Gartner Outlines Top 10 Trends to Watch in European Fixed Voice Telecom market
Gartner analysts available at ITU Telecom World 2003 in Geneva to comment on developments
Egham, UK, 9 October 2003 — Gartner today outlined what it described as the top ten trends in fixed voice that operators must monitor and adapt to in order to manage their competitive market and continue to deliver value to customers. Gartner today urged operators to manage the decline in traditional fixed voice services and proactively seek out new opportunities with other fixed voice services, such as IP-based voice, and value added services. It said many of these trends would drive market growth and present revenue opportunities to incumbent operators and new market entrants.
"The fixed telecom market is mature and changing, rather than mature and boring," says Katja Ruud telecom analyst at Gartner. "Fixed voice remains the operators' cash cow. But although they must stay focused on providing 'bread-and-butter' fixed voice, operators have to innovate and change to accommodate evolving technologies and the shifting competitive landscape. Operators that do not have a vision now to manage these trends will become marginalised in the future."
"Operators should target services to specific customers in order to stimulate uptake of next-generation services like IP Centrex and videoconferencing," says Ruud. "They must provide services relevant to the needs of the small and midsize business (SMB) market and consider offering bundles that incorporate value-added services such as security as well as voice and data services."
Gartner's Top 10 Trends to watch:
Trend 1: Voice Fights Back - Voice revenue will still dominate total service revenue generating 102 billion euros or 67 percent of total fixed service revenue by 2007. Metered voice services will continue to decline, and 50 percent of residential call volumes will be delivered by flat-rate packages by 2005.
Trend 2: Systems Integrators and Brand Extenders Take Market Share - A new group of entrants, the so-called "brand extenders", are expected to make less of an impact than systems integrators like IBM, as fixed voice services will only ever be a niche offering for them.
Trend 3: PSTN Connections begin to Decrease - Traditional methods for voice access (PSTN, ISDN and cable telephony) will see less use as prices rise and newer technologies become available. Despite a second lease of life for PSTN in countries where it underpins DSL, total PSTN connections will fall 5 percent to 64 percent between 2002 and 2007.
Trend 4: Mobile voice revenue Overtakes Fixed Revenue - Mobile revenue is set to overtake fixed revenue in 2004.The mobile segment may have taken customers and revenue away from the fixed services market, but it has also created a new revenue segment: fixed-to-mobile call revenue. Fixed-to-mobile service revenue amounted to 19.6 billion euros in 2002, making up 27 percent of total call revenue. Growth in the segment has now slowed, yet will contribute 29 percent of total call revenue by 2007, worth 64.1 billion euros.
Trend 5: VoIP Flexes Its Muscles - VoIP contributed only 1 percent of total Western European call revenue in 2002, with 965 million euros. Gartner Dataquest forecasts that revenue will reach 3.6 billion euros in 2007, representing 3.6 percent of the market.
Trend 6: Pricing Gets Simpler - Distance-based pricing, where a long-distance call costs more than a local call, is no longer valid. As a result of changing cost structures and greater competition, there are fewer time bands and domestic call zones. Operators must focus on selling the simplicity of their offer.
Trend 7: Fixed Voice Volumes Fall Away - The three fixed voice call segments with heaviest volumes are domestic, including Internet dial-up, fixed-to-mobile and international. Only fixed-to-mobile volumes showed any real sign of growth in 2002. However, as this still accounts for less than 10 percent of the total market, it will only help to reduce the overall rate of decline.
Trend 8: New Arrivals Strengthen the Voice Family - There will be new sources of voice revenue growth, some of which will come from managed voice-related services such as IP Centrex, video over IP and messaging services.
Trend 9: Regulators Sharpen Competition - Regulatory steps have been taken to foster competition, including number portability, call-by-call selection and carrier preselection for local calls. Call-by-call selection and carrier preselection have had the most impact on market share, as a result of better market awareness and potentially greater savings. The overall effect has been a reduction in incumbents' market shares.
Trend 10: Wholesalers Race to Keep Traffic Growing - VoIP will encroach on traditional services, so that before 2010 there will be no effective difference between the two technologies. Wholesale voice providers will simply offer wholesale voice the best way they can to fulfill their own objectives and those of their customers.
Gartner recommends:
Providers Offering Fixed Voice Services
Be proactive in managing the transition away from traditional voice services toward other fixed voice services, and to other services such as mobile and non-voice communication, such as e-mail.
Target service offerings carefully to stimulate uptake of next-generation services like IP Centrex and videoconferencing among users. Include the SMB market and consider offering bundles that incorporate value-added services, such as security, alongside voice and data services.
Be prepared for new market entrants. This may be a mature market, but it is also a large market with low barriers to entry.
Prepare flat rate (access and/or volume) packages and take time to design them well.
Corporate Fixed Voice Users
Be clear about what you need from voice services in terms of price, features and quality. These will steer your choice of voice provider, with less focus on which technology underpins the service.
Be proactive in stipulating the level of functionality and why
Be aware and proactive in terms of changes in pricing structures. The market is entering a new, more innovative phase of tariffing. These developments must have more focus in contractual discussions.
Thoroughly evaluate the benefits that new generation voice services would bring and separate them into quantifiable cost savings and productivity gains.
ITU Telecom World 2003 Geneva Gartner analysts will be at ITU Telecom World 2003 in Geneva this year and would be happy to talk to you or provide comments for any articles you are researching or writing. For a full list of Gartner analysts available please contact:
Shiri Blatt on +44 208 434 5561, shiri.blatt@augustone.com Laurence Goasduff, +44 1784 267195, Laurence.goasduff@gartner.com or
Visit Gartner's stand in Hall 2, Stand number 2261.012
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