Monday, 26 December 2011

Free Calls For All! Why Mobile Operators Panic The End Of Phone Or International Calls

The use of BlackBerry Messenger in the riots gave an insight into the two-tier mobile society - where lots of people have discovered ways to stay in touch virtually for free. Operators worry more will follow suit

The August riots pushed the popularity of BlackBerry Messenger into the public consciousness, with the teenagers' mobile (or "mobe") of choice revealing itself as the perfect tool for organising spontaneous – er – mobbing.

Until the chaos erupted, I suspect most of BlackBerry's suit-wearing users, who rely on the phones for their office email, had little idea that the gadgets had taken off with such a different demographic.

But those without companies to pay their phone bills have found a way to get something for almost nothing – and legally. Armed with an unlocked, secondhand BlackBerry and a SIM-only contract from T-Mobile costing just over £10 a month, BBM (BlackBerry Messenger) messages are free and unlimited. If all your friends are messaging, there is no need to spend any money at all on calls and texts.

The way we use our phones is a neat example of a two-tier society, and BBM is just the tip of the second tier. In the jungle of applications now available to smartphone users, those that use the internet to offer free calls or messaging are emerging from the undergrowth.

Mobile phone networks have been worrying for some time about how these "free" services would eat into their profits once they became mass market. A quick look at the numbers now using them suggests the threat is no longer theoretical.

What App, based down the road from Google in Mountain View, California, is a text message alternative that works on most handsets, including BlackBerrys, iPhones, Android and Windows Phone devices. Launched in 2009, it uses 3G or Wi-Fi, has been downloaded onto more than 10m phones, and now carries over 1 billion messages a day. (That compares to about 6bn SMS messages sent daily in the US alone.) It can carry text, but also photos and videos, saving a packet on the extortionate fees charged by operators to send a picture message.

Viber, which offers free international calls and text messages, has been downloaded 30m times. Rebtel, with a similar service, has 14m users, and video calling application Tango 20m followers.

"Over-the-top" services (so-called because they piggyback on the mobile phone networks without bringing them any revenue) have come out of the trenches and are rushing headlong towards us.

There are stumbling blocks. Because they are free, these over-the-top services do not yet make big money for their creators. There are exceptions: Rebtel, which can connect you to a phone not on its network and charges for that, has revenues of $60m a year. With a swathe of rival brands competing for our attention alongside similar products from big beasts like Google and Facebook, many will fall by the wayside.

And of course using WhatsApp or Viber is only free if the person at the other end subscribes. Like Skype, which also has a mobile offering, they are only useful for communicating with people you are likely to speak to on a regular basis.

Whatever the hurdles, the numbers are growing. Downloading WhatsApp this week, I found that out of over 900 work and personal contacts on my phone, some 70 are already signed up. Less than 10% but more than I expected

At the Telco2.0 conference in November, senior executives from the telecoms industry were polled and predicted text messaging revenues would decline by 37% in three years, and voice revenues by 21% over the same period. They blamed cuts imposed by the European Commission on the price of calling a mobile, as well as competition from rival operators. But the biggest factor, they believed, would be responding to price pressure from over-the-top alternatives.

In fact, 2011 has been a year of mobile phone tariff inflation, as the likes of T Mobiles, Vodafone, Orange and O2 try to mitigate the impact of the price cuts imposed by European regulators.

Working out how to maintain revenues at their current levels is a multi-billion dollar question. But price increases in cash-strapped times may simply drive more consumers into the arms of free alternatives. The two-tier mobile culture is here to stay.


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