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InformationWeek Reprint - VoIP Eats Into Traditional Voice Service Revenue

A new report says that because of VoIP, traditional voice service will soon not be the primary revenue generator for traditional telecom operators in developed nations.

By David Haskin
May 16, 2006 11:13 AM

In a few years, incumbent telecom operators will no longer earn most of their revenues from traditional Public Switched Telephone Network (PSTN) voice service, according to a study released Tuesday by U.K. market research firm Informa Telecoms & Media.

The precipitous drop in PSTN revenue will be caused by increasing use of voice-over-IP (VoIP), a trend the telecoms will need to continue to capitalize on, the study says. The study predicts a worldwide decrease in revenues from traditional PSTN voice service of about 16.7 percent between the end of 2005 and 2011. That percentage works out to about $100 billion in lost earnings from traditional voice service, the market research firm said.

The market research firm company said that VoIP accounted for only 25 percent of the total revenues for telecom operators in 2005. The good news for the operators is that they have widely built out their broadband networks over which VoIP service can be offered and the percentage of revenues the telecom operators gain from VoIP is expected to rise significantly, the report concluded.

"After 2010, PSTN will no longer be the main revenue generator in developed countries," report author Malik Saadi said in a statement. "There will be no justification for big operators to reserve a whole network for traditional PSTN voice traffic. This trend will increasingly push operators and network owners to gradually migrate their subscribers from traditional PSTN to VoIP."

Saadi noted, though, that there is peril in this trend. In particular, there is the threat of revenue loss for telecoms because VoIP charges are lower than those for PSTN service, he said. In addition, there is a lot more competition from dedicated VoIP vendors such as Skype and Vonage, according to Saadi.

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