Internet-based phones vs telecoms

THE ability to use a regular mobile phone handset to make and receive free to ultra lowly-priced calls, text messages and multimedia messaging via the internet is now a reality.

The internet

Given that core revenue streams of Zimbabwe's telecoms companies flow from services which can be availed nearly for free on the internet, mobile voice-over-internet protocol and complimentary internet-dependent messaging pose a direct threat to these companies' very survival. VoIP (Voice over Internet Protocol) is a innovation that allows voice-based communications to be routed absolutely via the internet, by-passing the voice-transmission infrastructure of regular non-internet phone networks.

In the not-so-distant future we might witness power changing hands in the telecoms industry from regular mobile networks to internet service providers. ISPs that will innovate to provide affordable always-on mobile internet, providing good-enough internet bandwidth to enable voice and text messaging, will be crowned the champions of telecoms.

Already, some sections of locally-based Zimbabweans, especially the internet-savvy youths who have access to internet-enabled mobile phones, are beginning to embrace complimentary instant messaging services just as WhatsApp, Mixit and Nimbuzz. Canadian-based Innovation In Motion, manufacturers of the Blackberry phone, have evidently demonstrated the commercial power of driving their sales by turning text messaging into a complimentary service through their BlackBerry Messenger, a software application that allows users of Blackberry handsets to send free text messages to each other via always-on internet platforms. Major phone brands are beginning to carry instant messaging and VoIP capabilities.

That VoIP and internet-based text messaging capabilities could be extended to entry level mobile phones is not a far-off dream. It is this spectre of extending mobility to internet services to the low-end telecoms market segments in other words enabling internet-dependent communication to disrupt telecommunications incumbents just as Telecel, Netone, Telone and Econet.

The incumbents' perspective

From the incumbents' perspective, the estimated impact of internet-based communication innovation might be perceived as a minor threat to their current and future revenues. Such a strategic response could be suicidal.

To suggest that telecoms incumbents could be destroyed by the pursuit of profit is counter-intuitive. Sadly, this business truth is not taught in many a business school. This might even be intellectually unnerving to many financial analysts and business pundits.

In fact, by withdrawing from the low end, overall margins for the incumbents rise when all is said and done are other metrics just as Return on Net Assets. Naïve investors are hoodwinked by a technicality that manipulates the denominator- Rona increases simply because the incumbent is now using less assets during revenues remain stagnant.

Process might occur in Zimbabwe's telecoms sector

Such a process might occur in Zimbabwe's telecoms sector. Telecoms incumbents thriving on premium pricing models might find it culturally repulsive to adopt a low-balling business model.

Two issues could be hired as an argument against adopting mobile VoIP. First, an argument centred on the quality of VoIP could be advanced, reasoning that the current voice delivery technologies offer superior quality in terms of voice clarity, speed, smooth conversations and convenience. Incumbents who fear 'soiling' the brands they have built over time might view adopting a research fraught with quality issues a non-starter.

Indeed, when bandwidths are low, the quality of VoIP calls is poor, ranging from chopped conversations to delayed voice transmission. Second, an economic argument could be advanced, positing correctly that the profit margins are likely to be significantly lower than those yielded by established offerings. For enterprises sold to the profit-maximisation dogma, these are perfectly rational nevertheless potentially fatal strategic responses.

In this case, the emerging disruptive mobile internet's instant communication innovation is in the main likely to disrupt through the non-consumption gateway, the same way mobile phones disrupted landlines. Thousands of potential Zimbabwean users of VoIP are not consuming VoIP owing to barriers to access. Not owning either a Personal Computer or a smartphone is the most influential driver of VoIP non-consumption in Zimbabwe.

First, telecoms incumbents should understand that no business is immune from disruption. A former Israeli politician, once remarked that the US could conquer the world using three Generals - General Electric, General Foods and General Motors. GF is no more. GM was disrupted by the Japanese automobile triplets-Toyota, Nissan and Honda - who launched disruptive attacks through low-priced 'inferior' models aimed at the low-end of GM's market. Similarly, TM Supermarkets were driven to a nearly-death experience by retail disruptors pushing low-priced 'inferior' quality products.

Third, disruptive forces have been known to chip away at the incumbents' core business slowly and imperceptibly. It has been noted that the mainframe computer and its disruptor, the minicomputer, grew side by side for 20 years earlier the mainframe became a technological dinosaur. It took lesser time for the minicomputer to be disrupted into extinction by the PC. Already, in Zimbabwe, VoIP phones with restricted mobility are gaining traction, bringing fixed telephones even closer to the brink of extinction.