LTE has soundly defeated WiMAX as the preferred technology for fourth-generation (4G) cellular networks, but the initial LTE deployments have been restricted to data services. That is about to change; Verizon announced its intention to roll out Voice Services over its LTE (VoLTE) by next year. Given the competitive nature of the mobile operator market, I expect the other players to follow Verizon's lead.
VoLTE can impact mobile voice services in two important ways: cost and quality. Let's look at the quality issue first.
To be frank, cellular voice quality stinks. The 2G networks (GSM and CDMA) are using early '90s vintage voice-encoding technology that was a product of compromise--too much compromise. Given that 2G's radio technologies are relatively inefficient when it comes to bandwidth utilization, the designers had to deliver "acceptable quality" voice service using as few bits as practical.
In GSM that was accomplished with Adaptive Multi-Rate (AMR) and the CDMA standards opted for Q-CELP. The only technical analysis I ever saw for the voice quality was an IEEE paper that found the best Mean Opinion Score (MOS) you could get with AMR was 4.0 (i.e. barely acceptable business quality), and it dropped rapidly as the quality of the radio signal dropped.
LTE will do for the cellular network what IP did for the wired networks. First, the vision of LTE is that all traffic--voice and data--will be carried in packet form. Further, just as with wired VoIP services, multiple voice-coding options can be accommodated over an LTE radio network. So with LTE, all of a sudden, high-quality wideband voice over wireless becomes possible.
With VoLTE, if you're the one person using a cell phone on a conference call, not only will you be able to hear what's going on (finally), but the rest of the participants won't have to ask you to mute your line.
The second and bigger issue is what VoLTE will mean in terms of cost. According to mobile network analyst Chetan Sharma, voice still represents 61% of U.S. mobile operator revenues, with data making up the rest. For years I have heard people postulate that we will soon be able to buy a mobile data package, forego the voice, and use VoIP over the cellular network. But the mobile operators' worst fear is that they become a "dumb pipe" for someone else's profitable service.
In preparation for the transition to LTE, the operators have been phasing out flat-rate data plans; only Sprint continues to provide one and it promises to continue to do so on its LTE network. Mr. Sharma has calculated that data now represents 85% of the traffic on mobile operators' networks, but as noted above, it produces only 39% of the revenues.
In short, voice remains cellular's cash cow. Let's take a quick look at how a wholesale shift of voice to LTE at current rates could impact the operators’ revenue streams.
Assuming a high-quality voice service uses a 64-Kbps codec (e.g. G.722), the total data rate with overhead would come to around 100 Kbits or 12.5 Kbytes per second. A moderate enterprise voice user burns 500 to 1,000 voice minutes per month (30- to 60-K seconds per month). That translates into less than 1 Gbyte per month. LTE services are typically selling for $10 per Gbyte. So, operators who currently net $25 to $50 per month per enterprise voice user, would now net less than $10 per month. While it’s enticing to think of a world where technological Darwinism drives mobile services to “dumb pipe” status, the mobile operators will do whatever they can to avoid crippling their cash cow. So while VoLTE should have a very positive (and long overdue) impact on the quality of mobile voice services, I am not optimistic about that VoLTE will bring enterprise costs down, at least in the short term. The operators have made significant investments in deploying LTE networks; now we have to wait and see how much they’ll charge for LTE services.
