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Why is T-Mobile UK blocking calls to mobile VoIP start-up Truphone? Mobile carriers are scared of one thing: becoming dumb pipes whose only utility is to carry voice and text. And it is one of the reasons why they are fighting tooth and nail with the […]

Why is T-Mobile UK blocking calls to mobile VoIP start-up Truphone?

Mobile carriers are scared of one thing: becoming dumb pipes whose only utility is to carry voice and text. And it is one of the reasons why they are fighting tooth and nail with the mobile VoIP providers, using all sorts of tactics to make mobile VoIP a non-starter. (See video below the fold!)

The company bearing the brunt of this scorched-earth policy is Truphone, a UK-based start-up that has developed a mobile VoIP client that makes it easy to make cheap calls (cheaper than mobile minutes that is) over dual mode phone, like Nokia N95 and Nokia E-Series phones. Once again, the company finds itself in the cross hairs of a behemoth that wishes to see Truphone go away.

T-Mobile UK is refusing to interconnect with mobile VoIP provider Truphone. T-Mobile customers making a call to Truphone’s number range (07978 8xxxxx) will not be connected. T-Mobile told Truphone, that as a result of a policy decision, they don’t connect to VoIP-based low cost calling services.
T-Mobile UK’s decision to block Truphone might have come as a response to the new and radically better Truphone 3.0 client that allows you to send Free SMS messages and allows VoIP calls over 3G. According to M:Metrics, nearly 86% of UK mobile users are heavy SMS users, and that means it is a cash cow that carriers like T-Mobile can’t afford to be slaughtered by IP-based SMS services. (Jesse Kopelman had discussed the impact of Mobile VoIP in his excellent post here.)

On the issue of Voice calls, Truphone CEO James Tagg says, “This affects every new entrant into mobile telecommunications because the only company that can facilitate interconnection with T-Mobile is T-Mobile. It amounts to T-Mobile being able to veto a new entrant into the market. This would put telephony back 100 years, to a time when interconnections were not assured.”

T-Mobile is offering to pay Truphone 0.21 pennies per minute, even though it charges its customers 35p per minute. Truphone claims that its call termination costs are 9p a minute. “T-Mobile is blocking our numbers unless we accept this loss-making offer and, since T-Mobile is the only company that can route calls from its customers it has a complete veto on the Truphone service,” Tagg says.

This is not the first time Tagg is fighting the big guys. A few months ago, the company got into trouble with Orange and Vodafone, which had prevented Truphone from working on devices that carried their own version of the operating system.

Since then, Vodafone has introduced a new policy which makes it more expensive to use data plans for anything other than browsing and email, a move that is designed to blunt the uptake of Mobile VoIP, especially over fast 3G connections.Fighting the incumbents is not the only challenge Truphone faces –Vonage and countless other VoIP providers have learnt the hard way that fighting the cheap minutes battle is an unviable strategy in the long term.

  1. Jack Wishart Friday, June 15, 2007

    Truphone appear to have more problems than other operators. I hear that none of the other VOIP service providers have these issues. Truphone customers don’t seem to be able to make calls if their network operator is Vodafone, Orange and now T-Mobile.

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  2. I’ve said it before, and I’ll say it again. Voice is special in the sense that convincing people it costs per minute to provide is one of the greatest scams in history. Joe Nacchio, former CEO of Qwest, famously boasted that “Long Distance is still the most profitable business in America, next to importing illegal cocaine”. His choice of peer group is telling… Then again, he is now a convicted felon, so not so surprising after all.

    How much longer the price for voice can defy gravity is another question. Telcos are just trying to milk the cash cow for all it’s worth while the going is good, and postpone the inevitable with the usual lobbying tactics. A couple of weeks I met with a former colleague of mine who is now responsible for fixed and mobile services architecture at France Telecom, his constant worry is Skype.

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  3. Carriers will never support applications that threaten their own revenue, hence this development is reasonable.

    Their offer to Truphone is somewhat puzzling though.

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  4. If you have a T-Mobile data plan, there shouldn’t be a problem. Things have changed… voice is data now.

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  5. @Jack Wishart: One of the significant things about this is that T-Mobile’s action DOES affect other VoIP providers. We’d name them, but we don’t have their permission to do so. The Orange and Vodafone issue affects only their branded Nokia N95 handsets.

    “You hear?” Make sure you’re listening to the right people.

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  6. Jesse Kopelman Friday, June 15, 2007

    The flip side of this is that Mobile VoIP is exactly how WiMAX can beat 3G. While 3G carriers worry about protecting legacy voice and SMS revenue, hungry WiMAX operators can come in and eat their lunch by being dumb pipes for VoIP and IM. Metered voice and SMS may be a high margin business, but there is too much competition to support profitable new entrants. Taking the initiative and changing the game is a way to build up market share quick and achieve profit via scale — see Amazon, Craig’s List, and eBay as good role models for this.

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  7. The issue is not only between carriers and alternate voice providers over their IP network. In fact looking at other type of value added services locked by carriers we can see the same issues when it comes to old voice related services. Take for example 411, very few people know why they are still charged for getting someone’s number when you can do it for free on the net. 411 is provided a 3rd party supplying the carriers. They are now more companies competing for directory assistance because carriers can not impose one service and hide their supplier hostage without access to the a broader market.
    So in France, since you are mentioning Orange earlier in this thread, after some litigations the carriers had to abandon offering the 411 service directly and when you dial the 411 short number you now end up listening to a carrier sponsor message asking you to find a provider on your own :->
    411 services such as 118 112 are competing in the market place supported by bloated advertising campaigns to fight for the directory information business which is very very profitable.
    Amusingly enough 411 services can’t really provide you any cell phone number, mostly landlines.

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  8. @ Jesse Kopelman,

    You made a number of really good points. This said, wouldn’t you create the chicken and egg problem of mobile VOIP (service and phones) versus WIMAX deployment?

    Thanks in advance for your response to this question.

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  9. Om, I have some more details about Vodafone’s data pricing for VOIP on my blog : http://leavingthedayjob.blogspot.com/2007/06/does-anyone-at-vodafone-understand.html

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  10. Truphone is just too famous. That’s why T-Mobile picked them. Other VoIP providers can do the same job and have similar prices. T-Mobile can’t block them all. The installation on the new Nokia phones is quite easy.

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