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MNO Strategies to Combat Substitution

The high cost of international telephone calls between licensed carriers has long provided the incentive for other players to utilise alternative routes to deliver lower cost services. This has led to the development of grey routes, refiling, arbitrage and, more recently, the internet to provide lower cost alternatives. User access services via these channels frequently required the use of calling cards, lengthy access codes or PCs.

The spread of broadband mobile access with good coverage and the introduction and widespread adoption of smartphones has facilitated the development of easier means of accessing low cost bypass services through the use of apps. Providers of bypass VoIP services such as Skype and Truphone have created apps for their services, making them very much easier to set up and use than was previously possible. These developments represent a significant threat to mobile operators' revenues, especially for international and roaming traffic. There have also been regulatory developments that affect the operators' ability to respond to the threat. These include FCC and EC action on net neutrality and EC action on mobile termination and roaming.

This report looks at the nature of the threat, the regulatory environment and market behaviour, and assesses the extent of the risk and recommends actions operators can take to minimise its impact.

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Table of Contents


1
Overview
1
2
Introduction
2
2.1
Background to the Report
2
2.2
Report Content
3
2.3
Currency and Conversions
3
3
Bypass Services and Smartphone Apps
4
3.1
Introduction
4
3.2
Bypass Service Approaches
4
3.2.1
International Connectivity
4
3.2.2
Local Access, Handsets and Apps
5
3.2.3
Roaming
5
3.2.4
Messaging and Social Networking
6
3.3
Bypass Services Using Apps
6
3.3.1
Skype
6
3.3.2
iCall
7
3.3.3
My Global Talk
7
3.3.4
Truphone
8
3.3.5
fring
8
3.3.6
Others
9
3.4
Pricing
9
3.4.1
MNO Pricing
10
3.4.2
User Costs
11
3.5
Target Markets
12
4
Market Drivers and Demand
13
4.1
Introduction
13
4.2
Market Uptake - VoIP and Skype
13
4.2.1
Market Uptake Appeal and Constraints
13
4.3
Ease of use
15
4.4
Quality of Service
15
4.5
Promotion and Awareness
15
4.6
Price Elasticity
15
5
Regulatory Developments
19
5.1
Introduction
19
5.2
Net Neutrality
19
5.3
Roaming Charges (EU)
21
6
MNO Responses to Bypass Services
22
6.1
Introduction
22
6.2
MTRS and Roaming
22
6.3
Bypass VoIP over 3G
22
6.4
Innovative MNO International and Roaming Charges
23
6.4.1
International Charges
23
6.4.2
Costs to Users
24
6.4.3
Roaming
25
6.5
Quality
25
7
Key Findings
26
7.1
Substitution Services
26
7.2
Uptake
26
8
Conclusions & Recommendations
28
8.1
Conclusions
28
8.2
Recommendations
28