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Thoughts on Convergence

Posted by on 08.26.05 | 1 Comment

There’s been a lot of talk lately about converging mobile and fixed lines with technologies like UMA. The common thinking goes that mobile networks will grab traffic from fixed lines when users can take advantage of the benefits of mobile networks and the cheap prices of fixed VoIP in a single device — but I’m beginning to get a little skeptical converged products will live up to the hype.

There’s no doubt that something like UMA sounds great. I’d love to be able to get the rates of my Vonage connection, particularly on international calls, on my mobile phone from any hotspot. Just thinking about what that could do to ridiculous international roaming rates sounds great, too. But there are a couple obstacles I see. First is the assumption that converged mobile services will grab a lot of traffic from fixed lines. One study recently said that two-thirds of Western European mobile calls are made from the home or office, which says to me that people aren’t always choosing the cheapest alternative.

Granted, there’s a lot of uncertainty in drawing my conclusion solely from this figure — there’s no distinction between incoming and outgoing calls, for one thing, and it gives no indication of how many calls still go out over the fixed lines. So are users as interested in always using the lowest-cost option as we assume? Perhaps that’s where the automatic technology can come in, choosing the lowest-cost network available at any given moment. But that can create a pricing problem, since it may not be clear how much a user’s getting charged at any given moment.

The second, and bigger obstacle, is the carriers themselves. The iTunes phone has been conspicuous most by its absence, with some of the delay attributable to carriers being reluctant to introduce a device that essentially cut them out of the value chain. How will carriers with fixed-line corporate relations take to offering a product that will serve to cannibalize fixed-line revenue?

I’m expecting virtual operators to lead the way with UMA, and I wouldn’t be surprised to see them use it as a way to get into virtual broadband sales as well. I also expect incumbent carriers to resist offering it as long as they can — after all, why cut prices unless you have to?

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