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Telco-OTT Today | April 26, 2017

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The fixed line fight back

By Sean Jackson for Telco-OTT Today | July 21, 2014

The fixed line fight back

Are we on the verge of seeing most mobile calls made indoors connect via Wi-Fi?

BT has just announced the One Phone, at present it is targeted at business users, but a consumer launch is in the works apparently. Though not billed as a Wi-Fi first service, the carrier highlighted its “five million BT Wi-Fi hotspots” as a key benefit for this service. It looks like connecting via Wi-Fi wherever possible but ‘falling back’ to cellular (EE’s LTE in this instance) when necessary will be key to the success of the service. BT tried and failed to get back in on mobile in 2005 with the Fusion, just under a decade on, why should the One Phone be any different?

Let’s take a large step back in time. In 1995 mobile penetration in the UK stood at seven percent, mobile phones and calls were still relatively expensive and a fixed line connection was the primary means of mass market voice telephony. Over the course of the next ten years mobile penetration in the UK would rise to over 100 percent and cellular communications would become the dominant force.

In 2004, the Fixed Mobile Convergence Alliance formed “to encourage the seamless integration of mobile and fixed telephone services”. Mobile phone ownership was, by this time, the norm. But fixed connections had not dwindled. On the surface, FMC seemed to make sense for consumers. The prospect of connecting to a landline at home to take advantage of cheaper minutes and connecting to cellular services when out and about looked compelling. Here was a way that fixed and mobile could work together in perfect harmony.

FMC though would prove technically challenging and ultimately of little interest to consumers. The economic benefits of landline calling were reducing rapidly as mobile operators fought aggressively on price for market-share. For most people the convenience of using a device that contained an address book with all of a subscriber’s contact numbers, outweighed the marginal financial benefit of getting off the sofa to use a fixed telephone in the home.

In truth, even before the FMCA had founded in 2004 the transition from a reliance on fixed to an obsession with mobile was well under way. Connecting to a land line then being able to walk out of a building front door and seamlessly connect to cellular networks was not a powerful enough proposition to mean FMC would ever take off. The FMCA was disbanded in March 2010.

It’s funny how things go in cycles. Here we are less than five years after the FMCA closed its doors and it looks like we’re approaching another tipping point that could see mobile connections move from back from cellular to fixed line indoors.

In the home and office, the fixed line connection seems poised to win back voice traffic at the expense of mobile networks. Why? Well, Wi-Fi. Wi-Fi is in almost every home and every office, it is available in coffee shops, pubs, train stations, airports and it’s in every mobile device. The majority of people automatically connect to home/office Wi-Fi when they walk through the door as Kineto discovered in its global survey and Telco-OTT discovered in our survey of journalists and analysts at Mobile World Congress.

VoIP is not new, of course, people will use Skype and its contemporaries where there is a cost benefit, but mobile has remained in pole position at home and in the office because it offers higher quality calls and convenience. However, the emergence of so-called Wi-First carriers such as Republic and Scratch the US where subscribers make the majority of their calls over Wi-Fi (91 percent in the case of Scratch) demonstrates there is a clear demand for the model.

Wi-First carriers promise lower total cost of ownership for subscribers, arguing that since the majority of calls are made at home or in the office where Wi-Fi is practically ubiquitous there should be zero cost for calls. They do, however, charge a premium for cellular calls when out of Wi-Fi range (the US Wi-First carriers are MVNOs on the Sprint network).

There is a market for Wi-First, but it is not mass at this point since (as with FMC offerings such as BT Fusion in the past) the choice of handset is severely limited and the cost benefits are not compelling enough to drive mass market adoption. Two truly mass market offerings in the UK come from EE and 3UK who have both recently announced Wi-Fi Calling services similar to the Wi-Fi Calling Sprint launched in the US in February. The majority of people (89 percent) who own a smartphone already automatically connect to Wi-Fi at home or in the office, so it just makes sense to redirect calls over that channel.

Subscriber behaviour drove mobile/fixed substitution at the turn of the century and it is poised to drive it back in the opposite direction indoors. In less than five years’ time from now people will think nothing of connecting to Wi-Fi to make ‘mobile’ calls over fixed lines, and we will have seen the pendulum swing back in favour of fixed for voice telephony indoors. Cellular, of course, will still be essential for the majority outdoor situations. But most people make most of their calls at home or work indoors using a mobile device. Perhaps a genuine FMC proposition will see the light of day after all. The One Phone is a step in that direction and a clear marker that the sleeping fixed giants are stirring back into life.

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