By Wireless Watch
Published Monday 18th July 2005 11:33 GMT

Vodafone is responding aggressively to the rise of VoIP by launching a
low cost, flat rate phone service of its own, using capacity on its 3G
network. Echoing similar moves by its US joint venture Verizon
Wireless, Vodafone’s plan reflects the main defense that cellcos have
against the non-3G operators that seek to steal their voice markets
using voice over Wi-Fi or, in future, WiMAX.

 The plan is to exploit the superior spectral efficiency of the 3G
networks to bring voice prices crashing down and remove the main
advantage of VoIP. This could have far reaching implications for the 3G
business plans though. UMTS networks allow operators to deliver voice
minutes far more cheaply (for about one-third of the cost), and so are
valuable in keeping margins stable even as voice prices fall.

However, the efficiency of 3G was expected, by most carriers, to
deliver a net increase in voice margin for some years as, before mass
market wireless VoIP loomed on the horizon, they were predicting
gradual erosion of voice rates, rather than a need to compete with flat
rates and even, in future, voice services bundled for free.