VoIP eating into telcos' revenue

Traditional voice telephony is on the wane while IP services are poised to surpass it.

Revenues for fixed-voice services in Europe are set to drop three per cent annually, from $108bn in 2003 to $95bn in 2008, according to market researcher IDC.

The drop is due to the rise of voice-over-IP (VoIP) services, the uptake of mobile phones as a substitute for landlines and growth of broadband which has a set monthly fee, IDC said in a recent study, Fixed Telephony Services in Western Europe, Forecast and Analysis, 2003-2008.

To fight this downward revenue trend, fixed-line telephone companies need to embrace the new technologies.

Jill Finger Gibson, research director at IDC, said: "They need to have a serious plan of making sure their infrastructure is fully capable of handling IP traffic and be ready for VoIP because it's happening."

Gibson cited BT as an example of one service provider that won't be left behind, thanks to its 21CN plan which will see the company move to an all-IP network by 2010.

However, in general the telecom old guard "have their heads in the sand" when it comes to VoIP and "haven't been making it clear to the market they have a strategy for what's happening to voice traffic", said Gibson.

"[Many fixed-voice carriers] are emphasising that they're investing in broadband," she continued. "But that's not making up for the fact that more than half of their revenues usually come from voice."

Short-term fixes to combat the decline in voice revenues include new pricing and handsets and selling value-added services. But those won't be enough to save companies who rely on voice services, according to IDC, as the declines are expected to continue as VoIP gradually takes over.

In a separate poll released by the Computing Technology Industry Association (CompTIA), VoIP was named as the application capable of offering the greatest productivity gains by 34 percent of 500 respondents.

Organisations that have deployed VoIP networks and other IP-based converged data services said they've improved communication between employees and with customers and partners, according to the CompTIA.

This echoes similar results from a recent poll by Mitel Networks, in which UK executives said they believe IP telephony allows them to provide better customer service.