We have all got used to research report after research report showing that fixed voice services are in severe decline - and so they are - but in the interests of gaining a little perspective on the subject, Martyn Warwick reports that even in its relatively debilitated current state, fixed voice is still a force to be reckoned with. After all, it's still worth more than US$300 billion a year.
According to Ovum';s latest forecast the availability of fixed voice lines will continue to decline at a compound annual growth rate (CAGR) of minus three per cent between now and 2014. And as the number of fixed lines shrinks from 1.1 billion to 0.9 billion over that period, global fixed voice revenues will decline at an even faster rate, with a CAGR of minus four point nine per cent over the same period, reducing the value of the sector from today's $418 billion to $309 billion by 2014.
And nowhere is exempt from the attrition. Even the burgeoning Asia-Pacific parket will feel the pinch exhibiting a with a CAGR of minus two point eight per cent in terms of lines and minus five point eight per cent in terms of revenues over the same time frame.
However, Ovum analyst Nathan Burley says, "Despite pressure to de-prioritise legacy services, fixed voice should not be ignored. In 2008, revenues from fixed voice equated to 63 per cent of that derived from mobile voice. By 2014, fixed voice revenues will still amount to 40 per cent of mobile voice revenues, which will also be in decline by then."
Burley adds, "Fixed voice lines and revenue declines will vary by market, driven by various factors including differing levels of Fixed Mobile Substitution (FMS), VoIP substitution, operators’ strategies, cultural behaviour, economic conditions and existing telecoms infrastructure. Generally, in the short-term, we expect broadband-led and mobile access substitution to cause further declines in fixed voice channels."
The report also says that substitution from VoIP and naked DSL will also continue, although this effect will vary substantially from country to country, depending firstly on the degree to which large market players actively market and support VoIP services, and secondly on whether or not Naked DSL has been mandated by national regulatory authorities.
Operators been managing the decline in fixed voice as best they can. In general the telcos are being realistic and pragmatic about these structural changes to a model that has served them well for a century and longer and this has resulted in initiatives such as subscription-based pricing and bundling.
However, as the report shows, it looks as though these and similar initiatives are now past the time of peak effectiveness.
The simple fact of the matter is that bundled services and other such sophisticated marketing exercises are not as popular as they were as subscribers look around for perceivedly better, faster and cheaper alternatives.
That said, telcos are relying strongly on customers that have signed-up to bundled service packages sticking with what they have once their contract period end rather than going to all the fuss and bother of opting for new stand-alone products.
In other words, they are relying on subscriber inertia - the fact that many will find it just too time-consuming and difficult to bother making a change - to slow the decline in fixed voice subscriptions, particularly in those countries where Naked DSL has not been implemented.
However, ADSL's reduced competitiveness as a broadband technology in advanced markets means that it will be increasingly difficult to bundle broadband with PSTN access and, fixed line players would do well to draw a lesson from mobile's fickle subscriber bases. There is very little brand loyalty in that sector and mobile consumers are perfectly willing and able to transfer allegiance to another provider at the drop of a hat, or the lowering of a tariff.
Nathan Burley says, "Some broadband FMS, especially at the low-end has begun, as wireless broadband alternatives gain more traction. Future upgrades to mobile networks could allow mobile operators to attract more fixed broadband users to their mobile broadband offerings, which is why it is imperative that fixed operators embrace next generation broadband in order to maintain their advantage in this market."
The report also says that in terms of call volumes, FMS will continue at a steady rate, with the ever increasing buckets of minutes available with mobile packages contributing to this trend.
Furthermore, the convenience of mobile relative to fixed line, and the converging trend in the price of the mobile and fixed voice minutes will result in users continuing to use mobile telephony even when they are within reach of a fixed line.
Nathan Burley comments, "We expect call substitution to continue to grow at a greater rate than access substitution".
That said, it is evident that fixed line services will continue to form major revenue stream for operators for many years yet to come.
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