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Mobile operators face unexpected rivals

VoIP undermines revenue assumptions

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A new study from the OECD predicts that increased use of internet telephony will result in lower revenues for both fixed-line and mobile operators.

According to its latest report, the number of fixed phone lines in OECD (Organisation for Economic Co-operation and Development) countries fell for the first time in 2003 as mobile operators gained market share at the expense of traditional telecoms companies.

That trend has continued into 2004 and 2005 but is unlikely to carry on for very much longer. That's because use of Voice over Internet Protocol (VoIP) services is expected to increase with the result that both fixed-line and mobile operators will see a significant drop in revenues.

A comparison of the cost of calls in OECD countries using Skype and traditional fixed-line carriers revealed an average saving of 80 per cent for users of the free software application. Although such obvious cost savings are leading consumers to ditch their landline, as yet there's been little impact on the mobile market.

According to a Gartner forecast last month, worldwide sales of mobile phones are expected to top 779 million in 2005. By 2009, it is estimated that over 1 billion mobile phones will be sold each year.

However, there's no doubting the fact that use of VoIP services is on the rise and will at some point impact on mobile operators revenues. A recently published report from Point Topic indicated that the number or people using internet telephony more than doubled in 2004.

The research company found that 11 million people around the world were using retail VoIP services by the end of July, up from just five million the previous year. These figures don't include users of PC-based "soft-client" applications such as Skype, which claims to have 35 million registered users.

OECD predicts that traditional telecom companies are likely to offer new services such as Wi-Fi hotspots in a bid to maintain market share. It warns that these offerings may provide tougher competition for 3G mobile operators which weren’t expecting to have such rivals when they paid exorbitant sums for licences between five and seven years ago.

To maximise revenue, the report suggests that 3G operators may need to change their charging policies, for example by persuading customers to sign up for longer-term contracts rather than purchasing calling time on an ad-hoc basis.

In addition, OECD forecast that service operators will increasingly offer integrated video, voice and data products in a single service package. It also expects that the growing popularity of downloading video from the Internet will result in a reduction in the amount of time people spend watching television, leading to a fall in both audience share and advertising revenue.

© ENN

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