‘Free’ can sometimes be a pernicious word and is often the antithesis of real business.
It lies at the heart of the web 2.0 philosophy. Here it is often assumed that revenue will not be generated from the core service that a company is providing, but rather derived from ancillary or attached activities such as advertising. It seems that a service needs to get millions of customers to get sufficient revenue from low click-through rates. To achieve these high subscriber numbers the service needs to be free. There is an Alice in Wonderland type logic in play here sometimes.
It feels very peculiar to see that the kingpin of multimedia (which to me means multiple media voice video and information), voice, is currently experiencing a complete destruction of financial value. We all know that IP services are generally not profitable today due to low revenues and high costs, but I do wonder why everyone is jumping on this bandwagon and assuming that zero revenue voice is what the future is all about. This is not just a fixed wire-line issue but this will roll over into the mobile world as well.
Even though VoIP is just a technology it has always had the tag of being a particularly disruptive one from the very beginning and was highly resisted by many within the telecommunications industry for many years. We are now seeing some rather radical voice initiatives from the former telecommunications monopolies.
I read with interest the other day about AT&T’s Unity plan and wonder what the future holds. According to their press release:
AT&T Inc. today announced an unprecedented new offer, which gives subscribers the nation’s largest unlimited free calling community, including wireless and wireline phone numbers.
The AT&T UnitySM plan, which is available beginning Sunday, Jan. 21, brings together home, business and wireless calling, creating a calling community of more than 100 million AT&T wireless and wireline phone numbers.
AT&T Unity customers can call or receive calls for free from any AT&T wireless and wireline phone numbers nationwide without incurring additional wireline usage fees or using their wireless Anytime minutes. In addition to free domestic calling to and from AT&T numbers, the AT&T Unity plan includes wireless service with unlimited night and weekend minutes, as well as a package of Anytime Minutes.
Wow! If any carrier had announced such a package a few years ago they would have been thought of as rather crazy. In the 90s everyone complained about the destruction of core value from a number of carriers who undercut wholesale network charges (I guess this has somewhat stabilised in recent years) but this seems much worse to me.
This is complex issue which has its foundations, I would assume, with AT&T losing significant numbers of customers and revenue to free peer-to-peer voice services such as Skype on one hand, many more to wireless operators and still more to cable companies on the other. Most industry people believe in the mantra that the future lies in triple and even quadruple plays, as promoted by our own Virgin Media. But, if you have no customers to deliver these too then the future is going to be rather bleak!
Is this the reason why AT&T is discarding their future voice revenue? I find it hard to believe that on one hand every carrier is pursuing a converged IP-based Next Generation network strategy and biggest multimedia service of all, voice, will not contribute to revenue flow? Is this case of 2 + 2 not making 5 but 2?
I spent so much time in the 90s promoting VoIP technology and services but I never expected it to be this disruptive! Let’s look on the bright side. To me this narrowly focused strategic thinking creates opportunities for start-ups who are able to go in a different direction to the industry gestalt that is driving the majority of carriers.
Let’s also hope that the drive towards converged NGN networks based on reduced costs does not shrink revenues even more.