Neutral Wireless Networks Will Mean Higher PricesAs SMS and voice revenues get eroded, expect a constricted pipe...
04:14PM Tuesday Oct 20 2009 by Karl Bodetags: competition · business · hardware · Op/Ed · wirelessWith the FCC poised to extend network neutrality principles to wireless services, and carriers like AT&T
now allowing Skype over 3G, mobile VoIP is finally gaining traction. It will be a slow climb, suggests
Gartner Research. According to Gartner, 50% of mobile voice will be VoIP end to end by 2019, and 30% of mobile voice traffic will originate via content websites that have embedded the functionality into their services. Instat research meanwhile suggests mobile voice apps will generate
annual mobile VoIP revenues of $32.2 billion by 2013. What's this mean for you, the consumer? Higher wireless data prices, says Instat:
"Currently, many high-voice usage customers are business customers," Nogee said. "These subscribers likely wont switch to VoIP in the near-term as their business pays for their service. Still, the AT&T announcement will have long-term implications for the current U.S. cell phone billing model. If AT&T and other operators cant charge high prices for voice, they will likely make it up by raising prices for data."
As we
discussed last week, when consumers begin using the apps and devices of their choice over truly neutral networks, things start to change drastically. IM programs make SMS irrelevant, killing a huge telco
cash cow. Mobile VoIP and programs like Google Voice also eventually threaten the telco voice minute pricing models, going so far as to take the dialing mechanism itself out of the hand of incumbent phone companies. How will wireless carriers respond to a loss of power as traditional "service" companies? Higher wireless data prices.
Ideally, you'd like wireless carriers competing for your business by offering lower data prices, but as the industry's collective 200% SMS price hikes of recent years indicate, it doesn't usually work out that way. Prices charged are usually completely unrelated to actual costs because, like the terrestrial broadband industry, the wireless data sector is
considerably less competitive than carriers would like you to believe. With concentrated control by just a few major players and tools like long term contracts and early termination fees, it makes it easy to engage in non-price competition (and offer
sub-par service) without any real penalty.
This lack of substantive competition means users can expect ever higher overages and lower caps as networks become more neutral -- even as wireless bandwidth gets more abundant and less expensive to deliver. You can expect wireless data prices to rise as the industry's biggest players counter the threat of consumer choice with the only weapon they'll have left when it's all said and done: the pipe itself.