U,K,-based mobile service provider EE will invest £275 million (about $447 million) in 2014 in the voice portions of its network. That will mean upgrading 5,000 2G sites, while increasing capacity on 5,500 3G network sites, which now carry over two thirds of all EE calls.
EE says some money will be spent to trial 4G voice (VoLTE) and voice over Wi-Fi as well, but that will not represent the bulk of the spending, obviously.
In the first half of 2013, EE had capital investment of £295 million ($480 million). If it spends about $960 million for the full year, the 2014 investment in voice infrastructure would represent about 47 percent of total annual capex.
That decision to invest in the legacy and declining voice business, and the magnitude, illustrates how necessary it sometimes can be to invest in the legacy part of the business that, while declining, represents a huge contribution to present revenues, and which must be defended, even as huge new demands for investment in new fourth generation Long Term Evolution networks also are required.
In the third quarter of 2013, voice and messaging contributed 57 percent of total service revenues, with voice at least 43 percent of total revenues.
Over the long term, voice is becoming a feature, rather than the primary revenue driver. But voice remains an essential function of most communications networks.
Generally speaking, service providers are shifting investment to the growth parts of the business, generally video entertainment and high speed access in the fixed business, and mobile broadband and brand new revenue sources in the mobile business.
The problem arguably is greater now that more people rely on mobiles for all or most of their calling.
There has been a major shift in voice calling patterns across our comparator countries over the last decade, with falling fixed call volumes having been offset by increasing mobile call volumes.
Between 2007 and 2012, for example, use of fixed lines declined 12.7 percent in the Netherlands, 12.4 percent in Poland, 9.3 percent in France and six percent in Germany.
In Italy, fixed lines in service declined 6.4 percent. In Japan, lines declined 8.2 percent, in the United States 2.5 percent, in China 5.8 percent, according to Ofcom.
Additionally, there is evidence that total voice call volumes are falling in some countries, as consumers substitute traditional fixed and mobile voice calls with text-based alternatives.
The United Kingdom was among countries where total voice call volumes fell in the five years to 2012, with total call volumes falling by an average of 1.7 percent a year. That decline happened despite mobile call volumes growing by 25 percent over the same period.
But fixed network calling dropped 31 percent. Fixed voice call volumes fell 14 percent in Japan in 2012 alone, for example.
The highest average rate of decline in voice call volumes in the five years to 2012was in Japan, where calling dropped 3.3 percent annually.
In most countries, over half of outgoing voice call minutes originated on mobile phones in 2012. In China, 98 percent of all calls originated on mobile devices.
In Poland, 84 percent of all calls originated on mobiles. In the United Kingdom, 56 percent of call minutes were mobile-originated in 2012.
Part of the reason, obviously, is that people are using text-based communication modes. Ofcom research in September 2013 indicated that 90 percent or more of U.K., U.S., Japanese, French, German, Italian and Spanish respondents were users of email.
Similarly, 70 percent or more of respondents in all those countries except Japan (41 percent usage of text messaging) and the United States (56 percent) said that they sent and received SMS messages.
All that noted, no mobile service provider can hang on to its customers when calling quality is low. Whether voice capabilities drive significant revenue or not (and, at present, voice still is important), voice communications remains an essential feature of mobile phone service.
So even if a service provider would rather invest capital in “revenue growth” initiatives, sometimes a hygenic investment of substantial size must be made.
By Gary Kim