Expect fireworks as WhatsApp allows calls - TechCentral

Expect fireworks as WhatsApp allows calls

Duncan-McLeod-180-profileWhatsApp, the world’s most popular smartphone instant messaging platform, has started rolling out voice dialling in its application (Android users only for now), striking fear into the hearts of mobile telecommunications industry executives everywhere.

The company, now owned by Facebook, first announced its plans at 2014’s Mobile World Congress in Spain to allow its hundreds of millions of users to call each other using the app.

That announcement set the cat among the pigeons in the mobile operator world, with fears that WhatsApp and other so-called “over the top” or OTT services would not only eat away at their lucrative voice profits but undermine the business case for rolling out the next-generation broadband networks the OTT providers need to offer services to consumers.

The reason the mobile industry is so concerned about WhatsApp in particular is its vast subscriber base, now numbering more than 700m active users. The company will soon overtake China Mobile — the world’s largest mobile operator — by subscriber numbers.

The problem for mobile operators is that voice still tends to be a much more profitable business than data and WhatsApp wants to offer free voice calls — at least between its users — over the operators’ lower-margin data infrastructure. In other words, WhatsApp is threatening to rip out the operators’ most profitable business from under them, by using their own networks to do it. That has to hurt.

And the operators can’t simply hit back by blocking WhatsApp. Their customers would revolt if they tried and regulators would come down on them like a ton of bricks.

The debate over OTT providers has been raging in South Africa for some time. MTN South Africa CEO Ahmad Farroukh fired the first salvo in 2014 when he accused OTTs of wanting a “free ride” on the billions the operators invest in network infrastructure.

Now Vodafone’s global CEO, Vittorio Colao, who was in South Africa this week for meetings with South African-headquartered subsidiary Vodacom, has weighed in on the subject, warning at a press conference in Johannesburg on Wednesday that regulators and policy makers need to ensure that OTT providers are subjected to the same rules as operators.

Though he said he doesn’t think of companies like WhatsApp as a threat, there has to be “fairness in the ability to compete”. He said Vodafone would be taken to task by regulators if it refused to interconnect with another operator anywhere in the world, yet it can’t interconnect with WhatsApp.

“If I want to send an instant message from a Vodafone client to WhatsApp, I can’t. The biggest communications company in the world [WhatsApp] has no obligation to interconnect. The regulations should be the same,” Colao said.

He said companies like WhatsApp should be forced by regulators to interconnect with telecoms operators. “There is an imbalance of power. The dominance of these OTT providers is the real issue, and could result in a reduction of competition and innovation.”

In addition, if operators are required to provide legal interception to authorities, the OTT companies should be obliged to do the same. The European Commission should investigate the issue, he added. “There is no reason I should have a higher cost than them.”

Vodafone CEO Vittorio Colao

Vodafone CEO Vittorio Colao

But there appears to be little sympathy for this point of view among mobile consumers. Many people argue that operators are still making money from selling them the data services they need to access OTT services.

WhatsApp voice calls won’t be completely free since users still need to pay for the data they consume. But, on average, the operators’ profit margins will be significantly lower than if those calls had been routed over their own voice networks.

For many users, making calls over the Internet is still an inconveniece — for one thing, quality is not yet what it should be. But as operators build out 4G broadband networks, the situation will improve.

And, as a colleague pointed out this week, Microsoft smartphones will soon “detect automatically if the person being called has Skype, and transparently hand a voice call from the mobile network to Skype”. Expect this to happen on other platforms, too.

To mobile operators, this is tantamount to a declaration of war. No wonder Colao is keen for regulators to step in.

  • Duncan McLeod is editor of TechCentral. Find him on Twitter
  • This column was first published in the Sunday Times

20 Comments

  1. Anonymous 777 on

    if it’s cheaper – i will use it! Chances are – it’s the same quality as Cell C, so we’ll be fine 🙂

  2. Andrew Fraser on

    500 Million Whatsapp users. You don’t need to be first. Just the first to scale.

  3. Desperate Dan on

    After Vodacoms illegal price increase, I will use it. I Hope Vodacom is hurting. They lose customers so they put their prices up. Rocket Scientists. Just improve your service that might justify a price increase. Good for Whatsapp. Vodacom have had it too good for too long. Greedy scum.

  4. Greg Mahlknecht on

    Skype has a larger user base and is better for voice. For the reasons Skype didn’t kill the industry, I don’t think Whatsapp will. The scale has been there for ages. I do join you in hoping it’ll give the operators a rude wake-up call, but I have my doubts it will.

  5. I think whatsapp is being an idiot, so many jobs will be cut down from Mobile Operators if this happen, They should be banned from Voice Calls.

  6. How about a compromise – Mobile operators reduce their obscene profits by slashing their rates.

  7. Theo Schuurmans on

    Cell C reception generally down in the peninsula is NOT FINE – unfortunately.
    I agree the greedy cell phone operators need to have some real competition not only with regard to technical competence but have enough admin ability and inclination to react to customers complaints. Once the contract is signed oh boy you are on your own.

  8. Andrew Fraser on

    Skype’s success hasn’t been in mobile. Whatsapp is 100% mobile. User ID is cellphone number, so integration to existing contacts is simpler. I think Whatsapp is better poised than Skype.

  9. Thabo Mokaleng on

    That cost is more or less nothing if both caller and recipient are on free wifi. And that, I think is what’s causing the network providers concern. Instead of buying airtime users will just go to a free wifi hotspot…

  10. Andrew Fraser on

    And their IM service infringes on Network’s SMS revenues. Should that be banned as well?

  11. Do they really want whatsapp to be able to call landlines? That is the only thing that would keep them in business.

    They should be embracing internet communications. It will make people more dependent on their phones, hence more dependent on data networks, specifically reliable data networks. Hence an investment into a quality data network will attract customers.

  12. Isn’t it just a big laugh? Capitalism or so-called capitalism that is. We were told since Standard 3 that capitalism is the answer because it brings about COMPETITION. Well BS to that, it’s obvious that competition is the last thing these operators want.
    They have been schoolyard bullies in the cell phone world here in South Africa and now the new kid in school is giving them the punch in the greedy snout they oh so richly deserve. Good on yer WattaApp!
    Please spare me the heart rending violin music cries of …”Oh but we provided the initial network.’. Hoss manure, you provided that with a view to a nice cosy enrichment scheme beyond mere mortals dreams. Now move on and face up to real competition. We are sick of you and your gouging greed. (See the MTN CEO’s prattle.)

  13. If both parties are on WiFi then they are not on top of the mobile networks and not cannibalizing their networks.

    Having said that I can see the networks winning some ground on the regulatory argument. Especially the security argument.

  14. Deon Pretorius on

    No sympathy here for the mobile operators! There is a shift to data and they must adapt. Voice is already declining!

  15. “For many users, making calls over the Internet is still an inconveniece — for one thing, quality is not yet what it should be. But as operators build out 4G broadband networks, the situation will improve.” THIS SEEMS TO BE TRUE FOR VOICE CALLS IN MANY AREAS IN SOUTH AFRICA,IT WILL JUST BE CHEAPER DROPPED CALLS..

  16. Nothing here is actually free; Whatsapp has a yearly fee and now adding another service. MNO’s should be very familiar with offering VAS services with as little and diminishing margin to the wholesalers as possible; clearly they do not like it when the tables are turned :). Whatsapp is offering something awesome and even if the calls are bad, it will continue the push towards better technology in this area. Even going to free wifi areas will be related to supporting businesses (such as coffee shops) etc. As said above, the MNO’s will still make money from selling the data and as per comments below, this would far from dissolve the MNO business. Final thought: If the MNO’s are so quick to want to pull in regulators when they see their “pie” being threatened, shouldn’t the same be done on them in the banking sector 🙂 ? – The MNO’s simply love playing in the banking space; so should we regulate airtime like cash now? -nope, exactly…leave Whatsapp alone and focus on evolving with the times

  17. Madimetja Shogole on

    With Whatsapp running 100% on mobile, network operators have to be really worried; I would be worried. Bring it on ‘Zuckerberg’, we are so ready to finally enjoy good priced services.

  18. I have literally saved 1000s of rands by calling all my
    international calls in skype. I used to pay around R400 a month on my calls,
    after getting skype, only the data charge (inclusive in my data contract).

    Operators are losing revenue big time.

  19. Its good to use whatsapp messenger now if u want to make international calls its very cheap, same if u using Facebook messenger its very cheap same cant be said about these local network providers who charge exorbitant fees for voice calls.