40% decline in PSTN voice revenues in Australia predicted...

40% decline in PSTN voice revenues in Australia predicted
Wednesday, 20 July 2005

Australia's fixed-line voice telecoms services market faces the threat of a 40% decline in revenues over the next five years, says research group Gartner.

Customers are switching more of their calls to mobile services and accessing cheaper voice of internet protocol (VoIP) services that have become more widely available with increasing broadband adoption.

According to Gartner's research, price capped mobile calling plans are steadily eroding the cost difference between fixed-line and mobile services, encouraging customers to use their cellular phones in preference to fixed-line. As a result, the substitution of fixed-line voice revenues to mobile poses the biggest near-term threat.

Gartner predicts fixed-line voice services revenues will fall from $10.6 billion in 2004 to approximately $6 billion in 2009, a decline of 10% a year on average. In contrast, mobile voice services will grow from $8.9 billion in 2004 to $10.7 billion in 2009, up by approximately 1.7% a year on average.

"A sign of how quickly this market is changing can be seen from the fact that mobile voice revenues will overtake those of fixed-lines in 2006," says Puneeth Punja, principal telecom analyst at Gartner. "The fixed-to-mobile substitution is only part of the story. In another three to four years, the pressure on the fixed-line voice market will intensify as VoIP over broadband services introduce new and potentially radically cheaper pricing into the market place. At that point, the decline in the fixed-voice revenues will speed-up sharply."

Gartner says VoIP over broadband will allow new low-cost competitors to offer dramatically cheaper voice services, using the internet to bypass the existing dominant carriers.

"VoIP over broadband will make a significant impact in Australia due to soaring broadband access and a large voice market. But the full effects of this won't be felt until 2008 as there remain significant hurdles to mass market adoption," says Punja.

The key inhibitors in the short term are:

Broadband penetration of households, while improving fast, is still relatively low in Australia.

The quality of Internet infrastructure is not good enough for voice, especially for business use.

Regulatory restrictions, like the need to link to emergency services and numbering controls, are still in place.

"As both Telstra and Optus have large mobile businesses, fixed-to-mobile substitution may not impact their overall revenues initially. The bigger threat in the long term, especially to Telstra, is VoIP over broadband. It has the ability to push down fixed-voice prices dramatically, as experienced in North America, where some customers enjoy rates more than 50% lower than those they had previously been paying," says Punja.

Having been a Skype user for many months, we can state with a degree of certainty that anyone with a decent broadband connection can potentially cut their phone bill in half. For back-up and emergency use, it's a fair bet that most family homes are littered with a choice of mobile phones, so for our money, it's bye bye PSTN, for 100 years you served us well.