THERE SEEM TO BE DOZENS OF STARTUPS aiming to build a business with voice and messaging services that leave carriers out of the revenue chain. But nobody seems to be a real threat to wireless network operators. Yet.
Talkster is the latest player in the game with talki, a downloadable application for phones running Java or Research In Motion Ltd.’s BlackBerry operating system (support for Microsoft Corp.’s Windows Mobile is reportedly on the way) that includes unlimited international phone calls, text messaging and MMS in three dozen countries for a few dollars per month. Talki is the latest from the 2-year-old Toronto-based company, which offers both mobile and fixed-line products and targets consumers directly and markets white-label products for brands, mobile virtual network operators and others looking to sell cut-rate services to subscribers.
Talkster is joined by countless others that offer Internet-based services that compete with – and almost invariably undercut – mobile network operators. While Skype is the most recognized name in the space, lesser-known players include barabu, fring, Jajah, Jaxtr, TerraNet and Tring. Carriers aren’t exactly feeling the pinch from the startups yet, though, according to Rebecca Swensen, an IDC analyst specializing in enterprise mobility and IP communications services.
“You aren’t going to see any huge dents in carrier revenue because many of these services, if not all, are used as supplemental voice services,” Swensen said via e-mail. “That is, the user will keep their traditional landline or wireless service and use the (IP-based service) to make cheaper international calls, for instance. Also, with many of the mobile VoIP services, the user is making a local call and therefore still using up minutes in their plan with the carrier.”
Indeed, much of the appeal of the new services is in bargain-basement – or even free – international calling. That’s not a space that generates a ton of revenues for carriers anyway, Swensen noted.
Barriers to adoption
And while the IP-based offerings may be cheap, they often aren’t easy to use. Talki, for instance, reassigns a local number for each contact in a user’s calling list, requiring the user to dial the talki number instead of the mobile number for each call. And its PC-to-phone service is even less convenient: after the calling parties are connected, the recipient has 10 seconds to call in to the Talkster number while the original caller waits on hold.
Similarly, Jaxtr, a Silicon Valley startup, last week launched FreeConnect, which alerts users via text message and e-mail when a Jaxtr calling is trying to reach them.
“It could take a little bit of time to wait for the other party to call back,” Jaxtr co-founder and COO Touraj Parang conceded, adding that his company also offers a more convenient premium service that supports international calls for a tiny fraction of what cellular operators charge. “With SMS, wait times should be a lot shorter than if you rely on other methods, but in return what users get is basically a free call. It’s a question of how much inconvenience people are willing to put up with.”
The business model
Jaxtr has amassed an impressive base of 10 million registered users despite having spent no money on marketing or advertising, and the company has raised more than $20 million in venture capital. Parang is looking to social networking to grow its business, and early next year will introduce features that “provide context” in ways similar to those used by sites such as Facebook and MySpace.
Jaxtr launched a paid offering a few months ago and plans to expand its premium services as it continues to support free activity for those willing to tolerate less-convenient services. Talkster, on the other hand, is hoping to turn traffic into dollars via advertising. The latest product “is built from the ground up to include the option for advertising,” Talkster President and COO James Wanless posted on the company blog last week, and can include banner ads, click-to-call images and pitches included in text messages.
“All of the ads are generated and tracked through the talki advertiser portal,” Wanless wrote. “The open standards used in the API enable us to connect to ad content aggregators to deliver content in addition to that generated by our own advertiser interface.”
Although VoIP is a far cry from Web browsing, it’s worth nothing that AdMob last week reported that 8% of its total ad requests in November occurred over Wi-Fi networks, up from just 3% in August. It certainly seems likely that consumers who use Wi-Fi to access the mobile Web may eventually experiment with Web-based voice services.
Carrier concerns
Meanwhile, there have been a handful of stories regarding the increasing tension between VoIP providers and mobile carriers. Truphone last year won an injunction against T-Mobile International after the U.K. carrier tried to block its service; here at home the FCC has warned mobile operators and other service providers against crippling competitive, IP-based offerings.
For the most part, though, Internet-based voice and messaging startups seem to complement mobile network operators more than compete with them. So it’s likely that carriers will opt to partner with – or even acquire – the newcomers as networks evolve and become more data-centric.
“At some point, all calls will transport over IP and the carriers need to find ways to migrate into that market,” Swensen observed. “The networks are not ready yet for a complete end-to-end IP solution in the U.S. so that the cellular network is no longer needed, so carriers are hedging their bets right now with acquisitions and partnerships. In addition, doing so gives them access to minutes they wouldn’t otherwise be privy to, that being minutes in regions where the carrier has no network.”
