Carriers Eye IP-based Bundling as They Hang up on Landline Business
Services based on an all-IP network are where the traditional telco landline business is heading, carriers said in interviews. Rather than a stand-alone service, voice is becoming part of a converged communications offering, they said.
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Voice is becoming just an application running on an IP network, said John Broten, Verizon executive director, product management and development. The market is moving to a place where “there’s an aggregator that brings together a whole bunch of capabilities,” he said. More than 67 percent of AT&T’s new U-verse TV customers bundle in U-verse Voice and more than 75 percent of U-verse TV customers have triple- or quad-play, an AT&T spokeswoman said. IP-based services help AT&T counter access line loss, she said. Having more IP services integrated across platforms and devices is critical, Broten said, citing services like Caller ID on TV.
Steve Coker, Sprint Nextel product manager for converged solutions, expects VoIP to increase its presence as part of landlines as the legacy business continues to diminish. Legacy service revenue is expected to decline as the company grows its IP-based service revenue, he said. Additionally, traditional wireline circuits could become fixed wireless end points, he said. Sprint’s IP-based services, including offerings like VoIP, now constitute 42 percent of its landline revenue, up from 25 percent in 2008. Unlike traditional voice and data revenues, which have declined, Sprint saw a 7 percent year-over-year increase in its IP-based services revenue in 2009.
Meanwhile, any broadband policy changes would be critical for VoIP providers, carriers said. The National Broadband Plan recognizes the reality that the “traditional POTS business model is in decline” and the FCC appears intent on transforming its policies to achieve the common goal of 100 percent broadband, the AT&T spokeswoman said. Universal service fund revamp is also key for universal broadband and thus indirectly positive for VoIP, she said. Clearly voice delivered via IP is where the growth is, Broten said, saying “continually thinking of things in a copper context just doesn’t work.” It’s a hard bridge to cross” but “we are getting there,” he said.
The loss of landline subscribers was primarily due to wireless substitution and competition from cable operators, Broten said, saying the ones that have gone to cable companies are all VoIP. Without VoIP, it would be far more expensive for cable operators to be in the voice market, he said. Some cable companies have decided to bring VoIP in-house as they phase out carrier-VoIP (CD March 17 p5).
It appears that carriers are shifting away from stand-alone VoIP to focus on managed services: Verizon and AT&T have discontinued their stand-alone VoIP services. The exit of Verizon VoiceWing VoIP was because the service wasn’t running on the carrier network so it’s hard to manage the end user experience, Broten said, saying the key focus is FiOS. AT&T, which exited its CallVantage service, is focusing on U-verse Voice, a spokeswoman said, saying innovative VoIP services that bundle with TV, broadband and wireless services are the trend.
Mobile VoIP is also on the rise, carriers said. T-Mobile USA, which doesn’t have a landline business, has very few restrictions on consumers’ choice of applications, and VOIP applications (like Skype) are allowed to run, a spokeswoman said. Verizon Wireless also allows Skype on its network. AT&T had no objections to Skype’s attempt to bring its app to AT&T’s cellular network, but Apple had rejected the program for iPhone.