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N. American Residential VoIP Market Set to Enter Mass Market
Online staff -- Electronic News, 7/20/2005
Voice over Internet protocol (VoIP) service providers are gearing up to deal with the substantial increase in demand as well as challenges associated with moving into the mass market, according to new analysis from Frost & Sullivan.
As a result, these providers must address the issues of pricing, regulatory uncertainty, and competition to be successful in the big league, where the North American residential VoIP market opportunity is expected to reach $4.1 billion in 2010 from $295.1 million in 2004, the Palo Alto, Calif.-based firm reported.
Mass-market customers, unlike early adopters, are not attracted to new technology and must be convinced that IP telephony is superior to plain old telephone service that still provides access to 911 networks.
“Customer apprehension about the value of the service can be overcome by increasing awareness about the advantages of VoIP over traditional telephony,” said Frost & Sullivan senior analyst Lynda Starr in a statement.
“The issue of providing timely access to 911 can be alleviated through industry cooperation,” she added.
Once all issues are resolved, VoIP-based services are expected to burgeon due to greater broadband penetration, service providers’ need to increase revenue, and availability of low-priced services, the firm believes.
While potential subscribers are likely to show initial interest in IP telephony due to its cost savings, they will choose the service for additional features such as virtual numbers and videoconferencing.
VoIP also enables advanced features including Web-based call logs, click-to-dial, and scheduling phone calls, which increase customer satisfaction and offer providers additional revenue streams, Frost & Sullivan reported.
However, some participants such as the incumbent telecommunications service providers correctly perceive competition from new IP telephony providers as a threat to their revenue.
In the past, incumbent local exchange carriers (ILECs) in the U.S. have lost 15 million access lines to various competitors, with many of these lines being second lines used by teens, telecommuters, and data-dedicated lines.
“Residential subscribers are likely to replace second lines with wireless or VoIP; the benefits of VoIP include lower cost, additional features and ease of use,” Starr noted.
“If an ILEC offers VoIP, it risks cannibalizing traditional revenue but also opens up new revenue streams,” she continued.
Frost & Sullivan expects the residential VoIP market to experience significant growth in the customer base and revenue despite residential VoIP subscriptions still being in the nascent market stage.
Service providers that also deal in cable, Internet service provider, and non-telecom operations are likely to enter the market, and thereby drive the growth of VoIP lines from 1.5 million to more than 18 million between 2004 and 2010, the firm concluded.
