Broadband threatens voice comms

10 Jul 2003

The traditional voice communications market will be affected by the rapid growth of broadband, warns telecoms analyst firm Ovum.

Just as the telecommunications market appears to be settling after the lengthy two-year downturn, traditional telephony is bracing itself for another hit, this time from broadband. Delivered via xDSL and cable modems, broadband is now the fastest growing telecoms service across the developed world.

Ovum forecasts that broadband connections will grow from 70 million at present to about 380 million worldwide by 2008. “We believe that such growth will affect the number of voice lines,” said Ovum analyst Angel Dobardziev.

“Since broadband allows both voice and Internet-access traffic to be carried simultaneously over a single copper pair, many households are likely to dispose of the second fixed line,” Dobardziev said.

Second line disconnections, he said, are becoming very common for broadband users. This is one of the key causes for the rapid line decline for the US operators. Verizon has seen its number of second lines for households fall from 6.2 million in 2000 to 5.9 million in 2001 and 5.3 million in 2002. There is also evidence of this happening in the Nordics, for example in Denmark and in Finland.

Dobardziev said: “There is also a danger that heavy mobile users could abandon their only fixed line once they get broadband. At present a voice subscription is a precondition for getting an ADSL line with the traditional telcos. They have no intention of separating the provision of the two services for obvious commercial reasons.”

However Dobardziev said that cable operators can change this by bundling broadband with TV and leaving the fixed voice subscription out of the package. What is more, some are offering just broadband as a standalone service, for example, NTL in the UK. In these circumstances, a user could get cable broadband from a cable provider and rely on mobile as his/her only voice channel. “This will be a concern for telcos that face cable broadband competition,” he warned.

“With the growth of mobile and broadband, fixed telephony is no longer a consumer priority. This does not mean that users are set to abandon their fixed line connections. However, broadband will remove the need for the second voice line, while the availability of standalone broadband will tempt the heavier mobile users to abandon their only fixed-line voice subscriptions.”

Dobardziev continued: “Operators must offer bundles of broadband and voice as one way of increasing the stickiness of the fixed voice subscription. Finely balanced voice and broadband bundles might mean slightly lower revenues than from separate services, but those revenues will still be greater than those from a subscriber deciding to go ‘broadband-only’ with a cable operator.

“Operators with no cable broadband competition will be in a better position as they potentially face only second line disconnections. Those up against cable broadband operators must compete using voice and broadband service bundles,” Dobardziev said.

By John Kennedy