Four Battles that Will Shape the Future of Voice Services

In order to gain insight into the future dynamics of the enhanced voice market, a U.S. businessperson need only hop on a plane and travel across the Atlantic. Europe has a more advanced telecommunications infrastructure and services offering, as well as much broader wireless penetration than the U.S. The European market offers a unique window for previewing new trends and is an important leading indicator of similar developments in the U.S. and elsewhere. This article addresses four conflicts in the European market. How these “battles” are resolved will create opportunities that will fundamentally shape the future of voice services. 1. Young vs. Old
Europe has a higher wireless penetration than almost any other region in the world, with mobile penetration exceeding 70 percent in every Western European market except France and Germany, according to theYankee Group. Much of this penetration is due to the youth market. The latest figures from NOP Research Group show that 65 percent of 11-to-12-year-olds and 23 percent of 9-to-10-year olds in the U.K. have mobile phones. Wireless marketing companies run advertisements targeting pre-teens in media outlets like Nickelodeon and Children’s BBC, while text message campaigns - with advertisers including beer brands, record companies and broadcasters - target the teen and young adult market. Colin Strong, director of NOP Business says, “The British love affair with the mobile phone continues apace. The young in particular see the mobile phone as the ‘must-have’ and we can expect to see further growth in this area due to the immense pester power from kids.” There is no question that the youth market is a ripe demographic for wireless carriers and that carriers recognize the opportunity. Yet, strangely enough – short of data services like WAP games and SMS – the majority of voice and data services available in Europe today are designed for adults. While the younger generation is adept with technology, they do not have the patience to learn about services that are not designed with them in mind, and carriers ignore this audience at their own peril. The Yankee Group estimates that 35% of Americans age 10-19 will be armed with cell phones by 2002. How carriers and their suppliers – both in Europe and abroad – respond to this opportunity will determine their future success. 2. Consumer Brands vs. Carrier Brands
Two trends are emerging in Europe that could fundamentally alter the carrier’s relationship with its customer: the rise of Mobile Virtual Network Operators (MVNOs) and the prominence of handset makers. The best-known MVNO is Virgin Mobile. Launched in the U.K. in November 1999, Virgin Mobile utilizes One2One’s network, but manages all of its own sales, customer care, order fulfillment, and payment processing, as well as product and service development and marketing. Virgin has effectively leveraged its global brand to quickly become the fastest-growing carrier in the U.K. and the fifth-largest operator. Among handset makers, Nokia is taking the most aggressive stance in reaching out directly to consumers. Its Club Nokia portal, a marketplace for selling content and services, claims approximately 10 million members. Nokia estimates that the number of active Club Nokia members will grow to around 50 million by 2004, with Club Nokia revenues reaching EUR 1 billion in 2004. The personalized portal and retail stores are having an effect, with some European consumers now asking for phones by brand name – then selecting their carrier. In this “battle of the brands,” companies like Virgin and Nokia threaten to drive a wedge between carriers and their most precious asset – their customers. Carriers need to reinforce and boost their own brand through highly personalized, customized and interactive voice services or they risk becoming wholesalers to MVNOs or handset makers. 3. Handset Value vs. Network Value
Carriers have been subsidizing handsets for decades in order to lure otherwise hesitant customers into wireless service contracts. But the days of $200 per phone subsidies may be coming to an end. With carrier margins falling, Vodafone became the first major telco to pull the plug on almost 10 years of multi-million dollar subsidies. Now, more than ever, carriers and handset makers are competing to get into the customer’s wallet. Each is providing wireless users with new, compelling value-added services in order to entice new customers to buy their feature-rich phone or feature-rich service plan. And, from a customer’s point of view, how the service is delivered is irrelevant. As the Kelsey Group says, “users don’t care whether the voice-activated dialing (VAD) functionality they receive is from a server in the network or from embedded speech recognition on their phone. It just needs to work.” To suppliers, however, it makes all of the difference whether the service is an embedded or an in-network solution. In this new world order, carriers must have a flexible infrastructure that delivers the services that customers want, with the type of billing that makes sense. European carriers, who have the advantage of a more mature infrastructure, already have a flexible billing system. U.S. carriers offering network-based services need to do the same, enabling customers to pay in any number of ways: pre or post-paid, flat fee, packet-based, minutes of usage, per call or per download basis. When the always-on wireless Web of voice and data becomes a reality, carriers will have to support it with the right services and the right billing structure to address their customers’ needs. While handset makers and carriers are both in a position to provide a compelling value proposition to consumers, the winners will be the providers who best understand user needs and are able to provide a seamless user experience. 4. Fixed Carriers vs. Mobile Operators
Perhaps nowhere is the conflict between wireline and wireless carriers more clear than in Europe. In Sweden, for example, 80% of the population uses a wireless phone and number portability is a way of life. This creates a loyal base of mobile users and very little incentive for consumers to own a wireline phone. The Carmel Group predicts the number of cell phones worldwide could eclipse the number of traditional land lines by 2006, with Asia and Europe leading the way as heavy adopters of wireless technology. As wireless usage gains momentum across the globe, it is imperative that wireline carriers come up with competitive services in order to maintain and grow their customer base. Telia, for example, has introduced a fixed line voice dialing service in Sweden that costs users $3/month. The voice dialing service integrates with a personal address book, enabling voice dialing from any wireline phone. It is this type of innovation that will enable wireline carriers to compete with wireless carriers in an increasingly competitive space. As these four battles play out in the coming months and years, a new landscape will emerge. Carriers will need to make tough decisions, including choosing vendors to provide the next generation of voice services. Will local suppliers, who know the culture and language, and have built-in relationships, best meet carrier needs? Or will global vendors, with easily integrated open standards-based platforms and components win the day? The results of these types of decisions will shape tomorrow’s telecom landscape, creating new carrier brands, new customer relationships, a whole new array of value-added services, a smaller, stronger combination of technology-enabling vendors, and renewed innovation by wireless and wireline carriers competing to earn the business of consumers.
Amol Joshi is co-founder and vice president of marketing for BeVocal and a recognized expert on the voice portal market. Amol can be reached at amol@bevocal.com.
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