Incumbent Telcos Set To Win Europe’s Consumer VoIP War

Forrester: What’s The Hype About? Only 1% Of Europeans Use VoIP Frequently To Make Calls From Home. According to industry hype, voice over IP (VoIP) pure plays like Skype and Vonage are on the verge of transforming and taking over the telecom industry. That pure plays have no chance of dethroning proactive European incumbent telcos from their consumer fixed voice market leadership. VoIP pure plays will fail to survive as independent companies because they don’t offer a truly disruptive and transformational service — and they lack key advantages that the incumbents have. Telcos like British Telecom and France Télécom can continue to dominate future voice markets as long as they maintain their proactive and innovative VoIP response strategies.

VoIP adoption will certainly help trigger sweeping changes in voice pricing models across the industry. However, that will most likely not lead to the major industry disruptions foreseen by VoIP pure play proponents — at least not on the retail side of the business. The consumer VoIP hype as wild exaggerations, reminiscent of the UMTS hype, dot-com, and telecom bubble days. The ‘no free lunch’ principle applies: Someone will always bear the costs of delivering the service. Voice calls will never be absolutely free, but the hype — and the pure plays — do teach some important lessons. To avoid the predicted upcoming telecom power shift, incumbent telcos must fully wake up and restructure their business, including their innovation activities..

It doesn’t help much if a new technology is very disruptive in a market that will remain rather small for years to come. VoIP isn’t really mature today. It faces a range of problems, including immature SIP technology, unresolved regulatory issues, and a lack of industrial-strength and scalable public network management systems. Consumer apathy and slow broadband uptake will also hold VoIP back. Only 1% of Europeans use VoIP frequently to make calls from home, whereas 70% of consumers doesn’t even know what VoIP is.* Coupled with relatively low broadband take-up, European consumer VoIP adoption will move slowly. Forrester predicts that VoIP will capture 30% of the residential fixed voice market in 2010 and won’t approach 100% until 2020.

In addition, the incumbent telcos are fighting back: Proactive incumbents like Telecom Italia, France Télécom, and Portugal Telecom launched flat-rate PSTN calling even before VoIP pure plays became a threat, reducing VoIP’s threat to their core PSTN business. Since then, a majority of incumbents have introduced various flat-rate pricing plans, further reducing their vulnerability to VoIP pure plays. Smart incumbents are also tearing down technology silos and focusing on user needs, not technology, further undermining VoIP pure plays’ key selling points. And by launching their own VoIP services, ADSL bundles, and enhanced functionality services, incumbents are fighting the pure plays on their own turf.

Lars Godell: “Incumbent Telcos Will Fend Off VoIP Attackers” ,“VoIP Is Still In Its Infancy in Europe, European’s Warm Up To Broadband Triple Play

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