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T-Mobile and the circling VoIP sharks

What do you do if a new generation of technology is emerging which will kill your cash cow?  It's an old story in the tech business, and you really only have two choices: fight innovation, or embrace it. 

T-Mobile is fighting at the moment.  They're refusing to connect calls on Truphone, arguing that Truphone isn't shouldering its share of the load of managing and maintaining the mobile network, because it owns no towers, no radios, no… well, you get the picture.  According to Truphone CEO James Tagg "T-Mobile will argue that it is not 'blocking' Truphone but is merely negotiating on price. T-Mobile receives 35p per minute from its customers but is offering only 0.21p per minute to Truphone even when Truphone's costs are 9p per minute to terminate the call." It appears that they've acknowledged that they can't fight VoIP.

As desparate as T-Mobile's move to block calls to Truphone is, it appears even more confusing given the recent T-Venture investment in VoIP service provider Jajah. The truth is that mobile carriers are scared witless of being reduced to nothing more than a dumb pipe. Deutsche Telekom (parent to both companies) seems to be directing T-Mobile to fight a rearguard action, while T-Venture looks for a way forward in this new reality.

My prediction?  As painful as this is for Truphone, they will ultimately prevail.  Logically applications and pipes are separate, and open markets demand interoperability. No doubt the smart people at Deutsche Telekom know this too, and are simply chumming the water to keep the sharks occupied while they finish formulating a strategy. 

{ 8 comments… add one }

  • Alec June 18, 2007, 11:56 am

    Aswath, I think the situation is a little different here in that the AT&T / Iowa story is solely about toll arbitrage between networks. In the Truphone situation, they're legitimately terminating a call on a mobile handset. They have switches, etc… it just happens that the technology being used to transport the last 10 meters of the call is WiFi. Their costs are lower than T-Mobile's… because of WiFi.

    Am I missing something?

  • Aswath June 18, 2007, 3:47 pm

    My take on this story is somewhat different from yours. This is not a case of superior technology being fought by an incumbent. As The Register makes it clear that the real culprit is Ofcom: I presume that special termination rates are issued to mobile carriers for social reasons, but then it has issued to one who is arguably is not. So I of the opinion that T-Mobile is forcing a debate on Ofcom. This is very much similar to AT&T and Iowa carriers in the US, that if I recall correctly you described it in detail in your blog.

    I agree that one day VoIP will win, but that will be also the day when there will not be any VoIP service providers as well, because it is a product and not a service. (Any categorical statement can be challenged; but my point is that the service will be eclipsed by the product.)

  • Martyn Davies June 18, 2007, 4:06 pm

    It’s all about threats to the cash cow, and we’ve caught T-Mobile at it before. I put some commentary on VoIP User earlier today: http://www.voipuser.org/forum_topic_9985.html.

  • Aswath June 18, 2007, 4:38 pm

    I am not sure whether you are missing it. It could as well be me. I am suggesting that the special termination charge is for terminating the call over the “air”. At least that was that society’s decision. Till now it was clear what is meant by “air”, because the carrier and the service provider were the same. Now with the advent of wireless data service, they could be different. So who should get the preferential treatment. I am not suggesting that the answer is clear. After all the initial decision was arbitrary and so there has to be a social discussion. It is in the interest of carriers like T-Mobile to force a discussion, because naturally they will argue that the original intent was to reward the wireless carriers and not the service provider. So the onus is on Ofcom to reinterpret the rule for the changed environment, just like in the Iowa case, FCC has to clarify what some see as a clear, cynical misinterpretation of the law.

    Whatever the merits of the above reasoning may be, I do not think VoIP being stampled upon in this case.

  • Alec June 18, 2007, 5:55 pm

    Got it. I understand your point Aswath.

    It’s an interesting question of interpretation.

    In the case of the Iowa’s, I’ve been chatting with some folks who wonder about placing enhanced services in Iowa, and simply billing back to the carrier rather than the customer. In my opinion, there’s the nothing the FCC should do in that circumstance. The enhanced service could just as easily be for the use of people local to the 712 area code as well as those calling in from other area codes.

    So, should Ofcom regulate this? Don’t know, and perhaps you’re right that is the subject of the debate.

  • Dean Collins June 19, 2007, 9:37 am

    I’ve been told that Iowa involved blocking payments to arbitrage only offenders (eg terminating the call out of state after the redirection) and that voice delivered audio information services were not being blocked and were being paid.

    At least this was the information provided by the entity wanting to host my clients information service – as my client is at least 6 months away from delivering a product it didn’t really matter eitherway as I’m sure a lot will change between now and then.

    Dean Collins

  • John O'Prey July 4, 2007, 12:12 am


    As you now know well WiFiMobile is a stand alone 3rd party application that does not rely on the Nokia client.

  • Tamara July 20, 2007, 1:13 am

    Mobile VoIP operator, Yeigo Communications’ Rapelang Rabana:

    "This is a VoIP milestone. The victory over T-Mobile has set a global precedent. We will now see greater belief in the innovative service provided, and an even larger influx of international clientele subscribing to VoIP technology.”

    “VoIP calls are most certainly cheaper, especially with regards to international communication. It's no wonder network providers are starting to feel somewhat threatened by the VoIP presence in the market.”

    For more information on Yeigo – visit http://www.yeigo.com

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