The 3GSM World Congress 2006 last week in Barcelona, Spain, was an eye opener about the impact of VoIP on the mobile phone industry, and how VoIP might actually end up aiding 3G service providers, many of which are still trying to find their audiences.

The 3GSM conference centers on the developing 3G services worldwide, services that offer quasi-broadband (500 kbps to 700kbps) mobile IP voice and data. 3G services were conceived a decade ago as a way to expand traditional mobile technologies to provide broadband pipes. Multibillion-dollar spectrum licenses have been granted in many areas of the world to accommodate 3G services.

In the meantime, VoIP has developed and grown into a technology already used by tens-of-millions and is on its way to dominating voice communications.

Most VoIP services are very low-cost. Many are free. 3G services, by contrast, tend to be expensive high-end communications. Consequently, 3G services have struggled to find the legions of subscribers needed to help pay for the expensive licenses, and now feel the threat of Wi-Fi VoIP cutting into their already limited revenue.

However, some 3G providers seem to have decided to embrace, rather than fight, the VoIP phenomenon. The 3GSM conference saw the announcement of some major VoIP-3G alliances and the hints of others. Also, new technology, such as the Windows Mobile operating system, can be exploited to bring VoIP to any smart mobile phone.

Skype Teams With 3G Operators

The most significant service announcement was Skype Technologies S.A.’s agreement with Hutchison 3 Group, a division of Hutchison Whampoa Ltd., to enable Skype on Hutchison 3G mobile services. Essentially, Skype will function as a softphone on Hutchison 3G devices.

According to the two companies, 3G mobile operator Hutchison 3 Group will be the first to market mobile devices that include Skype software. Hutchison is running trials with limited “friendly” users, and plans to launch in Australia, Austria, Hong Kong, Italy, Sweden and the United Kingdom later in 2006. The services will use 3G mobile phones from leading phone manufacturers.

Of course, this is not Skype’s first agreement with a 3G operator. In September 2005 the global VoIP operator announced an agreement with E-Plus, Germany’s third-largest mobile phone network, with 9.8 million subscribers. Skype software is bundled with E-Plus’ flat-rate data subscription, allowing customers to make Skype calls over the E-Plus mobile network.

Also, Hutchison’s 3 Sweden already is offering a Skype bundle with a 3G flat-rate subscription and 3G data card.

Skype also has another existing agreement with a Hutchison company. Hutchison Global Communications Ltd. (HGC), operator of a fiber-to-the-building network in Hong Kong, offers Skype to consumers, using the partnership essentially to help market the fiber broadband service to consumers.

The same thinking seems to be operating with the agreement announced at 3GSM. The new partnership will enable Hutchison to directly tap into the 75 million people using Skype across the Hutchison territories and promote to them the benefits of using Skype on Hutchison's networks, according to the company. In other words, access to Skype becomes a marketing tool for 3G subscriptions.

Not all 3G mobile operators may be interested in VoIP, however. Vodafone Group, the largest mobile operator in the world, was reported to be planning to counter VoIP with larger bundles of data services, using HSDPA (high-speed downlink packet access) technology, which it already has trialed in several locations. HSDPA supports 400kbps to 700kbps, and is a cost-effective upgrade for GSM operators.

The Threat From Within

Also of concern now to mobile operators at 3GSM is the perceived threat from VoIP on their own networks.

At the show, Steve Ballmer delivered an address in which he described Microsoft’s plans to deliver a mobile version of its Microsoft Office Communicator. That is not big news to anyone following the development of desktop VoIP soft clients, as Microsoft has been developing Office Communicator for some time, and it now is a multifunctional soft client for IP communications from the desktop. The extension of that soft client to Windows Mobile seems only logical, but apparently the discussion by Ballmer crystalized the implications of the technology for 3G mobile operators.

And Microsoft Corp. hardly will be alone in developing soft clients for Windows Mobile or Pocket PC. Already, CounterPath Solutions Inc. (formerly Xten) has developed a version of its soft client for Pocket PC, and Windows Mobile is not far behind. Other VoIP service providers that offer softphones already are adapting that software for PDAs, and soon will do the same for mobile phones.

This sets up a situation in which 3G mobile operators soon will have to decide whether to fight or switch. The increasingly smart mobile devices used in 3G soon will be able to support many kinds of soft clients, plus the operators’ own networks already offer IP pipes large enough to accommodate voice. VoIP soon will be a force on their own networks that they can no longer ignore.

One possibility is that mobile operators that do not wish to have VoIP used on their networks will try to block port 5060, the IP port used for VoIP signaling. Reportedly, Skype has ways to counter that, changing signaling ports if necessary, but blocking IP services that customers want to use is likely not a winning strategy for keeping existing customers and attracting new ones.

So it seems likely there will be more agreements like the Skype and Hutchison one in the near future. Otherwise, 3G operators risk driving customers into the arms of other network types, such as the rapidly growing infrastructure of Wi-Fi.

3 Sweden www.hi3gaccess.se
CounterPath Solutions Inc. www.xten.net
E-Plus www.eplus.de
Hutchison 3 Group www.hutchison-whampoa.com
Hutchison Global Communications Ltd. www.hgc.com
Hutchison Whampoa Ltd. www.hutchison-whampoa.com
Microsoft Corp. www.microsoft.com
Skype Technologies S.A. www.skype.com
Vodafone Group www.vodafone.com