IP convergence eat away at voice services cash cow

Customer pressure

IP convergence is forcing European telecoms operators to re-evaluate market strategies and move away from their traditional cash cow voice services and circuit-switched networks to packet-based infrastructures.

According to a Yankee Group survey of 25 incumbent and alternate operators across 16 European countries, two thirds of operators expect traditional voice services to account for less than 50 per cent of their revenue by 2006.

The primary drivers behind the migration to packet based infrastructures are, according to the analyst firm, lower operating costs - which almost 40 per cent of respondents cited - and new service deployment - which was the considered most important by a third of operators.

Yankee said the move to IP marked a departure for telco operators as it is the first time that they have been forced by customer pressure to provide services.

Chris Lewis, Yankee Group veep, said the change in telecoms is "happening from the street up. This means that operators are increasingly looking first at customer needs and then building a business case to launch a service. This is a major change for the industry that traditionally developed services that the market then followed."

The survey found that, for many operators, converged services are linked to the roll-out of broadband DSL, with almost a quarter of respondents expecting to use broadband as a major launchpad for service development.

The vast majority of operators polled by Yankee - some 83 per cent - are already offering or intending to offer an IP telephony service over the next three years, citing customer demand as the driving force.

Although the study indicates that operators are currently targeting the high end of the business market with convergence offerings, Yankee recommends extending this strategy to small and medium-sized businesses. The firm notes that these customers have fewer in-house resources to develop complex services or manage converged voice and data networks. ®

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