What's the telecoms industry to make of the international call growth slowdown? Perhaps at just 4 per cent it should send a few shivers? By Ian Scales.
Telegeography has just reported its latest international minutes statistics and they paint a picture of a sustained slow-down in conventional carrier-exchanged international minutes, perhaps in-part a response to the international financial situation.
Meanwhile, over on the other side of the fence, growth in cross-border Internet telephony (VoIP over the Internet, not VoIP used as international transport for conventional calls) represented overwhelmingly by Skype, has surged to an all-time high.
The Telegeography numbers show that international long distance traffic grew 4 per cent in 2011, to 438 billion minutes, less than one-third of the industry’s long-run historical average of 13 per cent annual growth. In contrast, Skype’s cross-border traffic (including video calls) grew 48 per cent in 2011, to an astonishing 145 billion minutes.
Telegeography points out that although the volume of international traffic routed via telephone companies was more than three times greater than Skype’s cross-border volumes, their growth rates differ dramatically. TeleGeography estimates that Skype added 47 billion minutes of international traffic in 2011—more than twice as much as all the telephone companies in the world, combined.
The analysts wonder aloud if something fundamental has just happened.
After nearly two decades of healthy international minutes growth, enabling carriers to make up in volume what they were losing in per-minute call price erosion, has the party come to end? Is this coming year (or the next) the beginning of the voice minute death spiral where both volumes and per-minute pricing for conventional calls goes into decline while Skype and other OTT providers continue to grow at an even faster rate?
“Given Skype’s enormous traffic volumes, it’s difficult not to conclude that at least some of Skype’s growth is coming at the expense of traditional carriers,” said TeleGeography analyst Stephan Beckert. “If all of Skype’s on-net traffic had been routed via phone companies, global cross-border telephone traffic would have grown 13 percent in 2011, remaining in line with historical growth rates.”
Telegeography's hesitancy on this is understandable. Since the mid 1990s (at least) observers have been calling the imminent end of the conventional switched telephone call and its replacement by some form of voice over the Internet.
To now that sort of substitution hasn't happened (at least not much). The conventional call market has been kept well and truly alive: first by competition and marketing in the 1990s which pushed up volumes and lowered prices, then by the arrival of the mobile phone - which tended to keep calls trapped within the mobile network, if for no other reason than that it was difficult to stay mobile while making Skype calls from a computer. All this was happening while the world was globalising and turning millions of mobile workers into long distance calling customers.
Against this you had a nascent Voice over the Internet market which stuttered and spluttered from its first days and didn't lift off until the arrival of Skype in the early 2000s.
Skype has made steady progress, especially with video calling, but it's direct impact on the carrier voice calling market is difficult to assess. Despite some obvious cross-over the two markets have seemed to operate quite separately. With the next global recession looming and Microsoft now stewarding the further growth of Skype, are we about to see that change?
What's the future for voice and why haven't telcos done more to innovate around how we 'talk at a distance'. Watch the discussion below.
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