Fixed broadband revenue is poised to overtake fixed voice next year, according to new research from Ovum.
Ovum’s report, titled Global Fixed Voice and Broadband Market Outlook: 2011–16, shows a clear shift in consumer behavior: traditional landline usage is shrinking while demand for fixed broadband keeps rising. The analyst firm forecasts an 18 percent decline in consumer fixed voice revenues over the next five years, whereas broadband revenue will continue an upward trajectory.
The study compares revenues and line counts for fixed phone and fixed broadband services. For 2011, Ovum estimates consumer fixed voice revenues at approximately $176 billion and fixed broadband revenues at about $167 billion. By 2012, the balance flips: fixed broadband revenue is expected to reach roughly $180.5 billion worldwide, surpassing fixed voice, which is projected to decline to about $158.6 billion.
Ovum also projects a fall in the total number of fixed telephone lines, from 685 million globally in 2011 to 560 million by 2016. In contrast, fixed broadband subscriptions are expected to grow to 776 million by 2016, representing roughly seven percent growth over the five-year period.
Ovum analyst Charlie Davies commented on the findings: “Our research reveals the extent to which the fixed voice telecoms market is shrinking and just how important broadband has become to the telecoms industry.” He pointed to several factors driving the shift: consumers increasingly abandon landlines in favor of mobile phones, homes require faster and more reliable broadband to support growing video traffic, cloud-based applications and content, and the proliferation of connected devices. Internet-based voice services such as Skype are also accelerating the decline of traditional fixed voice usage.
The report highlights another growth opportunity for telecom operators: entertainment services. Video, gaming and music — particularly on-demand content — represent significant potential revenue streams for telcos. Realizing that potential depends on how operators embrace branding, packaging and distribution strategies that position them as relevant providers of entertainment services.
Davies warned, however, that broadband revenue growth alone will not fully compensate for losses in fixed voice income. “Broadband revenue growth alone will not be sufficient to offset the decline in fixed voice revenues due to the investment needed for next-generation access networks and software,” he said. The findings underline the strategic need for telcos to develop new service lines and revenue models to justify network investments and maintain profitability.
In summary, Ovum’s outlook indicates a structural change in fixed-line telecommunications: declining voice lines and revenues, rising broadband adoption and revenues, and an imperative for telcos to diversify into services such as on-demand entertainment to sustain growth and support necessary infrastructure upgrades.