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Sunday, November 07, 2004

VoIP Threatens Traditional Telcos Revenue

( Via Digital Lifestyle-Info) A new report from Analysys, global advisers on telecoms, IT and media, reports that over 50 million broadband users in Western Europe could potentially be using private Voice over Internet Protocol Applications (PVAs) by 2008. As a result, the impact on traditional telephony providers’ revenues could reach 6.4 billion euros (~$8.23Bn, ~£4.47Bn) in 2008, representing 13 per cent of the residential fixed-line voice market. VoIP technology - used in excellent applications such as Skype - works by digitising voice in data packets, sending them over the Internet using TCP/IP networks, and then reconverting them into voice at the destination. As well as offering a ‘free’ alternative for voice conversations compared to traditional fixed lines, you can also compress voice packets, route them, convert them to a new better format, and so on - bypassing the existing PSTN network.Digital signals are also more noise tolerant than analogue ones - a feature appreciated by users communicating overseas. With VoIP, you can also talk all the time with every person you want (as long as the other person is also connected to Internet at the same time) for no call charges. And, in addition, you can talk with multiple people (conference call) at the same time.Analysys advises that incumbent public switched telephone network (PSTN) operators are highly vulnerable and should assess the weaker segments of their market and create targeted packages to retain valuable customers. They also advise that service providers should also make subscriptions the core of their service packages. 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.” Some analysts predict that 30% of homes could be using internet based phone service in the US & UK in the next three years. Forbes is bullish about the growth of some VoIP companies as well. The telecom market is in for a massive structural change in the next five years.
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