European voice telephony revenues drying up

Revenues from voice telephony are drying up in most European countries under pressure from mobile substitution, migration from dial-up to broadband and increasing competition from voice over IP (VoIP).

According to a recent study by IDC, the European fixed-voice market is expected to decline from $108bn in 2003 to $95bn by 2008, representing a compound annual decline of three per cent.

"This means a loss of $13bn over the next five years, a massive amount of revenue that will disappear over a relatively short period of time," said Jill Finger Gibson, research director at IDC's European fixed-voice communications service.

With the total market declining, service providers have entered a fierce battle for market share, the analyst noted.

"However, this can only be a short-term strategy. In the longer term, voice service providers will need to think about the viability of offering traditional fixed-voice services at all," said Finger Gibson.

"Any public services telephone network providers, particularly incumbents, which have not yet begun to plan a roadmap for transition to the VoIP world will find themselves in serious trouble by 2008, and possibly out of business entirely."

The IDC study also warned that revised pricing and packaging, better handsets and additional value-added services over the traditional PSTN infrastructures are short-term measures that will stem further losses, but are not enough to ensure long-term growth.