Johannesburg, 10 Oct 2003
Research firm Gartner has outlined what it considers to be the top 10 European trends in fixed voice, which operators need to monitor in order to correctly manage their competitive market and deliver continued value to customers.
The company suggests that operators deal with the decline in traditional fixed voice services by seeking new opportunities that exist within other fixed voice services, such as IP-based voice and value-added services.
"The fixed telecom market is mature and changing, rather than mature and boring, but fixed voice appears to remain the operators` cash cow," says Katja Ruud, telecom analyst at Gartner.
"However, while operators need to remain focused on providing their 'bread-and-butter` fixed voice, there is a need for them to change in order to accommodate evolving technologies and the shifting competitive landscape."
Ruud believes it is imperative for operators to adapt, as those that do not have the vision to manage the new trends will become marginalised.
"Telecoms providers need to target services to specific customers, in order to stimulate the uptake of next-generation services like IP Centrex and video conferencing," she says.
"There is a need for them to supply services that are relevant to the needs of the small and midsize business market and to consider offering bundles that incorporate value-added services such as security, as well as voice and data services."
The top 10 trends for telecoms operators to watch in the future are:
- Voice will fight back: Voice revenue should still dominate total service revenue, as it is expected to generate 102 billion euros (67% of total fixed service revenue) by 2007. Metered voice services are expected to continue to decline, and 50% of residential call volumes will be delivered by flat-rate packages by 2005.
- Systems integrators and brand extenders will gain market share: The so-called "brand extenders" are new entrants to the market and are expected to make less of an impact than systems integrators like IBM, as fixed voice services will only ever be a niche offering for them.
- PSTN connections will begin to decrease: Traditional methods for voice access (PSTN, ISDN and cable telephony) will begin to see less use as prices rise and newer technologies become available. Total PSTN connections are expected to fall by 5% (to 64%) between 2002 and 2007.
- Mobile voice revenue will overtake fixed revenue: Mobile revenue is set to overtake fixed revenue in 2004. While mobile has taken customers and revenue away from fixed services, it has also created a new revenue segment: fixed-to-mobile call revenue. Fixed-to-mobile service revenue amounted to 19.6 billion euros in 2002, making up 27% of total call revenue.
- Voice over IP (VOIP) will begin to flex its muscles: While VOIP only contributed 1% of total Western European call revenue in 2002, forecasts suggest that revenue generated by 2007 will represent 3.6% of the market.
- Simplified pricing: Distance-based pricing, where a long-distance call costs more than a local call, is no longer valid, thanks to changing cost structures and greater competition, meaning that there are fewer time bands and domestic call zones. Operators must instead focus on selling the simplicity of their offer.
- Fixed voice volumes will fall away: The three fixed voice call segments with the heaviest volumes are domestic (including Internet dial-up), fixed-to-mobile and international. Only fixed-to-mobile volumes showed any real sign of growth in 2002.
- New arrivals will strengthen the voice family: There will be new sources of voice revenue growth, some of which will come from managed voice-related services such as IP Centrex, video over IP and messaging services.
- Regulators will sharpen competition: Regulatory steps have been taken to foster competition, including number portability, call-by-call selection and carrier pre-selection for local calls. Call-by-call selection and carrier pre-selection have had the most impact on market share, as a result of better market awareness and potentially greater savings. The overall effect has been a reduction in incumbents` market shares.
- Wholesalers will race to keep traffic growing: VOIP will encroach on traditional services to such an extent that by 2010 there will be no effective difference between the two technologies. Wholesale voice providers will simply offer wholesale voice the best way they can in order to fulfil their own objectives and those of their customers.
Gartner suggests that providers who offer fixed voice services need to be proactive in managing the transition away from traditional voice services toward other fixed voice services, and to other services such as mobile and non-voice communication, such as e-mail.
The organisation also recommends that they target their service offerings carefully, in order to stimulate uptake of next-generation services like IP Centrex and video conferencing among users, that they consider offering bundles that incorporate value-added services such as security, that they be prepared for new market entrants and that they prepare flat rate packages focused on access and/or volume.
In terms of corporate fixed voice users, the research firm suggests they make it clear to providers what is needed from voice services in terms of price, features and quality, be proactive in stipulating the level of functionality, be aware and proactive in terms of changes in pricing structures, as the market is entering a new and innovative phase of tariff structuring.
Finally, it recommends that users thoroughly evaluate the benefits that new generation voice services will bring and separate them into quantifiable cost savings and productivity gains.
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