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Summary:

With AT&T announcing its free mobile to mobile calls to help fend off customers defecting for the iPhone on Verizon’s network, it’s time to recognize that voice is now worthless, but operators will turn to data and M2M to make up for the loss of voice.

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With AT&T announcing its free mobile to mobile calls to help fend off customers defecting for the iPhone on Verizon’s network, it’s time to recognize that voice is now worthless. We can joke that AT&T clearly thought that all along (hello, dropped calls) but the pricing here signals that operators are ready to put all their eggs in the data basket. Sure, there are strings attached (customers need to have an unlimited texting plan and already subscribe to a plan of 450 minutes or higher) but allowing customers to call any mobile numbers in the U.S. without using allotted minutes turns a 450 minute plan for $40 and the corresponding $20 texting plan (for individuals) into an unlimited voice plan.

This isn’t just a means to keep iPhone subscribers, however. It’s another depreciation for the value of voice calls as carriers accept the decline of revenue coming from voice. But before we get all happy about cheaper mobile bills, don’t think operators are going to leave data revenue lying around. For example, when AT&T introduced its new $15 for 200MB plan and 2GB plan for smartphones in June, its rhetoric about the plans being cheaper for subscribers didn’t fall on deaf ears. The operator has seen an uptick in its mobile subscribers since implementing the price change in June, although it’s cagey about details on how many of those that have signed up for the low-end plan that are new subscribers.

However, many of those who added data plans may find that the entry-level plan is more like a gateway drug that will draw them inexorably to gigabyte plans and perhaps even overage charges. Because voice is still profitable and represents a sizable chunk of operators’ revenue (see the chart from Chetan Sharma’s most recent mobile operator report), operators won’t let it go without trying to recoup some of that average revenue per user (ARPU) with higher data charges for consumers. They’ll also turn to machine-to-machine subscriptions to make up profits and provide high-volume, lower-revenue subscriptions. I explained a lot of this last May, but today’s news is yet another data point showcasing the continuing decline of voice.

Sure it’s good for those who use their phones for talking over cell networks, but thanks to VoIP, video chat, and increasing web use, that source of income is overrated. Carriers know it, which is why AT&T threw subscribers a bone as it seeks to hold onto iPhone subscribers and its real source of income: iPhone data hogs.

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  1. Voice is NOT worthless. That is what makes a phone different from laptop or a pda or a tablet. Most carriers haven’t invested in things like HD Voice so they really don’t offer much better voice than VOIP solutions which people can use over 3G or WIFI. On AT&T prepaid you get UNLIMITED voice (not just to mobiles) and UNLIMITED texts for $60 a month or $2 a day (and you don’t pay for days you don’t use it). Their prices for postpaid voice were just too high and are probably still too high considering there are taxes and fees on top of that $40 voice plan with $20 text added to it. I wish some carrier would add HD Voice in the USA so they could bring back the value of making a phone call.

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    1. Fair enough Stuart. And good point on the prepaid, but voice is becoming a less valuable commodity for carriers, and my point is that while voice pricing drops it’s likely that data prices will rise.

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    2. Hamranhansenhansen Wednesday, February 9, 2011

      You totally missed the point. Talking on the phone is still valuable in and of itself, but voice calls are just another kind of data now.

      You can make unlimited voice calls on an iPod touch with Skype installed for $6 per month, and for $5 extra per month Skype will give you a number. This all works on iPhone, too, even over 3G. So why am I paying $40 per month for voice minutes I don’t use?

      AND there are fewer dropped calls with Skype-over-AT&T-data than with AT&T voice calls, AND video calling if you have a FaceTime camera, and unlimited Canada calls are $3 per month more, AND I can answer or dial my Skype number from my Mac and iPad.

      When I pay my $30/month unlimited data plan for my iPad, I think “thank-you AT&T.” I don’t use that much 3G data on my iPad, but it is never off the Internet and it is always $1/day so it is money well spent. But when I pay my $90/month iPhone bill, I think “I just got screwed again” because I use about 50 minutes of calls ($40), 50 texts ($20), and a couple of gigabytes of data.

      Plus, I’ve had people call me from Canada, which is also country code 1, and I called them back without realizing they were in Canada and the call had long distance surcharges. Same with texts. Who needs it? If there was an iPod touch with 3G I would buy in a second.

      On iPhone, FaceTime is built-in VoIP, Skype is VoIP, Truphone is VoIP, and there are about 5 or 6 others, too. They are all much cheaper than Phone.

      So voice calls are a scam.

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  2. I wonder what will happen to voice charges when voice traffic shifts to the data network, a la Verizon’s pending implementation (next year anyway) of VoLTE. Will carriers still charge you for a voice “call” even though it’s data?

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    1. Voice calls down’t consume that much bandwidth so charges should be negligible. Cisco has a research paper on voice bandwidth requirements if you’re interested http://www.cisco.com/en/US/tech/tk652/tk698/technologies_tech_note09186a0080094ae2.shtml

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      1. Correct. A good 64Kb/s data pipe will support a good voice call. This is a tiny fraction of most pipes. The quality issues with VoIP calls are now more often due to device processor allocation issues than with bandwidth.

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  3. I’m curious, why is it just now considered worthless? Sprint has had the Unlimited Any Mobile Any time feature as part of their Everything Data plans since Sept 2009… I noticed it was mentioned no where in this article..if anything AT&T is playing catch up to Sprint.

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    1. You do not understand the true meaning of this post. The fact that AT&T will enable near-unlimited calling to almost all of their customers at no additional charge is a sign that voice is negligible as far as network usage and profits earned from it. IE: AT&T is getting so little overcharges from voice usage compared to data they can safely enable unlimited Calling with no perceivable hit to the network, all to attract new customers.

      AT&T now cares so little over calls that it’s basically an addition on top of Data and messaging.

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  4. Offering free calls to people already paying for 450 minutes and a huge pile of texts of them is an attempt to hang onto their best customers and does nothing for the rest of us who can’t get the 100 minutes and 1GB of data we want for less than $70/mo.

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  5. Saying that Voice is worthless is a misnomer. If Voice were worthless Skype would die tomorrow.

    Telecoms is a declining price environment, has been since forever. The wholesale price of a one minute call to North America (fixed or mobile) has been less than half a US cent for years.

    US Telcos could have made national calling free a long time ago. It has always been affordable for them to do so given offset in the volumes of wholesale (billable) inbound international traffic.

    The question US consumers should be asking is: hey, what took you so long? The next question from the prepaid customers should be: hey, why are you still ripping me off?

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  6. I don’t think voice is worthless as long as it’s faster than typing!!
    http://goo.gl/0NZYN

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  7. Actually,its not worthless. there is $20 upcharge(aka texting unlimited). with google voice plus push notification, who needs unlimited texting?

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    1. Who need unlimited texting? Apparently you don’t have a teenager in your house…

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  8. [...] defecting to the iPhone that is only now available on Verizon’s network.  As GigaOM point out this is a clear pointer to where the world is headed – voice will be worthless, and all the value [...]

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  9. [...] Mobile customers. The Virgin Mobile plans increase in price with more voice minutes and we know that voice is now becoming worthless, so perhaps a modification to the unlimited data aspect would boost prepaid ARPU. Even prepaid [...]

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  10. What I know after having a iphone for 15 months is that I use it for phone calls(not including texts) maybe 10% of my usage of the device. That is probably high. I have had a rollover plan with AT&T for years and have minutes expire every month. Games and surfing is what I use the device for and some music listening.

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