MCI Said Ready to Bet on Wireless VoIP, Hang On for Dear Life
SAN JOSE -- MCI sees the future in wireless VoIP while hoping and believing its expensive circuit switches will retain value for some time, said MCI Strategy & Business Development Senior Vp Jack Dziak. Sounding a lot less like a Bellhead than a techie with a legacy network, he told the wVoIP conference here Wed. the company’s preliminary calculations show a customer’s 2-year total cost including hardware for wireless IP voice and data services at home, at the office and around town runs barely 1/5 the cost using “best-of-breed” wired and cellular technologies such as DSL and 3G -- $1,650 to $7,570. And the advantage should only rise as “the costs continue to decline” on the Wi-Fi and WiMAX side, Dziak said.
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MCI’s capital cost to deploy a pre-WiMAX mesh network is about $80 per subscriber, about double that for EvDO or EDGE, Dziak said. But the IP network offers much more, notably a “fixed DSL equivalent as well as mobile data,” he said. Dziak also said he assumes Internet entrants such as Google will offer not only VoIP services but “wireless access itself.” He didn’t elaborate.
MCI turns over about 1/2 its revenue to other telcos in access costs, for termination charges and special access, Dziak said. Flat costs and pricing at or below marginal costs leaves MCI in a “clearly unsustainable” EBITDA situation, he said, and it’s “incumbent on us to quickly migrate” to a feasible technology platform. Data access prices are dropping almost as quickly as voice, Dziak said: “You're basically talking commodity,” forcing carriers “to move up the stack” in service offerings. Meanwhile, cellular is rapidly displacing landline long distance and local use, he said. “Going out and buying a wireless company is probably not in the cards, [but] we don’t think that is necessarily required.”
IP is the “best thing” and the “worst thing” to happen to a conventional telecom, because of its advantages and because it supersedes sunk investments in switched network, Dziak said. The industry transition to IP-based wireless broadband will come in the next few years, he said -- much faster than wired broadband and 3G, which took more than a decade. Dziak didn’t discuss how MCI’s pending takeover by Verizon would affect his company’s current situation or evolution.
Sketching the industry’s predicted development, Dziak conceded it was “heresy” to many that applications will be separate from the network. “But that train’s left the station,” he said. However, Dziak acknowledged many technology, standards, business and policy matters remain to be sorted out before wireless VoIP reaches its potential.
Dziak offered stark “hypotheses” on telecom’s course: (1) “The marginal cost of a VoIP call will probably approach zero.” Voice costs are increasingly from software instead of infrastructure, he said. The switched network will remain important, though, because “a large percentage of calls are gong to be terminated on a black phone.” Service providers also have large blocks of phone numbers, which will still be needed. And E-911 will add expense to VoIP service. (2) “Mobile VoIP will be priced at zero,” with value received for other services. Google and eBay VoIP pricing will be highly instructive. Voice might be cross-subsidized for consumers by ads or otherwise. “Per seat” charges to business customers would fit the software model better than volume-based bills. But “there will be no standard revenue construct for mobile VoIP.” (3) “Wi-Fi mesh can be profitable at price points much lower than other access technologies.” (4) “Voice will become the ultimate viral application.” Personalization and “presence” management will transform communications in a way evident from new verb uses, Dziak said: “Search for me at 9 a.m.” “Call me when you ’see’ me.” “Call me, don’t call my number.”