With little growth in fixed telephony, carriers need new business models to succeed: analysts

Cable companies offering voice services have been the clear winners in the battle to steal telco local landline customers, while services such as Skype and over the top providers like Vonage haven't had a material impact. But the erosion of local residential telephony revenue is going to force the telcos to explore different business models as a result of this competition, according to analysts."The voice, television and broadband triple play is an ideal bundle for a carrier like Bell," says Jay Angl, senior research analyst at London ON-headquartered Info-Tech Research Group. "They are being more aggressive and are trying to be more competitive with bundling, and have been successful to some extent."From Angl's perspective the erosion of fixed voice margins isn't going to cripple the telcos, but it will force them to continue to rethink their business models. "That steady $30 to $40 a month of income from a voice line, that hasn't seen much change over the years, but the telcos are being forced to be a little more creative when it comes to service."In the not-so-distant past, the likes of Skype and Vonage were going to wreak havoc on the telcos landline business by offering free or very inexpensive local and long distance services. Vonage gained some subscribers, but hasn't been considered a real contender for some time."A company like Vonage is trying to take the subscriber lines off the telcos," says Jan Dawson, New York-based practice leader at telecom research firm Ovum. "But it hasn't succeeded, because they had to build brand around a VoIP offering. And hardly anyone is using Skype as their main phone because of QoS issues."By contrast, the cablecos already have relationships with customers, and can sell triple play bundles. This is where they succeed in blowing out the telcos, because as voice is devalued it is cable that can then deliver better video and data services.Carriers need to leverage IPIn fact, it is the roll-out of new technologies - many of them IP-based - that will enable carriers to make more money by delivering a wider range of integrated voice services. The only problem for the big telcos is that these technologies will further empower competitive local exchange carriers (CELCs) as they take on the big incumbents (ILECs)."From an infrastructure perspective, we can facilitate voice services at an incremental network cost - as a result, smaller service providers can put voice on their networks and generate quite a lot of revenue," says Gaetan Campeau, CEO of Boucherville, PQ-based telecom hardware and software company TelcoBridges.That's not good news for big Canadian players like BCE and Telus Corp. But even the smaller players that might benefit from the technologies delivered by a company like TelcoBridges have to fight off the threat from innovative new companies."If the network offloads to Skype, then they'll make money and not you," says Campeau. "You need to put in the basic infrastructure to provide additional services."The carriers aren't doing much with VoIP - at least not much that is customer facing, or as part of a separate offering. Bell has Business IP Voice starting at $50 a month, though by offering 5 hours of free long distance, instead of unlimited calling, Bell seems to be clinging to its old business model. That said, on November 17 Bell launched its VoIP Managed service offering for those who use Cisco or Nortel IP systems."VoIP will become the underlying technology for the carrier," says Dawson. "It will mean that voice will be priced lower and the ability to deliver services will improve, but most of it will happen behind the scenes."According to Angl, the carriers aren't necessarily being left behind, but as everything moves to IP it makes for a much more dynamic environment. New VoIP-based technologies such as the USB-based Magic Jack device, which essentially allows to you to carry your VoIP service in your pocket, will continue to shakeup the market."We are seeing IP trunking services that are introducing competition where it didn't exist in the past," he says. "And there are applications configured for Skype that can be deployed alongside the enterprise PBX, with Skype handling the termination."

With little growth in fixed telephony, carriers need new business models to succeed: analysts

News | 12/01/2008 6:14 pm EST

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us