* Over 50 million broadband users in Western Europe could potentially be using private VoIP applications (PVAs) by 2008
* The impact of PVAs on traditional telephony providers’ revenues could reach EUR6.4 billion in 2008, representing 13% of the residential fixed-line voice market
* Incumbent operators are highly vulnerable and should assess the weaker segments of their market and create targeted packages to retain valuable customers
* Service providers should make subscriptions the core of their service packages
CAMBRIDGE, UK, 4 November, 2004 Private Voice over Internet Protocol (VoIP) applications threaten the core business of traditional telephony operators and could take as much as 13% (EUR6.4 billion) of the Western European residential voice market by 2008, according to a new report from Analysys, the global advisers on telecoms, IT and media (www.analysys.com).
The report, Voice Communications: from public service to private application, highlights the threat to incumbent public switched telephone network (PSTN) businesses that could be posed by a rapid and substantial take-up of private VoIP applications IP voice services that use a range of technologies to bypass the traditional PSTN. By 2008, over 50 million broadband users in Western Europe could potentially be using PVAs.
“The recent rapid take-up of one PVA variant peer-to-peer VoIP using free downloadable software from providers such as Skype raises the possibility of the appearance of a critical mass of PVA users that could unleash a significant structural change in the voice market by the removal of a large proportion of PSTN revenues,” says report co-author Stephen Sale. “In the residential market, PVAs are typically used to make longer calls to friends and family, the core telephony business of fixed-line incumbents. In combination with increased mobile usage, this could render the PSTN subscription worthless for many broadband users. Fixed-line voice would face not only mobile substitution, but PVA substitution as well.”
The report examines the potential impact of these applications on the residential voice market. It uses new market models to show that, given favourable future regulatory and other conditions, the rapid adoption of PVAs could generate direct revenues of over EUR3.5 billion, the bulk (about 85%) stemming from subscriptions, not call charges. This emphasises the huge importance that the subscription element will have in a future multiservice mix and in establishing PVAs in the mass market.
In revenue terms, the impact on incumbents of such a shift in subscriptions from PSTN to PVAs would be great. In a worst-case scenario, incumbents could potentially lose over EUR3.3 billion of subscription revenues in 2008, and cumulatively about EUR6.4 billion over the period 20048. Overall, the total revenues (subscriptions and calls) lost by incumbent PSTN providers could reach as much as 13% of the voice market in Western Europe in 2008.
“PVAs will contribute to an acceleration of existing trends, including a stronger horizontal industry realignment around communities, segments and brands, with lower prices and increased service convergence,” says Sale. “In the short-to-medium term, the voice market could even expand as innovative applications provide opportunities for increased usage, slowing the current decline in revenues. In the longer term, however, PVAs are likely to further decrease voice revenues. But they will also help tie those voice revenues to other communications services, thus offering voice players routes to potential new revenue streams.”
Written by Tim Hills and Stephen Sale, the new report assesses the potential impact on the Western European voice market of these PVAs. It evaluates the underlying business models and quantifies their short-term impact on the core businesses of both fixed and mobile service providers. The longer-term potential for a critical-mass effect of PVA users giving rise to a new market structure is explored and the possible scale of its impact is determined. The report explains how existing service providers can protect their revenues, and evaluates the strategic alternatives available to market participants.
The report is available to purchase online at http://research.analysys.com/store, priced at GBP1700 (approximately EUR2500). For more information, telephone Analysys on +44 (0) 1223 460600 or email email@example.com.
PVAs support voice communications within closed islands of software users, over existing broadband IP services, thereby bypassing the existing PSTN. They are part of a series of trends that includes the decoupling of services from underlying networks, the development of multifunctional edge devices and the view that voice service is just one end-user application that will appear in a multiservice mix. PVAs can be offered through various technologies, over both public and private Internets, by a wide variety of players, not necessarily from within the established telecoms industry.
About Analysys (www.analysys.com)
Analysys provides strategy and management consultancy, information services and start-up support throughout the telecommunications, IT and media sector. Its grasp of market dynamics, coupled with creativity, rigour and renowned objectivity, enables Analysys to consistently exceed the high levels of quality and innovation that its clients expect. The company has over 130 staff in offices in Cambridge, London, Glasgow, Madrid, Milan, Paris, San Francisco and Washington DC, and works with associates in Auckland, Melbourne and Vancouver.
Recent reports include:
* TV on a Mobile Phone: the killer application for 3G (October 2004)
* Delivering High-speed Mobile Internet/Intranet Services: the role for 3G and public WLAN (August 2004)
* The Business Case for Broadband Entertainment (July 2004)
* 3G Launch Strategies: critical decisions on services and technology (June 2004)
* Western European Fixed Telecoms Markets: forecasts 2004-2009 (June 2004)
* Spectrum Trading and Liberalisation: new threats and opportunities for telecoms business models (June 2004)
* The Road to FixedMobile Substitution Starts with 3G (April 2004)
* Western European Mobile Forecasts and Analysis 2004-2009 (March 2004)
* VoIP in the US Market: services, business models and regulation (March 2004)
* Strategic Options for Fixed and Mobile Operators in Central and Eastern Europe: scenarios and forecasts (February 2004)
* Vodafone live! versus i-mode - lessons and prospects for the rise of global wireless services (February 2004)
* Delivering the Broadband Home. New fixed and mobile services and devices: forecasts 2003-2008 (January 2004)
* Scenarios for the Evolution of the Wireless Industry (December 2003)
* The Future of Personal Videotelephony (November 2003)
* Operator Strategies and Key Performance Indicator Benchmarks (December 2003)
* The Role and Impact of Emerging Wireless Technologies (October 2003)
Media contact (for author photography, executive summaries and interviews)
Tel: +44 (0)1223 460600
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