The zero-install femtocell – AKA FaceTime

July 4, 2010 at 10:51 am 5 comments

I had a fascinating chat at Techcelerate with our local VC Ed French of Enterprise Ventures about Apple’s new FaceTime. (product? service? application – which is it????). Ed’s question was around the economics (he’s a VC, thats what you expect) of transitioning from a billable (nominally 10p/min) poor-quality voice call to a free higher quality video call.

If you look at it from a consumer’s point of view, this is a huge win. Imagine sitting in your lonely hotel room on a business trip, you call your family on your iphone. You check that now is a good time, then switch to video and loose all the costs (except perhaps the hotel’s wifi charge, but your company has paid that). This is pretty much how skype works now, except that there you require a latptop with skype installed instead. The flaw in the skype experience is the far end availability, your family may not be sitting in front of the laptop leading to a ‘not there’ problem (hence Skype’s interest in Skype for TV).

It is clearly in Apple’s interest too, since it generates a network effect around iPhone 4, owners will apply peer pressure on family and close friends and encourage them to buy iPhones so that they can get more FaceTime.

So where does this leave the carrier ? On the face of it Apple are doing them out of minutes for no return. Surprisingly the carriers are probably going to be pretty relaxed about it.

The loss of income argument only applies to Pay-as-you-go subscribers. Most iPhones are on monthly contracts, and very few people on contracts exceed their monthly minutes. So there is no incremental loss to the carrier of a shorter call, they get the monthly fee eitherway. Indeed, FaceTime unburdens the call from the carrier’s network onto the public internet (thanks to  the hotel wifi and the family’s ISP).

In effect, FaceTime acts as a portable, zero-install femtocell, offloading call traffic for free, without any carrier buildout or support costs or any customer setup and hassle. See Dean Bubley and Andy Abramson ‘s discussion on the merits of femtocells vs WiFi.

Ah, but what about those high-value roaming minutes the carrier is losing from foreign trips? Again the carrier has reason to be cheerful, the initial connection is made over GSM, so they get a connection fee (30p minimum?) and a minute or two of call at roaming rates. Consider the alternative, the smart business traveler these days uses Skype or Truphone or Fring, all of which earn the carrier nothing at all and draw them away from the carriers by using a new identifier – either a skype id or a new virtual number.

Which brings me to the remaining reason that carriers will quite like FaceTime, the id it uses is your current mobile number, not your apple-id – keeping you loyal to the numerical side of the great namespace divide.

All in all not a bad deal for a hard pressed carrier like ATT or O2, at least in the short-term.

Entry filed under: VoIP. Tags: , , , .

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5 Comments Add your own

  • 1. Ed French  |  July 5, 2010 at 2:24 pm

    Good analysis Tim however I still wonder if the carriers would’ve been so relaxed if it hadn’t been Apple? I notice the way that video content owners who always insisted on DRM as essential to protect their assets immediately sacrifice this in order to get their content onto the Apple Ipad.

    Reply
    • 2. babyis60  |  July 6, 2010 at 9:36 pm

      Yep, Apple do seem to be able to charm the birds out of the trees.

      Reply
  • 3. Darren Storer  |  July 6, 2010 at 12:20 am

    An interesting, thought provoking read Tim.

    A similar effect took place with Blackberry Messenger being favoured by the teen market as a direct replacement for SMS but at very low (if any) cost to the user. The final endorsement was the rash of Blackberry PINs displayed on Facebook profiles.

    How does the iPhone 4 hold up on battery life, when running FaceTime + the WiFi sub-system ?

    Reply
    • 4. babyis60  |  July 6, 2010 at 9:38 pm

      I haven’t got (or even seen) an iPhone 4 yet. The iPad’s battery life playing video is impressive due to the custom silicon, so FaceTime might not be too bad.

      Reply
  • 5. John Todd  |  September 28, 2010 at 4:21 am

    I strongly suspect that the first-minute GSM requirement is going to go away shortly. It makes no technology sense insisting upon it in all cases, and it removes many devices from the pool of potential endponts. That first minute is a marginal biscuit to throw to the carriers, anyway.

    Reply

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