ues

Key Features of the Interac ctive Forec cast Excel

Juniper Researchs ne ew Interactive e Forecast Ex xcel (IFxl) is an n enhanced Ex xcel workboo ok, providing a set of analytic cal tools to enrich understa anding of the m market as wel ll as giving acc cess to the fulll forecast data a. This IFx xl includes mo ore than 8,00 00 datapoints in 87 tables, with forecast ts including: R RCS/RCS-e tr raffic & users; C Circuit switch hed traffic & users; u 3G VoI IP handset users, average spend s per use er & total rev venues; 4G VoIP handset use ers, average spend per user enues; Tablet VoIP users, sp pend attributa able to r & total reve es; Mobile vide eo calling user rs, end user spend & adver rtising spend VoIP & total revenue mVoIP handset forecasts are split t by 4 countr ries (US, Can nada, UK and Japan), by 8 key regions and by ervice provide er type (MNO O/Third Party y). RCS/RCS-e forecasts additionally a offfer datapoint ts for a OTT se further 9 countries (Brazil, France e, Germany, It taly, Spain, Rus ssia, China, So outh Korea an nd India).

Jun niper Resea R arch L Limite ed

Juniper Research spe ecialises in pr roviding high q quality analyti ical research reports and c consultancy se ervices to the telecoms ind dustry. We have h particula ar expertise in the mobile, wireless, broadband and a IPgence sectors. Juniper is independent t, unbiased, and a able to draw from experienced senior converg manage ers with prove en track recor rds.

Public cation Deta ails

Publicat tion date: Dec cember 2012 Author r: Anthony Co ox For mo ore informatio on, please cont tact: Michele e Ince, Genera al Manager michele.ince@ju uniperresearc ch.com Juniper Research Ltd d, Church Cot ttage House, C Church Squar re, Basingstoke e, Hampshire RG21 7QW UK Tel: UK K: +44 (0)1256 6 830001/475656 USA: + 1 408 716 548 83 (International answering g service) Fax: +44(0)1256 830 0093 Further r Executive Br riefings and whitepapers can n be downloa aded at http://w www.juniperr research.com Page 4