Voice over IP has reached some major milestones in 2008 — in both the enterprise and consumer ends of the market — but how long can traditional telcos continue to fight against this disruptive technology?
At the end of 2007, according to analyst group IDC, the install base of IP Telephony systems (IP PBXs) in Australian enterprises hit the 50/50 mark with traditional circuit-switched systems.
Skype customers have made more
than 100 billion minutes of calls
Earlier this year, eBay subsidiary Skype announced that its 276 million consumer users had made 100 billion minutes of Skype-to-Skype calls, while local ISP's iiNet and Internode announced the roll-out of "Naked DSL" services — broadband connections that would no longer obligate consumers to pay line rental fees to Telstra.
It's a done deal. IP PBX is here to stay.
IDC telecommunications manager, David Cannon
A December 2007 report by telecommunications regulator ACMA found that there were some 269 VoIP providers operating in Australia. Ovum telecommunications analyst David Kennedy says that these operators are launching VoIP "primarily as a means of challenging the PSTN dominance of the incumbents".
He predicts that while the fixed-line revenue of carriers will "remain fairly flat", the percentage of calls being made over VoIP will increase from under five per cent to around 20 per cent by the close of 2011.
These statistics bode very well for VoIP, but not for the telecommunications carriers — knowing that their traditional "cash-cow" PSTN networks are gradually being circumvented as users discover cheaper and more functional alternatives. Around one-third of Telstra's revenues are derived via its PSTN network.
But to date, the carriers don't seem to have suffered financially from VoIP's growing popularity. Its maturation hasn't led to the catastrophic drop in carrier revenue many predicted.
In Telstra's results for the six months to December 2007, PSTN revenues fell by 2.1 per cent. That is a marked improvement on the 5.8 per cent drop during the same period in 2006 and the 7.8 per cent figure reported in 2005. Overall revenues rose 6.2 per cent.
"Telstra's fixed line (PSTN) business continues to defy the downward trends of our global peers," says a spokesperson for Telstra. "Not only did our revenue decline continue to slow [in the last half-year results] but the number of retail customers increased and our ARPU [average revenue per customer] increased."
The telcos have had ample time to adjust their business models — and not just survive, but thrive.
VoIP in the enterprise
IDC telecommunications manager David Cannon sees 2007 as "the point in which TDM lost the race to IP PBX."
Over 50 per cent of seats in Australian enterprises are using an IP-enabled handset, he said. That represents some six million VoIP handsets sitting on user's desks.
"It's a done deal," Cannon says. "IP PBX is here to stay."
"We don't see any new tenders going to market for a PBX without IP Telephony as a component," agrees Bjarne Munch, telecommunications analyst at Gartner. "It seems pretty accepted that if you replace your PBX, you replace it with IP."
IP's dominance is such, that many traditional PABX systems are no longer supported by their manufacturers. "In a few years time, vendors will not support any TDM infrastructure," IDC's Cannon predicts.
Originally, the main drivers to adopting IP Telephony within the enterprise were lower costs — its ability to enable you to skip carrier tariffs by making free inter-office calls over the WAN (wide area network).
But gradually, Cannon says, this driver is taking a back seat as enterprises realised the increased functionality IP Telephony can provide.
Functionality has to take the fore because carriers have competed aggressively on price to protect their revenues.
As predicted back in 2004 by telecommunications analyst Paul Budde, carriers have offered significant pricing incentives to large organisations to keep calls off the data network — with cheaper call rates or flat monthly fees between sites.
That strategy, notes Ovum's Kennedy, has...
It wasn't long ago they didn't like broadband - because it was eating away at their dial-up revenues. Eventually they had to accept it. no different for VoIP.