iPhone apps that route calls over the Internet — and don’t eat up your monthly calling allotment — are certainly not good news for wireless carriers. But they are not going to “blow up” the mobile industry, either.
The latest: NYT tech columnist David Pogue is super excited about an app called Line2, which gives your iPhone another phone number for cheap VoIP calls. It also has a bunch of other nice features like wi-fi calling, call screening, iPod touch calling, “do not disturb” hours, etc.
Sounds cool, and potentially disruptive over the long-term to wireless carriers like AT&T, which powers the iPhone.
But there is no real risk that the industry is going to “blow up,” as my colleague Henry Blodget writes this morning. The VoIP services simply are not good enough yet, and wireless carriers — well-aware that voice revenue is going to continue to shrink — are still solidly in control of your mobile phone.
- VoIP apps simply are not as good or as reliable as using your iPhone’s calling feature. On the iPhone, third-party apps — including VoIP apps — can’t run as “background” apps, which means you can’t receive calls unless you leave the app open all the time. That’s obviously not practical. They also don’t use your phone number — you need another number. These annoyances mean that most people won’t want to replace their main phone service — which, in theory, just works — with something less reliable.
- You still have to pay your phone bill! Whether you use VoIP apps on your iPhone or not, you are still required to subscribe to a monthly calling plan and a long-term contract. The cheapest plan AT&T advertises is $40 per month. Sure, VoIP apps may allow you to reduce your calling plan. But they won’t allow you to eliminate it.
- Carriers already know voice calling is becoming worth less money. So they’re charging less money for it! Unlimited calling used to cost $200 a month. Now it’s much less, and it’s only going to get cheaper. Carriers know you’ll continue to spend some money on voice calling, but their main goal is to get you to spend more money on data service. AT&T is much happier to have you to spend $100 per month on iPhone service — even if you’re making some VoIP calls — than the $50 per month you were spending for your Motorola Razr.
- What about no-contract iPhones with Internet-only service, and VoIP for calls? Phones without calling plans are not subsidized, and are therefore too expensive for most people. Unsubsidized iPhones are not going to be available for $199 or even $299. Expect to pay $600 or more for a no-contract iPhone. That may be practical for some people, but not the vast majority.
To be sure, yes, we’re aware how classic disruption works — something starts out as inferior, then it gets better, and then it gets scary. For instance…
- If Line2 and Skype can run in the background in the next version of Apple’s iPhone OS, they become much more threatening.
- If Apple’s next iPod touch includes a speaker and a microphone, it becomes a better potential phone replacement.
- If Google blankets your city with free wi-fi, it becomes a much more practical carrier replacement.
So there’s no doubt that carriers are facing disruptive forces in their future. As Henry Blodget writes, “the crumbling of the traditional per-minute cellular model, like the crumbling of the traditional cable TV model, is only a matter of time.”
We don’t disagree. But carriers are well aware of this trend. And they’re not going to “blow up” because of today’s iPhone VoIP apps.
Plus, if anything ever gets too disruptive, AT&T can always whip out its massive checkbook and buy it.
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