Why VOIP doesn’t work for the poor

The recent annoucement of WhatsApp Calling got me thinking. If you are receiving a VOIP call you must pay for the data. In other words, unless you’re using an uncapped or free connection, VOIP means both caller and called-party pays, unlike traditional voice for which only the caller pays.

The average data required for a voice call is about 0,5MB/minute and (in South Africa) prepaid data rates are about 10c/MB (USD). Like most emerging markets, South Africans do not have any options for uncapped mobile data.

All data is priced per MB, and most people use prepaid.

VOIP callers will therefore pay 5c/min for calls received.

This will not work. Poor South Africans do not have enough money to make calls, nevermind receive calls. The average South African living in a township or rural area uses his phone exclusively for incoming calls.

That’s why the “PleaseCallMe” service is so popular. Over 30million PleaseCallMe’s are sent across the mobile networks every day. The operators allow for a free SMS to be sent (using USSD) to the number of your choice, asking the recipient to “Please Call Me”.

It is used by millions of people without sufficient airtime (including the children of the wealthy).

None of these people will be able to receive calls from WhatsApp because they simply don’t have the airtime to pay for the incoming data.

At the very beginning of mobile in SA, 1994, MTN launched with called-party pays pricing. This was not an unknown-of model, but it was very short-lived. Its not only the poor that refuse to pay for incoming calls. The rich also refuse. Why? No one wants to pick up the tab for someone else’s call.

High mobile call rates are effectively a reverse-billing mechanism whereby the caller picks up the cost of called-party receiving calls.

The only way for WhatsApp to be inclusive is to allow for “break-out” whereby you can pay to make calls to people without airtime. The rate will be determined by the interconnect rate charged by the mobile operator.

In a world of WhatsApp Calling, the mobile operators with only wealthy customers will see significant margin attrition as their customers move from high-rates to VOIP.

The winners may be the mobile operators catering exclusively to low-income communities seeing as they aren’t dependent on revenues from their customers, but rather they make money charging interconnect fees to people who want to call their customers.