Pity the poor phone company

Before all you irate subscribers of our telcos start calling me names and ask if I am totally insane to feel pity for the hated telcos, hear me out. Like you, I had been and still am frustrated by the quality of service I am getting from my cell phone company. But I am looking at the big picture… our phone companies have big problems too.

I have been reading and hearing a lot lately about the coming demise of the phone company as we know it. Yes, if revenge is in your heart, this is as close as it gets.

Indeed, even the local market leader is feeling its mortality. They are openly talking of their eminent extinction in as little as three years unless they reinvent themselves. According to Doy Vea, the wireless top honcho of Smart and Sun cellular, “It’s the end of the world for our old business model.”

Reading a speech for Manny Pangilinan in a regional telecoms conference in Cebu, Doy said: “The current voice business of traditional operators faces extinction as more customers turn to low-cost or free services to connect.” Vea is referring to Skype, Google Talk, Viber and other so called OTT or over the top services which have slowly, but surely eaten up the traditional market of telcos all over the world.

“Traffic volumes will not rise fast enough to compensate for the continuing slide in prices of traditional telco services,” Doy said. He cited data from Ovum, a research firm, revealing that 75 percent of all voice traffic in 2010 was carried using voice over Internet protocol (VOIP) services like Skype. “The figure is expected to rise even further, to virtually 100 percent by 2015.”

PLDT’s solution? Shift to retail to continue capturing voice minutes as traffic shifts from fixed to mobile. That should help but I am not sure it is a viable long term solution because we are starting to talk less, from a telco point of view.

A blog post I caught on telecomasia.net in a column entitled Poulos Ponderings pointed exactly that... “It’s so funny how we don’t talk anymore...” The blog suggested that “it is time to give voice away for free.”

That guy is right. I rarely use the land line at home and in the office. I prefer to text or send an e-mail instead of calling up because I think that is less disruptive and a lot more polite. I have only started to do voice calls a bit more lately after my cell phone company developed a habit of delivering my SMS or text messages hours after I have sent it.

Voice started falling because, as the blogger pointed out, “mobile networks offered lousy quality, dropped calls, poor coverage, expensive devices and costly call rates, all teamed up with complex tariff plans to make the early fascination with mobile wane over time, only to be resuscitated, in spurts, by improvements in technology.”

The blogger is correct to say that “email, messaging, social networking et al, have made it easier to avoid calling someone for fear of disturbing or annoying them. Worse still, the fear of your call not being answered or being diverted to the dreaded voicemail system, the epitome of ‘impersonality.’”

I cannot understand how PLDT’s supposed response of going “retail,” or charging subscribers for the use of VOIP services over telco networks will work. In the first place, once you have a broadband subscription, the telcos cannot charge you for using services that run on it like Skype, Viber, Facetime or other similar services that are provided for free.

I have a family whose members are all over the world and we keep in touch through Vonage, a VOIP service that gives me a dial tone and a phone number as if I were in Anaheim where one of my daughters live. Facetime, on the other hand, enables free face to face conversations with all our children and grandchildren wherever they are. So we still talk a lot except that we no longer allow PLDT to charge an arm and a leg for doing so.

So I think Doy and his boss are dreaming if they think “PLDT can leverage its 70-million strong mobile subscriber base to continue capturing voice minutes as traffic shifts from fixed to mobile.” They will probably have to give away the talk minutes of that 70 million subscriber base by bundling those with their broadband subscription offerings.

PLDT spokesman Mon Isberto explained that going retail means tapping individual consumers, particularly overseas Filipino workers (OFWs). While that may indeed be what Isberto calls a “ready-made customer base abroad,” PLDT will have to be very creative to compete with so called OTT content service providers to make money on this market.  

David L. Smith, writing for imediaconnection.com, defines OTT as the distribution of voice, video and data services without going through the telcos. With OTT, there is another connection besides the telco. It is through your computer to the internet and rides “on top” of the existing infrastructure. In other words, you get one broadband subscription and all these services ride on top of your telco’s infrastructure. Your telco can’t charge you extra even for services that cut into theirs.

“Your current provider gets disintermediated, turning the provider into just dumb pipes. While the company will attempt to package content, the content available on demand will far outstrip the (telco’s) pre-packaged choices offered up. The consumer will take control...” Hmm... spending enormous sums of money to buy GMA 7 for content may not pay off.

So, Poulos Ponderings thinks that telcos at some point “are going to have to decide whether to compete with OTT VOIP, block it, partner with it or just give up on voice completely and concentrate on just being a network provider.”

But dire as it sounds, he thinks that if we get back to basics, telcos “are still holding the key – that humble phone number! The simplest and cleanest way to make a voice call is to use a number. It’s unique and it works very well from any handset, any device, any network, any country, anywhere – and that’s more than you can say for VOIP apps. The reason people go for VOIP is that it is usually free. Once a voice app takes hold, the user tends to use more of its functions like messaging, further eroding the telco revenues.”

His simple solution: “Give voice away free, gratis and do it now! Use the same ploy OTT VOIP players are using but with all the convenience of using that ubiquitous mobile service. Sure, charge for some calls terminating to international destinations but route them over VOIP, just like the others do… Make voice just another data service, bundled with a data package in order to keep the customer, firstly, then be able to offer them all those great new digital services they have in the pipeline or can garner from those burgeoning.”

That’s why folks, we have to be a little more understanding of our poor phone companies. They are at that awkward stage, stunned at the disruption to their world that’s happening fast. They feel bad to do all the heavy lifting of massive investment in network upgrade and all the Apples, Facebooks and Twitters just get a free ride.

 Network owners can’t even impose pricing tiers for their services because of a strong pressure to keep “net neutrality” which means they can’t interfere with content, applications, services, and devices. Telcos must remain open to all users and uses and everyone must be treated the same.

That even seems unfair. Some OTTs allow subscribers to download movies and gigabytes of other stuff that clog their network that in turn require more investment from the telco to expand it. But they cannot charge that OTT or make the subscriber pay more than the cost of providing the broadband connection.

The happy days of the telcos are over. They have to creatively think fast if they want to survive the new world that seems to belong to the OTTs and their apps.

The Boss

Jose Villaescusa sent this one.

The boss hangs a poster in his office saying:

“I AM THE BOSS, AND DON’T YOU FORGET IT!”

 When he returns from lunch, he finds the poster gone, with a note on his desk saying:

“Your wife called, she wants her poster back at home!”

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco