By Paul S. Cawte
Despite the introduction of LTE with its heavy focus on improved mobile broadband speeds, mobile operators still rely on voice and SMS services for a large part of their revenues (roughly 70% globally). In previous generations of mobile technology these services were explicitly supported as part of the mobile network stack, with voice bearers supported in the radio access network and SMS making use of the voice signalling mechanisms. Indeed in 2G mobile standards data was originally only supported by sending data over a nailed up voice channel (high-speed circuit switched data or HSCSD) with the native data transport mechanisms of the general packet radio service (GPRS) introduced later as part of the so called 2.5G standards and in enhanced form as EDGE with 2.75G.
With the advent of 3G mobile standards (such as UMTS) voice and data were catered for on an equal footing, with distinct voice and data air interfaces being defined, each optimised for their respective payload. The lu-CS interface, used for voice, uses circuit switching to provide deterministic, guaranteed capacity for in-progress voice calls. In contrast, the lu-PS interface, used for data, uses packet switching on a shared data carrier to maximise the efficiency of data transport.
Compared to 2G, the 4G LTE standard turns the situation on its head and is optimised for data services without any specific native support (i.e. circuit switched) for voice transport. The rational for this is that broadband traffic is now the predominant use of mobile bandwidth and it is better to optimise the network for data transport and carry voice as an application over data using voice over IP. This is possible in an LTE network due to the substantial enhancements in the data plane, which compared to 3G has significantly reduced latency and has the quality of service mechanisms required to support a good quality voice service.
Although LTE was, from the outset, designed to support voice service via voice over IP (VoIP), the call flows, their associated signalling and media encoding where not defined or standardised. So although all the “hooks” where in place to support voice their was no voice standard that an operator could deploy and indeed there were many options, a number of which were debated at length by equipment vendors and network operators as part of the standards process.
Given the importance of voice (and SMS) this lack of standardised support for voice could be regarded as a serious omission. To mitigate this a mechanism called circuit switched fall-back (CSFB) has been introduced which entails the phone switching to 3G operation when a voice call is to be made or received.
As indicated above, there has been much debate about the standard approach for supporting voice (and SMS) over LTE. One approach, called VoLGA, which was proposed was to utilise existing UMA mechanisms such as those supported on some mobile phones (notably Blackberries) to tunnel voice across WiFi. Whilst this would have leveraged existing voice switching networks it had the disadvantage of being quite backward looking and not providing a future path to full multi-media communications. Instead the approach using native VoIP with SIP signalling and an IMS (IP multi-media subsystem) core found favour as the approach for voice over LTE (VoLTE) with circuit switched fall-back being used as a transitionary step.
As of today (September 2013) VoLTE standardisation is more or less complete and both handsets and network equipment are available. Nevertheless, there are very few deployments of VoLTE – to this author’s understanding one in the US (MetroPCS) and three in South Korea (SK Telekom, KT and LG U+). Whilst it is clear that operators will eventually embrace VoLTE what is not clear is how rapidly operators will move to do so.
On the one hand aggressively introducing VoLTE could enable network operators to refresh their voice product set, so as not to be left behind by the over the top (OTT) voice and messaging service providers such as Skype and WhatsApp. On the other hand, existing voice and SMS revenues are not yet necessarily under threat and it may be better to take a slow and steady approach. This paper sets out the different approaches network operators could take and the rational for preferring one approach to another.
Broadly speaking network operators have three approaches they may take for introducing VoLTE (with various shades of grey in between). They may:
- Stick with the existing solution of circuit switched fall-back (CSFB) for the foreseeable future,
- Gradually introduce VoLTE over a period of time thus operating CSFB and VoLTE in parallel, or
- Aggressively migrate to VoLTE to obtain the benefits of improved service and network rationalisation sooner rather than later.
Circuit Switched Fall-Back (CSFB)
For an operator with an established 3G network and customer base, continuing to use CSFB (circuit switched fall-back) can make a lot of business sense, as it continues to exploit an existing asset that often will already have sufficient call carrying capacity. In this case, for those customers with LTE handsets, the downside of CSFB is slightly impacted voice service performance:
- There is an increased call set-up time of several seconds as the phone connects to the 3G network, and
- Data connections will likely be dropped as the phone reconnects to the network and is likely allocated a different IP address.
Whilst these issues do impact the service they are unlikely to be sufficiently troublesome to the customer to underpin a business case for the substantial investment required to enable VoLTE.
Introducing VoLTE into a network is not straightforward. It requires a new mobile voice core (IMS) and represents a substantial change in the way voice service is provided. This change from circuit switched to end-to-end VoIP as required by VoLTE means that new skill sets are required within the organisation and there is much to be learnt with respect to how to optimise the network to get the best voice performance. Putting aside business case considerations, these factors alone would suggest that an operator should approach the introduction of VoLTE cautiously.
OTT Service Competition
Whilst operators should approach the introduction of new technology cautiously, operators may also wish to seize the opportunity presented by the introduction of an IMS core as a enabler to more generally reinvigorate voice service, linking the launch of VoLTE service to wider reaching service improvements:
- Introduction of a better quality voice service, with wide-band CODECs and faster call set-up time,
- Linking to the introduction of RCS (rich communication services), often marketed as “joyn”, incorporating presence, instant messaging, group calling and video sharing,
- Enabling service to be accessed more generally, for example, enabling calls to or from the mobile phone number to be made from a PC client, tablet or fixed line.
Nevertheless, it can be argued and often is, that these services will not attract additional revenue but instead just protect current revenues, giving customers additional value for their money, making them less inclined to use alternative services. In this view, customers will not pay more for voice services and consequently other revenues sources must be sought – of which the most likely candidate is video. For example a video sharing service called “See what I can see” is a service that we can all identify with. Additional revenues associated with such new services, however, are unlikely to pay for the cost of introducing an IMS core to support VoLTE and the rich communications services (RCS) server.
In the opinion of this author, much of the analysis presented in the previous paragraph is in all likelihood correct but the conclusion that there is little value in investing in voice services is questionable. If voice services are genuinely under threat from competition, especially from over the top (OTT) providers and device manufacturers such as Skype, WhatsApp, Google, Apple and even FaceBook then there is financial value in defending existing revenues. It should not be forgotten that much of the competition from OTT providers has heretofore impacted fixed voice revenues. However, with the increasing performance of mobile broadband networks, especially after the wide spread introduction of LTE (and in the future LTE-A) there will be little to stop OTT providers encroaching on traditional mobile operators’ revenue streams.
Compared to fixed operators, mobile operators are typically at an advantage as mobile calling is normally part of a bundle and if a subscriber makes fewer calls within the bundle it actually saves the operator money. This is fine in the short term, but customers will sooner or later perceive that when they are making few traditional voice calls, and not sending so many SMSs that they are getting poor value for money and migrate to operators who are selling “value based” mobile packages with a focus on charging just for data. In this world, operators will then fall into one of two categories:
- Those that effectively compete with OTT providers and retain voice and messaging revenues, or
- Those that accept that they cannot compete with OTT providers and focus on providing a mobile broadband pipe in the most cost effective manner.
Currently most operators see themselves as being in the first category but are doing very little to make this a reality. Much more could be written on this topic, and this will indeed be the topic for a future paper.
The problem for operators faced with producing a business case for VoLTE and by implication IMS is that there is much uncertainty to the extent of the risk from competition from OTT services and equally there is uncertainty into how well defensive measures against the threat may work. In most organisations it is difficult to get financial approval for such uncertain business cases. Indeed matters can be worse than this, for example, a strategy to replace SMS by an operator’s own equivalent of WhatsApp could well be perceived to undermine existing SMS revenue and consequently be unpalatable.
It is seen in industries again and again that the market leaders are unwilling to risk undermining existing revenue streams and investing in uncertain innovation. This is left to entrepreneurs who thrive on risk and are willing to take a chance, “having a go” at the established market players. Few typically succeed, but the ones that do reap rich rewards, whilst the original market leaders fade into insignificance. One only has to look at the computing industry where DEC and Sun are no more, and the situation in the mobile industry where Nokia and Blackberry have fallen from their positions of pre-eminence.
In summary, a small proportion of operators will believe that it is their strategic interest to deploy IMS and VoLTE and will find ways to make the business case work. However, most operators will not take this leap of faith and will take a much tougher view of revenue threats and opportunities, effectively only considering in the bottom line of the business case those factors that they can be definitive about.
Looking beyond the direct customer benefits, from an infrastructure perspective, VoLTE presents a number of opportunities to network operators:
- Over time it will let them simplify their network as the old circuit switched voice infrastructure is closed down.
- It will no longer be necessary for the operator to continue operating 3G service in all LTE coverage areas (as would be required by CSFB). This means that the 3G spectrum can potentially be re-farmed, for example to increase the available LTE spectrum.
- The complexity of handsets may be reduced. At the present time, for example, there are not chipsets that support both LTE and CDMA. In this case dropping support for CDMA would reduce the cost of the handset – but would of course require the voice to be transported natively over LTE (via VoLTE). This is less of a driver for 3G UMTS operators as there are chipsets that support both this and LTE.
It will be clear that most of these benefits come from being able to turn circuit switched voice infrastructure off and re-farm 3G (or 2G) spectrum as LTE. The most significant barrier to this is likely to be the existing customer base and their handsets. Whilst the traditional upgrade cycle for mobile phones is quite rapid it is still in most markets too early too expect everyone to upgrade to the latest LTE SmartPhone that supports VoLTE. Moreover most operators will have a sizeable rump of low usage customers who change their handset infrequently, and whilst these will not be the highest paying users an operator will still be reluctant to loose these subscribers.
Another challenge at the present time with VoLTE is the support for roaming. Whilst the technical (3GPP) and interconnect (GSMA) standards are being progressed, even when they are complete, for the initial network deployments of VoLTE there will be few other networks to connect to that do have VoLTE – so for roaming users, even if VoLTE is present in the home network, circuit switched fall-back will have to be relied on for a substantial period yet. This means that handsets for users who expect to roam will have to support 3G with circuit switched fall-back for voice.
Example 1: MetroPCS
One of the few network operators to have launched VoLTE is MetroPCS in the US. What the author understands of their case, based on publically available information and assumptions is the following:
- They are a pre-pay operator focused on specific markets in the US.
- They have limited spectrum and are keen to re-farm existing 3G spectrum as LTE.
- Their existing 3G network is CDMA requiring dual chipset in the handset to support both it and LTE.
MetroPCS’s public statements make it clear that they are aggressively launching VoLTE in their different markets with a view to:
- Simplifying / reducing the cost of the handset as just including an LTE radio means that a CDMA chipset is not required.
- Enhancing the service via the introduction of RCS based services.
- Plan to shift investment to LTE infrastructure only with a view to re-farming CDMA spectrum as LTE when possible.
Given MetroPCS’s heavy promotion of the benefits of an LTE only handset with VoLTE. It must be assumed that the majority of its customers have limited need for coverage outside of their specific market area (though this will improve as MetroPCS rolls out LTE to more of its markets) and limited, if any roaming requirements. This may well be true for their target market segment – low cost, pre-pay users. It is assumed that users requiring great coverage flexibility will continue to use at least dual band LTE / CDMA handsets.
To enable it to cap investment in CDMA and eventually re-farm CDMA spectrum as LTE MetroPCS will need to rapidly shift its customers to LTE / VoLTE capable handsets. It is assumed that given the nature of the pre-pay market, there is a high degree of customer churn which could facilitate this. Nevertheless, to achieve it, MetroPCS will require an attractive range of LTE/VoLTE handsets, something which is still somewhat of a challenge.
Note that as of May 2013 MetroPCS has been acquired by T-Mobile. This may well change their approach to the aggressive introduction of VoLTE as it offers them a number of options to use T-Mobile’s existing coverage and extensive handset range. Nevertheless, MetroPCS has acted as a proving ground for VoLTE and this may well also lead to a change in T-Mobile’s approach.
Example 2: EE
Following the merger of Orange and T-Mobile in the UK to form EE, EE are now the largest mobile operator in the UK. They were the first operator to launch LTE in the UK using their existing 1800MHz spectrum prior to the auction of the “official” LTE spectrum.
EE’s public position is that whilst they will to continue to invest heavily in LTE to improve data rates they are not aggressively developing VoLTE. They state:
We found circuit-switched fallback [CSFB] for voice very stable from the beginning by putting deliberate aspects in for it with our core network vendors. We find that fallback is very reliable, and delays are minimal. It’s efficient as a solution, so we haven’t seen a need to rush to VoLTE. It will bring some additional benefits, but CSFB solution is good enough as a service.
It would be a fair guess to make that EE are actively investigating VoLTE and ensuring that new SIMs and handsets will be compatible with it wherever possible. It is also fair to say is that they do not see a business case for deploying VoLTE in the near future. This makes sense for EE:
- They have more than sufficient spectrum holdings to operate 3G and LTE,
- They have an existing voice network with sufficient capacity for their needs,
- They are focussed on promoting mobile broadband as their “hero” product, exploiting the market lead they have over the other UK mobile network operators,
- They believe the voice service provided by circuit switched fall-back is good enough for the time being.
It is clear that over a period of time most if not all operators will deploy VoLTE and migrate customers to it. What is less clear is how rapidly they will do so. Clearly MetroPCS have proceeded rapidly in the US whereas EE in the UK are proceeding cautiously and are quite happy at present with circuit switched fall-back. These two examples could be viewed as extremes of network operators’ positions. That being said, the author would not be surprised if, in light of their merger with T-Mobile, MetroPCS rollout less aggressively, and no doubt behind the scenes EE are working on their approach to VoLTE. In reality most operators are likely to fall somewhere in between.
For an operator considering VoLTE the benefits will fall into two categories:
- Voice product enhancements potentially also including multi-media and RCS based services, and
- Network rationalisation opportunities, whereby 3G equipment and spectrum can eventually be retired.
Operators in general prefer concrete business cases with clear cost benefits. The financial benefits associated with product enhancements are notoriously difficult to quantify whereas those associated with network rationalisation more straightforward. In an ideal world an operator would justify the cost of VoLTE deployment based on the network rationalisation savings and consider the benefits gained from product enhancements as “up-side”. For most operators, a business case of this nature is unlikely to show a return.
For substantial savings to come from 3G infrastructure rationalisation, network operators will need to shift a significant majority of customers to LTE and VoLTE capable handsets. This includes not only consumers but also business customers who may have large deployments of 3G (or even 2G) devices. Whilst the upgrade cycle for mobile phones is often quite rapid there will nonetheless be a sizeable rump of customers that will continue to have 3G phones for a considerable period. This inevitably will limit the speed at which operators can force a migration to LTE and undermine business cases based on network savings.
Clearly, given that one of the major barriers to migration to VoLTE is the entrenched base of customer handsets, operators should be planning now to ensure that any as many of the new handsets and SIMs deployed over the next few years are LTE and VoLTE capable. Even this though will just be the SmartPhone customer base. Whilst SmartPhone penetration is growing rapidly it is not clear if and when SmartPhones will entirely replace more basic phones and at what point a basic, low cost LTE/VoLTE phone might be manufactured as an alternative to todays basic 2G/3G phones.
Considering now the potential of product enhancements: VoLTE requires the introduction of an entirely new IMS voice core and major changes in the way the network is designed and operated. Business case aside, for any operator, this is no small undertaking. As has been indicated the benefits from product enhancement will be difficult to quantify and may be considered as a way to protect existing revenue from OTT competition rather than as a way to gain new revenues. Therefore, for most operators there is going to be a marked reluctance to move rapidly to VoLTE.
Most large operators are naturally conservative in nature and would view the case of moving to VoLTE as having questionable financial benefits and significant technical risk. That is not to say that sticking with circuit switched fall-back is not without risk. Indeed the voice product offered by mobile and fixed voice operators has changed very little over the last 15 years. Although handsets and the features they provide have been transformed the basic service provided by network operators remains the same. In the long run, this is not a sustainable position – operators will either need to improve their products or see customers move to OTT voice and messaging providers.
VoLTE actually offers an opportunity to operators to break from the legacy voice and messaging services and innovate. True, it is not yet clear what will be successful in the market, and to what extent it will generate new revenue. Nevertheless, operators need to start planning for IMS and VoLTE, it is to their advantage at the moment that they can start small, substantially reducing the risk for something they will inevitably have to do. In the view of this author, the prudent approach for most mobile operators with respect to VoLTE is the following:
- Push SmartPhones and make sure they are LTE and VoLTE capable. Ensure that all SIMs are IMS compatible.
- Build a small IMS core with associated systems and experiment – both technically and product-wise. Do not just limit service to mobile devices, but allow users to access their phone service from any device.
- Get IMS based VoLTE services in to the hands of a number of trial customers who are enthusiastic to try different services.
- Start making plans and building the key network and IT building blocks that will be required in the future for communication services. Which services will be successful is not necessarily clear, but the building blocks of future services are easier to define.
This is not to say that operators should proceed in undue haste, but they need to spend the time learning how to deploy voice over IP based VoLTE services, the service opportunities this presents and the challenges to their current systems and practices of offering something other than a basic voice service.
It may well pay operators to wait for VoLTE to be more mature, for IMS systems to have further developed and come down in cost, and for IT systems to have developed to support a rich fixed-mobile product set. What will be true, however, is that the knowledge they can gain now by experimenting and trialling will pay them back handsomely when the time does come to put together a robust business case for VoLTE, define system architectures, select vendors and move to deployment.
The message of this paper is that for most operators the case for aggressively implementing VoLTE is likely to appear weak. Nevertheless it is very important that VoLTE should not be ignored. It is for good reason that vendors and operators chose an IMS based approach for voice over LTE – they saw this as the best way to evolve voice service, to enable them to incrementally enhance their product. The alternative is for an operator to focus on delivering mobile broadband in the most efficient manner, at the lowest possible cost and accepting that voice and messaging revenues will eventually drift elsewhere.
The question of what strategy an operator should adopt for VoLTE forces them to consider the broader strategic question of the nature of their core business. Should they continue to remain a vertically integrated company offering all communications services or focus on operating a low-cost bit-pipe network that other service providers can overlay services upon. This is a hard question to answer; most operators will say they want to adopt the former position but then do nothing about it. A well-considered project to trial and implement (albeit at small scale) VoLTE actually offers them the opportunity to jump-start this process: understanding the challenges of launching more complex communications services, the impacts on network and IT systems, and the likely customer interest in such services.
Operators that ignore this risk falling between two stools:
- Not being ready to launch VoLTE and other VoIP based communications services and seeing increasing revenue erosion to other operators or OTT service providers.
- Not aggressively simplifying and cutting cost to make the network as cost effective as possible for basic bit-pipe based services and struggling to meet the price point set by other more efficient operators.
If past history is anything to go by, many operators will struggle to adapt rapidly enough to the changing market. Quite how this will play-out is yet to be seen – unlike other high technology industries network operators have the entrenched asset of their deployed network. Whilst this will protect them somewhat, networks are increasingly capital intensive and an operator will need strong revenues to continue to fund developments such as LTE, VoLTE and the next generation of LTE (LTE-A).
Copyright 2013 Paul S. Cawte
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