When the "homezone" is free

I was talking with a colleague about mobile-only “homezone” services. These services, quite popular in Germany, give subscribers deep discounts (ie “free”) for calls made within a cellular “zone”, typically around the home. The zone can be as simple as the cell tower nearest the subscriber’s home, or based on 3G “triangulation” techniques to draw a virtual circle around the subscriber’s home.

For calls made within that zone (or circle), two things happen: First, the subscriber gets a deep discount because they are in the zone, and two the mobile operator uses the same network infrastructure to carry calls. The result for the operator is that calls within the home zone are under significant profit pressure.

Apparently one product manager at an operator offering such a service has first hand knowledge of the price pressure. The story is that his wife lives and works within the zone. Because all the mobile calls made within the zone are free, the man’s wife pays nothing for the vast majority of her mobile usage.

The point is home zones and quite often office zones are free or will be free very soon. This is because in the home or office, there is real competition from both fixed line phones as well as new VoIP service providers.

Faced with this incredible competitive pressure, mobile operators are forced to develop artificial zones with artificial pricing to match these disruptive service providers.

While cellular based home zones will “solve” the problem in the short term, the reality is that operators cannot pay real network transport costs when the revenue collected is zero. Pricing below cost is a recipe for disaster.

This is the beauty of UMA. With UMA, operators can offer free services because they are using the same “free” Wi-Fi/IP network infrastructure the upstart VoIP providers are using. Second, UMA provides a zone that’s exactly the same size as the zone a VoIP provider has, namely the range of a Wi-Fi access point. With UMA, operators get a very targeted home zone, not one that covers an entire town or village.

There is no doubt that homezones are viewed as a “quick fix” to the pricing pressures faced by operators today. And it's clear what consumers want: Cheap Voice.

In the end, voice is a commodity, and the way to win is to be on the lowest cost access network. That’s what UMA does for mobile operators.