Thursday, May 25, 2006

VoIP substitution

Because I started my professional life in the GSM industry, working from a very central position in a clearing-house, I have been watching the impacts of the web on the telecoms business with a lot of interest. Judging from my own choices as a consumer (and I do not suggest for a minute these reflect general trends, but then again I must be part of some segment of the market so it may not be that insignificant), I would bet that the impact of VoIP on the traditional telephony businesses is one of enormous substitution; here are a few facts:

  1. my telco bill is 80% lower today than it used to be before I started using Skype, while I am definitely spending more time speaking to people on "the phone";

  2. in my business I have been speaking Skype-to-Skype and chatting with customers and prospects instead of placing phone calls. In fact, less than 20% of my calls to prospects, customers and business partners are with a traditional phone (my accountant is not online yet, but I am working on it)

  3. when travelling abroad, I am now using my mobile phone for less than one call out of three, when a few years back there was no choice. In a recent trip to Luxembourg, I placed all my calls using Jajah with a cost advantage over roaming that I assess to be in the region of 85% to 90% (by the way roaming is a rip-off and it's good the Commission of the EU is working on it IMHO)

Today I came across the intetresting account of a study done in Japan that tends to show that Skype increases consumption of telecoms more than it is a substitute for traditional telco services. I agree with the author of the post that this study is probably missing something important. Indeed prospects are getting darker for traditional telco operators who will be under enormous pressure to review their business model and that heralds a big shake-up of the industry.


  1. I don't think your assessment of roaming services is really fair. Granted, I also work for the GSM industry but quite honestly, I find it dangerous to jump on the "let's-blame-roaming" bandwagon.
    I wouldn't call roaming a rip-off because, having a fairly business-oriented mind, I do believe that the fair price of a product or service is what the market is willing to pay for it. And people who travel have definitely been willing to pay higher prices to be able to use the same phone number wherever they are.
    To achieve this level of service, the GSM operators did in fact spend significant amounts of money and it is only fair that they make a profit out of their investments.
    Nowadays other substitutes are out there and can provide travellers with the same kind of benefits roaming does. Hence the roaming fees drops we have already witnessed this year (and there is more to come, no doubt about it).
    The current situation with roaming reminds me a bit of the music industry with one big difference. Although the music industry has been busy fighting a pointless fight trying to stop the technology that will change its traditional business model, the GSM operators have understood the changes that are coming their way and are trying to embrace them in order to harness their next business environment.

  2. Phil,
    The difference between the "point-to-point",circuit switched world GSM operators have been used to and the IP world is that you cannot "harness" a business environment in the open world of the Internet. I understand how difficult this world is for GSM operators (particularly those who paid UMTS licenses several years ago)...
    The point of the fact though is that, in the ***past***, people were more or less compelled to pay outrageous prices because there was no alternative. Today, there are many alternatives and that's just great.
    I personally intend to drive my roaming bill as low as it can possibly get :-)

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