Inside telecommunications Issue 8

Service innovation

  • Share

Operators target improved call quality through High Definition Voice

Despite growth in data revenues, voice is still expected to account for half of operator revenues in years to come.

Operators have been keen to roll out new High Definition (HD) voice services in a number of markets. By October 2012, 51 operators were offering HD voice in 38 countries, representing a 60% increase year-on-year in the number of services available.

Device support is also growing, with 127 models enabled with 3GPP-approved Adaptive Multi Rate Wideband technology (W-AMR) available through some 14 manufacturers.

Global mobile Suppliers Association “GSA confirms over 50 mobile networks have launched HD Voice service” 28th October 2012

International HD voice calling has also appeared, with Orange launching a cross-border service for customers in Romania and the Moldova Republic in October. The France-based group plans to offer HD voice as a wholesale offering to other mobile and fixed operators.

For operators, efforts to improve call quality offer a new route to combating churn, with HD Voice capability offered to end users for free.

Monetization of HD Voice services is likely to be indirect: increases in average call duration for HD Voice calls can generate higher revenues, for example. VoIP providers have also taken steps to bring HD Voice to different mobile operating systems.

Despite growth in data revenues, voice is still expected to account for half of operator revenues in years to come.

Nurturing innovation facilities and funds for new services

Investment opportunities are widening for carriers as they look to offer new services to respond to competitive threats and generate new operating efficiencies. Operators are looking for alternative routes to innovation by seeking out new talent at its source.

Partnerships with start-ups in California’s Silicon Valley have become increasingly important. In 2011, Verizon and Vodafone established new innovation centers to identify start-ups with potential and take their ideas to proof-of-concept trials. In return, developers gain access to mobile operators’ networks and back office capabilities.

In November, NTT announced plans to establish a cloud computing R&D center in Silicon Valley which will focus on cybersecurity among other areas.

Other developments demonstrate a cross-sector approach to R&D. In October, a consortium of mobile operators and infrastructure providers – including Telefonica Europe, Huawei and Samsung – established a 5G research center in the UK led by the University of Surrey, with state funding also supporting the new facility.

Operators’ venture capital strategies are also being overhauled. There is an increasing focus on both early-stage investment and support for more mature innovators that are seeking global footprints. Holistic strategies that align venture capital approaches with innovation facilities are becoming more evident.

Operators are also partnering afresh with venture capital firms. Decentralized R&D is becoming more important as operators widen their addressable markets, while the potential of developing markets is driving the creation of new venture capital funds.

Existing incubator networks are being accelerated, reflecting both the emergence of new innovation ‘hot spots’ in the wake of convergence along with a greater onus on effective decision-making.

Selected operator innovation funds2

Launch Operator Innovation fund Fund value Notes
Feb-13 SoftBank Corp. SoftBank PrinceVille Investments US$250m Set up through existing fund Venture Capital; to be run in conjunction with Softbank affiliate and semiconductor firm MediaTek
Feb-13 NTT DoCoMo 500 Startups II, L.P.  via DOCOMO Capital ¥10bn Planned investment in 500 start-ups II via NTT’s U.S. subsidiary NTT Capital Inc.
Oct-12 NTT DoCoMo DOCOMO Innovation Fund and Innovation Village ¥10bn Focused on mobile services in Japan across eight new strategic fields: media/content, finance/payment, commerce, healthcare, M2M, aggregation/platforms, environment, security/safety
Oct-12 Telenet Group Telenet STAP €30 m Focused on investment in Flemish language  content for TV services over a four-year period
Sep-12 Telefonica Amerigo US$300m A Latin America-focused fund that will be combined with Telefonica’s growing network of Wayra incubators. Targeted countries include Spain, Colombia, Chile and Brazil.
Jun-12 SK Telecom SK Group Fund* US$85 m A private equity fund for direct investment with partner companies in small companies struggling to raise capital

1Global mobile Suppliers Association “GSA confirms over 50 mobile networks have launched HD Voice service” 28th October 2012
2 EY analysis