VoLTE – Opportunity, Opportunity, Opportunity

Filed in LTE, Roaming by on December 19, 2016 0 Comments

As I stated at the end of my previous post on VoLTE – from complexity comes great opportunity. However, it is not enough to understand the extent of VoLTE’s complexity; you also need to have the capability, the appetite and the guts to harvest the opportunity and to turn it into hard cash. The road to end-to-end VoLTE is a long and arduous one, in terms of technology, systems, business model and know-how.

So the question that begs to be answered is this: Is it a worthwhile journey?

As you will see if you keep reading this post, I strongly believe that it is, if you are serious about future-proofing your voice business.

Therefore, in my second post in a three-part series on this topic, I will outline my views here on the true potential of supporting international VoLTE. I will then conclude by giving you a glimpse into what other innovative services could be offered in connection with simple VoLTE termination and roaming services.

Money, money, money
At the end of the day, it all comes down to money and the true potential that VoLTE represents down the line for all the stakeholders of the voice ecosystem. So let’s talk numbers.

VoLTE subscribers
We are starting to see some traction in regard to LTE services across the globe, with LTE networks popping up on six continents. As we stand today at the end of 2016, over 520 LTE networks have been deployed across the world.

Also, at present, we estimate that 20 percent of the world’s mobile subscribers currently use LTE technology, which accounts for 1.5 billion people. This number is expected to more than double by 2020. So far, so good.

But what is of real interest to us is how many of these people will have access to VoLTE services in their respective country, while also using a VoLTE-enabled device to communicate. We estimate that over 100 LTE operators will be offering the VoLTE service by the end of 2016 and over 400 smartphones supporting LTE are on the market.

Therefore, based on our forecasts, we believe that there are currently 443 million VoLTE subscribers spread across the globe at the moment and that this number is estimated to grow five-fold by the end of 2020.

As a result, the number of VoLTE subscribers will start to be sufficient to make a mark in 2018, as shown in the diagram below. Nevertheless, it will take time for real traction to take place. We therefore do not expect any significant growth in VoLTE interconnect until usage has spread more widely across Asia, the true springboard for the world’s VoLTE growth.

volte_opportunity_chart1Source: HOT TELECOM

VoLTE traffic termination
The time frame for a major uptick in international VoLTE traffic is somewhat uncertain and is not necessarily directly correlated with the pace of growth of VoLTE users. As stated in my previous post, it is not always the case that when a mobile operator offers VoLTE within its home country that it will also support this capability for international or roaming calls.

For this reason, we believe that there will be a delay of about two years between the time when national operators actively deploy VoLTE in their native market and the time when they will enable it internationally.

Additionally, it will take some time for calls to be truly VoLTE end-to-end. For some time to come, the majority of the VoLTE calls may be initiated on a VoLTE device and network, but they will either terminate on a non-VoLTE-enabled mobile device or network or they will terminate on a fixed device (which by definition is not VoLTE-enabled).

So, the traffic growth of VoLTE may be interesting, but the true VoLTE-to-VoLTE calls will not gain traction before 2020 in our opinion.

Consequently, we estimate that international VoLTE calls will represent 11.9 percent of all international mobile calls by the end of 2018, and that this will increase to 28.2 percent by the end of 2020.

On the other hand, VoLTE-to-VoLTE calls will represent a mere 7.2 percent of all mobile calls by the end of 2018, and we expect this ratio to increase to 15.3 percent by the end of 2020.

Finally, as outlined in the diagram below, the majority of the VoLTE traffic will be terminated in Asia and Europe.

volte_opportunity_chart2Source: HOT TELECOM

So, the opportunity is definitely there for operators and wholesalers to benefit from offering and supporting international VoLTE termination, but the real requirements will not appear until 2018. And this in some way is good news, as it gives international wholesalers and IPX providers the time to deploy and fully test their VoLTE international solutions, which is a pretty complex endeavor to say the least.

VoLTE traffic roaming
On the roaming front, there are even more unknowns, as the complexity to support such an endeavor is significant. Multiple issues still need to be resolved:

  1. What type of roaming methodology will be used by each operator – local breakout (LBO) or S8 home-routed (S8HR)?
  2. If the S8HR roaming methodology is chosen, will it use a service-aware IPX transport link or not, to send the media back to the home network?
  3. Will a mix of different roaming methodologies be used by different mobile operators – all in parallel?

All of the above will impact the amount of VoLTE roaming traffic that will be transported by the international wholesalers.

For example, if the LBO roaming option is applied by all, we estimate that the VoLTE international roaming traffic will reach 8.9 billion minutes by the end of 2020, representing 2.9 percent of the total international wholesale traffic.

Alternatively, if the S8HR methodology is used and the operators decide to transport the media back to the home network using a non-service-aware IPX transport facility, the traffic generated by VoLTE roaming and transported by the wholesalers using the per-minute charging model would drop by an estimated 80 percent. This would represent a loss of 7.1 billion minutes for the wholesalers in 2020 – not a small number.

This is mainly because the large majority of calls made by roamers are terminated back on the home network and would be terminated by the home operator via IPX transport links. The remaining calls would be terminated at their destination using the usual per-minute international agreements.

And if a mix of the above is to be implemented by different operators, the answer lies somewhere in between, although it becomes almost impossible to forecast how much VoLTE roaming traffic the wholesalers would transport on their network on a yearly basis.

VoLTE revenue
Finally, we come to the heart of the matter – the money.

Based on what we know today, we understand that it will take some time for the VoLTE revenue stream to really take off, and it is understood that most of this revenue will be the migration of already existing traffic from 3G to 4G – so not necessarily new revenue. Consequently, if you choose not to support the migration from 3G to 4G when it comes to voice, it is obvious that at one point you will become irrelevant to your mobile customers.

We estimate that by 2020, the VoLTE-to-VoLTE international wholesale termination revenue should have reached $1.4 billion (accounting for 14.7 percent of the total). This is in comparison to $4.1 billion for VoLTE termination at the same period, accounting for 43.2 percent of total international wholesale voice traffic, not an insignificant number by any means.

On the other hand, we estimate that the roaming revenue, if using LBO, will reach $155 million and the roaming revenue, if using S8HR, will reach $31 million by the end of 2020. (This $31 million does not include revenue generated by usage on the IPX transport link.)

volte_opportunity_chart3Source: HOT TELECOM

The true value of complexity
Now this is all well and good, but if the per-minute business model disappears and is replaced by a data-oriented business model, such as paying for the port only or the volume of IP data transported, the revenue that wholesalers will generate from supporting VoLTE will pale in comparison to the estimates we have outlined so far. Wholesalers will therefore need to find a way to fill the revenue gap.

From my point of view, this can be partly attained by offering solutions that tackle some of the complexity that comes with VoLTE.

Enhanced routing
For example, for some time to come, multiple types of traffic originated using different types of technologies that will need to be transported to destinations that themselves will vary greatly in nature.

Some examples:

  • Calls originating in VoLTE but terminating in TDM (and vice versa).
  • Calls originating in VoLTE but terminating in non-VoLTE IP (and vice versa).
  • Calls originating in VoLTE and terminating in VoLTE.
  • Calls originating in VoLTE and terminating in VoLTE but using a data-centric charging model.

Each of these types of calls will not require the same kind of treatment, and a wholesaler might want to offer different quality, routing and business models depending on the nature of the call. To implement this would certainly require an enhanced call-by-call routing option. This could be of value to operators, and this facility could therefore be charged for on top of the charge for transporting the media.

Quality-of-experience optimization in real time
With the complexity that will come with VoLTE comes the challenge of ensuring end-user quality of experience at all times, and this challenge will be even greater when roaming.

Consequently, there is an opportunity for wholesalers to develop real-time tools and solutions, which would enable the constant monitoring of the end-user quality of experience when roaming, and to then take immediate action if required. From the VoLTE point of view, this could entail actively switching the user to a 3G network, another VoLTE network or even Wi-Fi if the quality of experience diminished below the threshold that the VoLTE customer is accustomed to.

As customer experience is everything to operators at the moment, it is not unrealistic to think that such a solution would have value and could therefore be charged for on top of the media transport fee.

At the end of the day, I think there will be no way of stopping the evolution of the business model away from a per-minute charge. The train is already in motion and it will be difficult to stop.

To this end, wholesalers and operators alike need to start to consider ways to monetize their VoLTE customers above and beyond transporting the basic media. In my opinion, this is where the true long-term value of supporting VoLTE lies.



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About the Author ()

Isabelle is President and Founder of HOT TELECOM, one of the most innovative and creative telecom research and consulting companies in the industry. HOT TELECOM has been supporting Tier 1 and Tier 2 operators on a global basis for over 14 years, particularly in the international and wholesale areas. Most recently, Isabelle has been working with many of the world's global wholesalers and service providers to help them define their transformation strategy. She has published a number of articles and reports on the subject and has spoken at numerous conferences to share her views on the future of the wholesale business. Isabelle holds a bachelor’s degree in engineering and an MBA in finance, and she has over 20 years of experience.

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