Telecoms - Sector Analysis Published: Mon 31 Oct 2005

Transcription

1 Telecoms - Sector Analysis Published: Mon 31 Oct World: Unravelling the VoIP Market This special report unravels the recent spate of VoIP announcements to identify four types of consumer VoIP, adoption rates, and the current drivers and inhibitors of adoption. Key Findings The recent spate of VoIP announcements has been about not one type of VoIP, but four. This special report identifies four current and future types of VoIP service - PC-to-PC; ; VoWLAN and mobile VoIP - and explains the differences between them, with a particular focus on, of which there are now millions of paying customers. One type of - cable VoIP or Vo - is undergoing rapid growth, particularly in North America. Given that most DSL customers also need to pay monthly telephone line rental to the fixed-line incumbent, the adoption rates for VoDSL are more modest. Discounted pricing and triple-play service provision, rather than enhanced IP-based functionality, are currently the main selling points for services. Four Types of VoIP The past couple of months have seen a swathe of VoIP announcements by service providers, from Google's launch of IM-based PC-to-PC VoIP, to ebay's acquisition of Skype, to a spate of (voice over Broadband) launches by fixed-line incumbents, cable TV s and alternative fixed-line s (see Global: 25 August : Google Enters VoIP Fray; Global: 13 September : ebay Acquires Skype for Up to US$4.1 bil.; and Czech Republic: 10 October : Czech Online Launches VoIP Calls). Developments in the handset and infrastructure space have been no less frenetic. Take Skype's recent launch of a wireless VoIP handset, the development of mobile VoIP solutions and the move to all-ip networks by European carriers such as BT and TeliaSonera (see Global: 12 October : Linksys and Skype Team Up on Cordless VoIP Phone and 19 September : IPdrum Set to Demonstrate Skype-over-Mobile Solution). Media coverage of these developments has often portrayed VoIP as a monolithic and disruptive technology/service and has thus failed to help end users distinguish between the various current and future types of VoIP and their different capabilities and applications. Thus, in this special report, we identify four types of consumer VoIP services, the types of providers offering VoIP, the take-up to date of across selected markets, and s and the drivers/inhibitors behind adoption. The following table identifies four types of VoIP: Type of VoIP* Characteristics Providers PC-to-PC Software-enabled (IM-based) calling between PC users. Also commonly known as peer-to-peer Skype, Yahoo!, MSN, VoIPBuster, etc.

2 calling or internet telephony. PC-to-PC calls are usually free. PC-tolandline and PC-to-mobile calls are charged on a per-minute basis. Not marketed as a landline replacement: PC-to-PC calling does not support emergency calling. VoIP enabled by broadband access infrastructure, including xdsl, cable, broadband wireless access (BWA), FTTx, etc. Set-up can be as simple as plugging a VoIP adaptor into a broadband connection to allow users to make VoIP calls via their existing handsets. is marketed by cable TV s and pure-play providers as a landline replacement service. Commonly known as VoDSL, Vo, etc. Monthly plans usually include unlimited domestic calling (to fixed-lines) and free on-net calls, but calls to mobiles and international numbers are charged separately. TV s, incumbent fixed-line s, alternative s, ISPs, virtual service providers (VSPs), such as Vonage. VoWLAN VoIP calls enabled within the coverage of WLAN networks via capable devices, such as laptops with softphones, smartphones, etc. There are a variety of pricing structures for this type of service. Skype Zones Beta offers both time-based tariffs (US$2.95 for two hours) and unlimited monthly usage (US$7.95). Dual-mode cellular/wlan handsets are currently being developed to enable endusers to make mobile calls within cellular networks and cheaper IP-based calls within Wi-Fi hotspots or corporate WLANs. For the likes of Vonage and Skype, VoWLAN provides the opportunity to generate revenues out of the home. PC-to-PC and providers. Mobile VoIP VoIP calls enabled over mobile (3G) networks via handsets, smartphones, etc. As yet, no has launched commercial mobile VoIP services, but E- Plus has enabled Skype calls for its W- CDMA data-card users. Mobile VoIP will also be provisioned through the deployment of mobile WiMAX (802.16e). While there will be independent mobile WiMAX providers, it is also likely that WiMAX chipsets will be integrated into mobile handsets and thus complement mobile s' existing W-CDMA/HSDPA and CDMA-based 3G. Mobile s, Wireless Internet Service Providers (WISPs).

3 Source: Global Insight * Please note there are various types of VoIP services - including hosted/corporate VoIP, wholesale VoIP and carrier VoIP - that are not covered in this special report. in Figures and Operators at Forefront of : TV and alternative s are at the forefront of deployment and growth. All cable s and alternative s, such as Free, are offering as part of a triple-play bundle. Incumbent s are typically taking a less-aggressive approach than their competitors. France Telecom (see below) markets its services as part of a broadband bundle, while BT's Broadband Voice is primarily being marketed as a second line to existing BT customers. A number of European and North American fixed-line incumbents, including Telefónica, have only recently, or are yet to, launch VoIP for residential customers (see Spain: 30 September : Telefónica to Revamp Services to Compete with VoIP). VoIP is Undergoing Rapid Growth in the United States: Time Warner, vision and Charter Communications reported 116% VoIP growth between 31 December 2004 and 30 June. At the end of June, they had 1,2 million combined subscribers. In Europe and the United States, a number of major cable s - including NTL and Telewest of the United Kingdom, Ono of Spain and Cox Communications of the United States - have already deployed circuit switch-based telephony, so the migration to will be slower. Other Broadband-Based Gaining in Numbers: Sweden, one of Europe's leaders in the market, had 80,800 VoIP subscribers at the end of 2004, up from 38,400 as of 31 December Of the 80,800 subscribers, 15,000 were provisioned via xdsl, 2,000 via cable and 56,500 via LAN. The U.S. incumbents Verizon and SBC, as well as Japanese incumbent NTT, will be providing as part of their fibre-based, ultra high-speed internet and video packages (see Japan: 26 September : Verizon Launches FiOS TV in Texas). Operator Yahoo! Japan Skype Vonage Free Time Warner vision France Telecom (Wanadoo Operator Type Virtual service provider Virtual service provider TV TV Incumbent fixed-line Leading VoIP Providers VoIP Type Enabling Technology Country/Region VoIP Subscribers Period xdsl, FTTx Japan 4.63 million 30 June Diversified PC-to-PC All broadband access technologies All broadband access technologies Global 1.8 million 27 July North America (U.S. and Canada) 1 million 21 September xdsl France 1.14 million 30 June U.S. 614, June U.S. 478, June xdsl France 326, June

4 Phone) City Telecom Charter Communications NTT Shaw Communications Videotron NextGenTel TV Incumbent fixed-line TV TV Alterative Catch Communications Source: Global Insight FTTx Hong Kong 282, February U.S. 67, June FTTx Japan 32, June Canada 22, May Canada 14, March xdsl Norway 7, June xdsl Norway 4, June Drivers and Inhibitors Price Versus Functionality: While all providers are keen to emphasise that their offerings provide far more than just cheap rates, but also enhanced services such as three-way calling, call forwarding, call waiting and, for an extra fee, video telephony, the main selling point in companies' advertising campaigns is 'price' (see United States: 20 September : VoIP Provider 8x8 Expands Video Capabilities). While consumers in Europe and the United States are increasingly used to bundled minutes in both traditional fixed and mobile sectors, plans go a step further. For instance, most U.S. cable TV and VSPs' services allow unlimited domestic calling for a flat monthly fee. Price, rather than IP-based functionality, is therefore the key driver of for the mass consumer market in developed markets. While 'talk is cheap' with VoIP, the upfront costs of using a PC-to- PC or service should not be understated. As stated below, most PC-to-PC and users will need a PC, a broadband connection and perhaps a landline before they can start accessing VoIP at home. The other costs for PC-to-PC and will include a microphone or a VoIP adaptor, which may or may not be offered for free by service providers. These upfront costs are a particular inhibitor to consumer in lower-income emerging markets. Broadband Adoption: While is priced at a discount to traditional PSTN, the end user needs a broadband connection (xdsl, cable or any other type of broadband) to get access to. If the end user has an xdsl connection, it is also more than likely that he or she also has to have a fixed line and therefore pay monthly line rental. For this reason, the end user may be reluctant or unable to pay for as well as fixed-line monthly rental. Significantly, several providers are positioning their offerings as a broadband-enabled second phone line rather than a landline replacement. Nevertheless, broadband coverage and adoption remain the key drivers of. For instance, at the end of July there were 47.6 million broadband lines in the European Union (EU) to million main lines in service. There are therefore million more main lines used for voice than there are capable broadband connections. At the end of March, there were some 1.5 million VoDSL subscribers in France, equivalent to 21.3% of the country's xdsl base or 20% of the country's total broadband base.

5 Non-xDSL Uptake: The providers of alternative broadband access, such as cable, broadband wireless access, FTTx and other technologies, are also able to offer Vo, broadband and video services independently of the incumbent. Of these, cable s have the largest market share (17% of the EU broadband market at the end of July and 56% of the U.S. broadband market at the end of 2004) and the strongest customer relationships. While some cable s have legacy circuit-switched voice infrastructure, many are investing in service provision and are able to provide a competitive double and triple-play offering (see Colombia: 18 August : Three Colombian TV Operators Prepare for VoIP Launch). In July, UGC Netherlands revealed that it was connecting some subscribers each month (see Netherlands: 4 July : Dutch Regulator Sees Strong VoIP Growth). Unbundling/Naked DSL: Vonage, which has operations in the United States, the United Kingdom and Canada, has identified the lack of provision of naked DSL as an inhibitor to VoDSL adoption (see United Kingdom: 25 July : Vonage Calls for Improved Choice for Internet Users). Naked DSL is where an end user is able to buy a DSL subscription from the incumbent without having to pay telephone monthly line rental as well. Given that the end user is not paying for fixed-line monthly rental, he or she will likely be more willing to pay an additional amount to get a home phone service based on VoDSL. However, naked retail DSL is available in relatively few countries at present. A related area is local loop unbundling (LLU), where alternative s pay a monthly fee to the fixed-line incumbent for access to either the voice and broadband segment of xdsl connections (full unbundling) or just the broadband segment (partial unbundling). 'Unbundlers', such as Yahoo! Japan and France's Free, which is controlled by Illiad, are able to break the relationship between the incumbent and the end user, and so are at the forefront of and triple-play services (see Europe Regional: 16 December : European xdsl Retail and Wholesale Market Trends). In markets where naked DSL and LLU has not yet taken off, the potential for VoDSL is more modest. Regulation, Interconnection and Emergency Services: While service providers have moved quickly to launch services, regulators have all too often failed to put measures in place to stimulate competition, greater quality of service and enduser adoption. Canada's decision to regulate the tariffs of fixed incumbent s, the U.S. FCC's tough stance towards enhanced 911 provision over interconnected VoIP networks and the lack of interconnection between endusers and incoming PSTN and mobile calls in Malaysia have all been criticised as thwarting the development of national markets (see Canada: 13 May : Decision to Regulate VoIP Attracts Fire from Canadian Incumbents; United States: 20 May : FCC Orders E911 to be Implemented for Interconnected VoIP within 120 Days; and Malaysia: 18 October : Malaysian VoIP Market Thwarted by Interconnection Problems). Analyst Contact Details Julian Watson Copyright 2006 Global Insight Inc. Reproduction in whole or in part prohibited except by permission. All Rights Reserved Information has been obtained by sources believed to be reliable. However, because of the possibility of human or mechanical errors by our sources, Global Insight Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Terms of Use Privacy Policy