Monday, June 18, 2007

Mobility + VoIP = $$$ Calls

This equation doesn't sound right, does it? Calls are supposed to get cheaper with VoIP, right? A lot cheaper. That's what all of us want - unless you're an incumbent, who typically doesn't want to change the status quo unless it's for the better.

That seems to be what's happening with startup Truphone and wireless giant, T-Mobile. The details are well covered by bloggers closer to this space than me, notably Om Malik, Alec Saunders and Thomas Howe. Their posts will tell you more than you need to know about how T-Mobile is blocking traffic from Truphone in the U.K. unless they pay the price they set to access their network.

I'm not that steeped in the technical and regulatory issues around this - especially in the E.U. market - but it just looks like VoIP all over again. We all know VoIP is better and cheaper, and it poses the same threat to the wireless operators as it did to the wireline carriers a few years back. Economically, there is zero incentive to embrace it - at least until a tipping point is reached - and that's a long way off in the wireless world. In the wireline world, it looked like Vonage would create that tipping point, and maybe they did psychologically, but the real inflection point in the U.S. came with the cablecos, and now the RBOCs have no choice but to fight back.

Oligopolies behave the same regardless of what industry they're in, and T-Mobile's behavior here is exactly what one would expect from someone who holds all the cards. Wouldn't you? They have the customers, they own the network, business is booming, and profits are fat. Truphone may have a great solution, but right now, they're a pesky annoyance, and T-Mobile can afford to act like the schoolyard bully and basically hold them ransom. Sure, Truphone can interconnect, but only at a price that loses money.

At this point in time - as good as Truphone's offering is - and it's great - a full house beats a pair of 10s - which is about how this hand looks to me. T-Mobile will win this hand, but if Truphone can stay in the game long enough, things will go their way. Until the mobile carriers feel a lot more pain, the Truphones of the world - and there are a few - will have a tough go.

That's why it's so important for anyone following this space to be supportive and remind anyone who's listening that history repeats itself. What happened with landline VoIP will happen in the wireless world, and solutions like Truphone are the enablers. If they can find a way to hang in long enough, their turn will come.

On that note, what makes this story rather concerning is the way T-Mobile can be so arbitrary about this - because they can. It's not unreasonable for the owner of the pipes to set the price for using them, and with limited competition, it's clearly a seller's market. However, T-Mobile is now an investor - along with Intel - in Jajah. You don't have to look far to find out what that's about, and it doesn't take much to see that T-Mobile is simply protecting their investment here. Again, a perfectly reasonable thing to do.

Fair enough. But let's see what happens if somehow, Truphone could make their own deal with another wireless carrier and will only take Jajah's traffic at a certain rate. I don't think things would - or could - unfold this way, but at this stage of the game, Truphone needs to find some friendly ground and work it really well until the time is right to go up against the giants.


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1 comment:

ipcom said...

Posted by: T-Mobile + Truphone: Just the 1st of Hydra's heads

Blocking Truphone is like trying to cut all of Hydra�s heads. It�s not only Truphone which is offering VoIP over 3G and over Wifi. It�s also Fring, Wifimobile, Mobiboo, Yeigo, aql and thousands of other companies worldwide. In fact every SIP based VoIP provider can do a quite similar job like Truphone. It makes no difference if you install your SIP login data into a mobile phone or an ATA or a soft phone.