Voice Erosion Now "Alarming" in Some Markets?

Though the trend is not always quite so obvious in the U.S. and Canada telecom markets, erosion of fixed network voice lines is assuming alarming proportions in some markets, including the United Kingdom.  

Some 65 percent of 500 U.K. chief information officers surveyed by Vanson Bourne on behalf of Virgin Media Business believe fixed network telephones “will disappear from everyday use within five years,” Virgin Media Business says.

Separately, analysts at STL Partners estimate that, with 2009 representing an index point of 100, U.K. fixed network voice revenues will have shrunk by 50 percent by 2014. Keep in mind, that is an estimate that use of fixed network voice lines will be cut in half in just five years.

That wouldn’t be an unusually damaging occurrence, if new revenue sources can offset the losses. But STL Partners says new data services will fail to keep pace, with a net overall result of declining fixed network revenues of possibly 24 percent by 2014, compared to 2009.

The latest report on U.S. fixed network voice connections by the Federal Communications Commission suggests that voice connections declined three percent between June 2010 and June 2011. That raises an obvious question: will number of fixed voice connections continue to drop, without end, to zero?

That seems highly improbable. There would seem to be some good reasons for predicting a perpetual demand for fixed voice connections, not the least of which is that voice quality likely always will be higher, and more consistent, on fixed connections, compared to mobile or forms of VoIP that do not use managed connections.

But that isn’t the only reason. Much might hinge on how voice services are packaged and priced.

In principle, service providers can package fixed network voice service in ways that impose little incremental cost over not buying the service, or in fact tie the purchase of another network service to the voice service. That is not to discount the “add value” approaches, but simply to note that the easiest path forward is simply to make fixed voice service so affordable there is no reason to drop it.

Service providers will not like the gross revenue implications, but the simple matter is that if the value of fixed voice keeps dropping, compared to mobile voice, erosion will continue. On the other hand, if voice and perhaps other features are bundled with the “lead” broadband access service in ways that users find reasonable, massive erosion might be avoided.

Under the new Verizon Wireless pricing scheme, for example, though users can still use over the top messaging and voice, there is no financial incentive to do so, at least for domestic calling.

At some point, fixed network providers will probably reach the same conclusion, and package “broadband access” with voice features in ways that make paying for fixed network voice a reasonable and preferable option. You might argue that Charter Communications and Verizon’s landline business already have moved in that direction.
If the executive opinions wind up being correct, whether the magnitude or timing of the changes are accurate, there will be huge shifts of opportunity for suppliers of voice services, unified communications, business phone systems, mobile and fixed network service providers alike.

Obviously, voice will become--even more than it already is--the preferred way for people to use voice services. The only real surprise is that this could be true for enterprise employees, not just consumers.

Of course, for every “loser,” included fixed network telcos or suppliers of premises-based  business phone systems, there will be “winners,” including mobile service providers and possibly some providers of unified communications services.

Call center functions obviously will continue to require a high level of voice and unified communications support. But collaboration functions could shift to other media types, for many other enterprise workers.

But if the CIOs are accurate, business voice rapidly is shifting to mobile modes, for most workers, with obvious architectural implications. By the end of 2012, 70 percent of the U.K. population is expected to have a smart device reliant on mobile connectivity, Virgin Media Business argues.

Already, in the past year the amount of data consumed on the Virgin Media Business network jumped to 765 billion individual bits of data being transferred every second, erasing the previous mark for the Virgin Media Business network by 27 percent, Virgin Media Business says.

The big problem in the U.K. fixed network business now appears to be that the legacy voice business is declining faster than the broadband access business is growing.