Telecom towers on buildings in Srinagar, Indian-administered Kashmir. Picture: REUTERS/DANISH ISMAIL
Telecommunication towers over buildings in Srinagar, India. Cellphone operators everywhere face the challenge of riding the waves of rapid change. Picture: REUTERS/DANISH ISMAIL

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BRITISH sociologist Prof Sylvia Walby has written about "global waves of social energy". It makes for fascinating reading: "… a wave starts in one temporal and spatial location, builds rapidly through endogenous processes, and then spreads out through time and space to affect social relations in other locations.

"The implication of a wave may be backwash and resistance as well as transformation in the direction of the wave as well as hybridisation …. Waves are not permanent, they are intrinsically nonlinear and unstable forms of energy."

Walby could very well have been referring to the challenges facing cellphone operators in SA. This is no exaggeration. The three waves facing telecommunications firms are as potent and problematic as the ones she describes.

Take the first one, where revenue is rapidly migrating from voice to data. Faster data networks means VoIP (voice over internet protocol) is feasible, and it is only the truly price-insensitive consumers that will carry on spending money needlessly on voice calls. At the very least, high-margin international call rates are a thing of the past.

Telecommunication companies have historically relied on unreliable data quality, slow speeds, and VoIP throttling to keep people using traditional, expensive, switched-voice calls. But as 3G networks upgrade to LTE (long term evolution) it is becoming impossible to differentiate the quality of regular voice calls from VoIP, and it is increasingly hard for telecommunication companies to blacklist VoIP traffic.

Even the great firewall of China cannot keep internet users from finding what they want to find. Everyone wants to make cheap phone calls. Nobody can stop the VoIP wave.

Consumers moving in their droves from contracts to prepaid is the second wave. The 24-month contracts were invented to make it possible to get a free phone with a SIM-card. It is effectively an instalment plan, whereby the device is paid off over 24 months.

It made sense to commit to a contract because prepaid airtime was about three times more expensive than contract airtime. But, over the years the gap between prepaid voice and contract voice rates has closed, and there is virtually no cost difference between making calls from a prepaid or contract SIM. So, why be locked into a 24-month contract when a phone can simply be bought for cash and pay-as-you-go? The temptation of a "free" phone is dying, especially as network subsidies fall and the maths no longer makes sense for consumers.

Once all consumers are on prepaid and using SIM-independent apps such as WhatsApp and Skype, the cellphone operators will face enormous margin attrition and be unable to block customer churn using 24-month contract lock-ins. Nobody can stop the prepaid wave.

The final wave is how data networks are moving from LTE to WiFi. GSM (Global System for Mobile Communications) started as a standards-based movement, but has been slowly hijacked by proprietary technologies.

Consider the difference in price between an iPod Touch and an iPhone5.

The iPhone5 costs twice as much as the Touch, and yet the only difference is the 3G chip. The cost is not related to hardware, it is related to royalties.

Proprietary licensing fees are killing the financial feasibility of the LTE technology roadmap. WiFi is stepping into the vacuum.

A standards-based roadmap, massive device penetration and thriving equipment manufacturer ecosystem means WiFi is rapidly becoming the best technology for data network deployments. Nobody can stop the WiFi wave.

Incumbent cellphone operators face a classic innovator’s dilemma. Embrace the waves of the future and accelerate the cannibalisation of their existing, highly profitable businesses, or put their heads in the sand and pretend tomorrow will be the same as yesterday.

Steve Jobs said Apple was a company that chose which wave to ride. Apple wants to ride with the wave, which is why it abandoned Flash when it became apparent they were becoming obsolete.

When Apple killed its support, 75% of internet video was in Flash. Today Flash doesn’t exist. Are cellphone operators the next Adobe?

Walby’s potent descriptor is as relevant in sociology as it is in technology. Nobody can stop the wave. All you can do is ride it.

• Knott-Craig is the chairman of Hero Telecom