Free Internet phone calls are the future - new report

By Matt Whipp

Posted on 4 Nov 2004 at 14:31

Free Internet phone services could eat into as much as an eighth of traditional fixed line revenues within four years, according to a report.

Research company Analysys predicts more than 50 million broadband users in Western Europe will take advantage of software services and voice-based messaging apps like BT Yahoo! messenger, Skype, and SIP-based services such as Gossiptel that require IP phones, to make free calls across the Internet and cheap calls to fixed and mobile lines.

'The recent rapid take-up of one PVA variant - peer-to-peer VoIP using free downloadable software from providers such as Skype - raises the possibility of the appearance of a critical mass of PVA users that could unleash a significant structural change in the voice market by the removal of a large proportion of PSTN revenues,' says report co-author Stephen Sale. 'In the residential market, PVAs are typically used to make longer calls to friends and family, the core telephony business of fixed-line incumbents. In combination with increased mobile usage, this could render the PSTN subscription worthless for many broadband users. Fixed-line voice would face not only mobile substitution, but PVA substitution as well.'

By 2008, incumbent fixed line operators such as BT stand to lose 3.3bn Euros between them; the cumulative figure from now until then pegged at 6.4bn Euros.

But the bulk of these revenues will derive from subscription packages rather than call charges: as much as 85 per cent.

However, the subscription model will help bring the billing of voice calls in line with other communications services such as Internet access and paid-for television services - the so-called 'triple-play' dream to which many service providers aspire.

Indeed this may turn out to be the eventual downfall of voice-only services. Current revenue models stem from charging for voice calls to fixed and mobile terminals: but if everyone is on an Internet-based call package then those revenues simply disappear.

Skype says it will bring in premium consumer services for which it will charge, and business services, although the core Internet voice calls between users will remain free. But eventually one would expect them to either have to team up as either the voice offering for a 'triple-play' service provider or license the technology to them.

The report, Voice Communications: from public service to private application, is available from Analysys.