Telecom Carriers need to continue to focus on improving performance and capacity to improve retention and drive down the cost per bit. We see VoLTE as a critical tool for carriers to significantly improve voice performance and capacity while reducing cost. For mature markets, we believe wireless carriers will look at VoLTE primarily as a
mechanism to improve capacity on finite spectrum resources. Some carriers may also try to leverage VOLTE’s features to improve customer retention, including the promised improvements in voice quality and integration of video calling.
Spectrum vs Demand for Data Services:
The supply of spectrum is unlikely to keep up with the demand for data services over time. Hence, carriers need to employ more cell sites and new technology to improve capacity. While carriers are investing heavily to deploy faster data services using 4G LTE technology, voice services are still riding on slower 2G and 3G networks. For example, we have learned that Voice over LTE or VoLTE is roughly 2-3x more efficient than 3G voice services and 4-6x more efficient than 2G voice services. VoLTE also improves the quality of voice and introduces integrated video calling features.
Transition to VoLTE – Not All Technologies are Equal
VoLTE implementation is not easy because IP-based calls are at greater risk of dropping when customers move between cellular towers. Carriers migrating to LTE services from a GSM platform [ can employ a technology dubbed SRVCC to retain call quality and reduce dropped calls] should have a smoother transition to VoLTE than providers of 2G CDMA [don’t have a back-up solution yet] voice services.
We believe the harmonization of LTE and VoLTE standards by carriers around the globe are likely to further commoditize voice and data services within each market. In the short and medium-term, carriers can still differentiate based on their quality and investments in the network. Longer-term, we subscribe to the idea that cell placements and technology become homogenous within a specific country and may dilute an advantage that some carries have for voice quality under their current 2G and 3G deployments.
In the United States, T-Mobile and AT&T Have Taken the Lead for VoLTE Deployments. To this point, all of the national carriers except Sprint have announced formal plans to test and commercialize VoLTE services over the next 12-months. Verizon has the highest wireless margin in the sector currently, the lowest amount of spectrum per customer, iPhone users are unable to use simultaneous voice and mobile data, and a significant portion of its spectrum is being used for relatively inefficient 2G CDMA voice services.
While there is a general agreement among the European operators regarding the long-term benefits regarding VoLTE, most see little immediate benefit to it, hindered by – limited availability of handsets, poor LTE coverage, technology challenges in Single Radio Voice Call Continuity [SRVCC] deployment and unclear customer demand. For European operators, voice quality is the main strength of their brand and the common view is that until they can ensure the same customer experience on VoLTE as on 3G they will be reluctant to introduce the technology.
Within Asia, Korea is at the forefront of VoLTE adoption with 60% of consumers having already migrated to LTE subscriptions. The smallest player, LGU, had implemented a full VoLTE set-up while larger players such as SKT and KT have moved to defer the commercial launch of VoLTE. For Japan and Singapore, only the incumbent operators – DoCoMo / Singtel, respectively – have commercially engaged in VoLTE service.
For most of the emerging Asia markets (China, India, Indonesia, Thailand, Malaysia, Philippines, Taiwan), VoLTE won’t be in play for the foreseeable future given (1) limited LTE network deployment (2) pre-paid centric subscriptions which limit subsidies that are important for LTE handset adoption.