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Wireless VoIP: Loss Leader or Upselling Strategy?

Rob Frieden

Verizon Wireless' decision to allow their subscribers to access Skype (see http://about.skype.com/press/2010/02/verizon.html) raises a question about strategy. Is Verizon leveraging Skype access as an inducement for subscribers to upgrade to smartphones and commit to $30 a month data plans, has the company acknowledged that its future marketplace success lies in data and not voice services, and how will the company prevent a substantial reduction in plain old voice subscriptions priced above the $30 data plan benchmark?

Like many, I have bought the view that voice communications has become a software application that rides on top of any wireline or wireless link. As such, the downward trend line for telephony approaches zero, right? Yes, if subscribers abandon their voice minutes of use plans that start at about $45 for 450 minutes a month. But no if subscribers keep the voice plan and add the $30 or higher data plan.

There was a time when wireless carriers mandated the bundling of a voice plan for the privilege of adding a data plan. Absent such compulsory bundling, Verizon must have confidence that consumers will opt to keep the user friendly voice option. This assumption makes sense particularly if wireless carriers expect to replace unmetered, "all you can eat" data plans with several tiers of monthly throughput baskets.

Cable television operators did not have such confidence that their subscribers would add service tiers rather than cherry pick. By law cable operators must provide subscribers with some "buy through" opportunities.

With a future data dominant, but tiered service environment, users may consider it prudent to keep their voice minutes on a voice plan to conserve their available megabytes for nonvoice services. Under this scenario, efficient pricing plans trump visions of convergence and zero cost voice.

By Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law
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