The Death of Voice
4G LTE's ability to offer voice calls virtually free threatens to disrupt existing business models
4G LTE’s ability to offer voice calls virtually free threatens to disrupt existing business models
A1998 book, The Death of Distance, by Frances Cairncross, flagged the imminent and impending end to astronomical long distance voice call rates. Rapidly-evolving technological and networking trends – like multiplying computing power, high-capacity optic fibre cables criss-crossing the world and emerging capabilities of packet networks using the Internet Protocol ( IP) standard – were behind this “death”.
Almost two decades later, the Indian telecom sector is staring at another “death” – of voice. Voice is the killer app that rakes in over `1,50,000 crore a year in revenues for mobile companies. A combination of factors is threatening to upend this.
Technology is playing a major role once again. Today, the 2G and 3G networks carry billions of minutes of voice traffic daily. According to a September 2016 report by Trai, the average revenue per user ( ARPU) on GSM networks was `121 per month. Voice calls (bundled with rentals) accounted for `82 per user per month. A measly `29 came from data.
However, this voice traffic (which accounts for the lion’s share of profits) continues to be transported on old technologies on networks set up over the past 20 years. 2G and 3G mobile networks have to create dedicated pathways for voice calls. And the call occupies a full circuit (or link) between two calling parties at each end. This requires bandwidth (capacity) to be reserved for the entire duration of the call (hence measurement in minutes).
This is set to change with the recent launch of disruptive fourth generation ( 4G) mobile network based on long-term evolution ( LTE). LTE players are offering “free” voice calls. Many see this as a gimmick and an entry strategy – nothing can be free. But LTE brings in huge technological advantages. For starters, the network has no legacy technologies in the core. It uses very efficient transport techniques based on end-to-end IP.
A 4G LTE network also uses only packet switching and transforms voice into small packets before shooting them at high speeds over the network. Thus, a dedicated circuit or line is not required. Data packets (measured in kilobytes or megabytes) are sent from one end to the other – carrying voice, video, sound or text. And many users can share the same line. This improves capacity significantly. Everything (even voice) is now a packet of data. Minutes of use have little significance – it is all megabytes, gigabytes and terabytes.
This has created a tremor in the sector, as it will inexorably move the cheese away from the `1.5 lakh crore voice business. The economics is frighteningly simple.
On this full IP network, a traditional voice call of one minute corresponds to a data packet of about 0.2 MB; it could be even lower as compression at the edges improves. So, 1 MB data can effectively carry almost six minutes of calling.
Trai’s September 2016 data show an average monthly usage of 366 voice minutes per user. Even if we assume 400 minutes of use, this translates into consumption of approximately 70 MB data per month on voice calls. Permitting for variables like high vol-
Voice is the killer app that rakes in over ` 1,50,000 crore a year in revenues for mobile companies. A combination of factors is threatening to upend this.