Cash cow in a BigTinCan?

Around one third of Australia's telcos have shut their doors over time, but that isn't stopping new ventures hoping to chip away at carriers' mobile call bonanza. By fighting carriers at the smartphone rather than the home phone, could the latest two contenders be onto something big?
Written by David Braue, Contributor

Australia's register of licensed telecommunications carriers is littered with the carcasses of companies that were once dead-set on changing our telecoms world: 96 out of 273 carriers registered since 1 July 1997 have either surrendered their licences or, in a handful of cases, had them revoked.

Seeking profitable niches outside the mainstream, many of those were small operators who hoped to cash in on what seemed to be a surefire recipe for success: buy international calling minutes in massive quantities, then on-sell them to customers as prepaid calling cards offering dirt-cheap rates to specific countries or regions around the world. Some tried the different "callback" approach: you dial your number, and the service calls the number and rings you back from a country where it costs next-to-nothing to connect the call.

The calling card market has turned into a solid money-spinner for a few companies: market leader gotalk, for one, reported last year that it is pulling in around $100m a year from prepaid cards, understandably leading other players to try new angles.

One of the reasons the calling card market has been able to thrive is that it has grown outside the ambit of Telstra, Optus, and their brethren, who have been far more focused on rolling in the money generated from exploding mobile call revenues. More than a decade into the mobile phone revolution, Australian customers are still routinely paying up to nearly $1 a minute for mobile calls, while calls to mobiles have failed to fall below 30¢ a minute thanks to stubbornly high interconnect fees.

Two recently launched efforts, however, could change all that — and while carriers may not be shaking in their boots, they're going to at least want to sit up and take notice.

The key differentiator here is the smartphone, which forms the launch platform for local start-up BigTinCan. BigTinCan has written applications for Windows Mobile, BlackBerry, iPhone, and Google Android-based smartphones — as well as a PC client — that lets you make calls at discount rates straight from your smartphone.

(Credit: BigTinCan)

Start up the app, dial the number you want, and your phone shoots off a tiny packet of data to BigTinCan's servers. Using the call-back approach, the servers dial the number, call your mobile and conference you in; you get a mobile voice call at a fraction of the normal price. Because incoming calls to mobiles aren't charged, you get a normal voice call without paying your mobile carrier for the privilege.

Your outlay: 30¢ a minute to most anywhere in the world. Right now, you'd probably pay more than that to ring your next-door neighbour on your mobile, and even unlimited-calling mobile plans exclude overseas calls. BigTinCan also carries MMS and SMS messages for 10¢ each, and can be used to forward video messages and large files as well. And, unlike the VoIP applications inching their way onto smartphones, this approach doesn't consume customers' precious data allowances.

But will these sorts of capabilities be enough to earn BigTinCan long-term relevance? Given the proven appeal of calling cards, CEO David Keane is naturally excited about its prospects, citing more than 100 new sign-ups per day after just a few weeks in business: "we think of ourselves as an overlay telecoms service provider," he explains. "The traditional calling card market remains strong, and we're going to be adding interesting new things into the service."

Certainly, the company's cost of entry is relatively low: by aiming for maximum reach with minimal physical infrastructure — costs that proved fatal for many would-be Telstra slayers — BigTinCan can theoretically keep its costs in check as it builds up its customer base. Whether this translates into a game-changer or not, time will tell; certainly, it can't be long before card-based call-back operators pick up the concept as well, and it will be easier for them to push existing customers onto the service than it will be for BigTinCan to lure completely new customers.

Potentially more threatening for carriers is Google Voice, a full-featured voice service from Google that will put the company in competition with telcos on a number of fronts.

Currently in invitation-only beta, the free Google Voice service bundles a host of features including call screening, free calls within the US, free voicemail — including a voice-to-text transcription service very much like the cool-sounding Voice2Text service for which Telstra now charges between 25¢ and 55¢ per message. There's also conference calling, call recording (subject to legal limitations, one assumes), personalised greetings and more.

(Credit: Google)

Wrapping it all in a dedicated phone number, Google is basically combining its broad infrastructure with its experience in voice and messaging to spawn a totally free, full-service telco. Google basically wants to add your voicemail, contacts and other calling-related information to its Great Big Database Of Everything. And while the service is only going to be available in the US when it initially launches, success there could presumably see it replicated in Australia and other markets with relative ease.

These sorts of services reflect the continuing commoditisation of voice calling — and while carriers have already ceded much ground in this space, their stranglehold on mobile calls has kept profits high in compensation. It might be some time before the big carriers notice the edict that BigTinCan has nailed on their front doors, but moves like this by an operator as big as Google are another story entirely. And if carriers' grip can be loosened by sneaky operators that can put their services right on customers' smartphones — well, to where will the carriers retreat then?

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