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North American Enterprise TDM-Based Wireline Voice Services Markets
Frost & Sullivan, Oct 2005
IP Network Advancement Limits Demand for Traditional Voice Services within Wireline Voice Services Market
Internet Protocol (IP) enables the convergence of voice and data, integration of multiple channels, centralized reporting function, and allows telecom vendors to offer many other value-added features in a single package, thereby steering voice traffic away from switched networks to IP networks. Apart from lowering costs, the IP-based models are set to replace access and private lines with virtual private networks (VPNs), endangering the time division multiplexing (TDM)-based wireline voice services. The shift in demand from traditional, disparate TDM-based networks/services to IP services is likely to have a negative impact on the growth of traditional local voice services thereby affecting service providers’ revenues, access lines, and profitability.
This Frost & Sullivan research service analyzes the North American enterprise TDM-based wireline voice services markets. The study provides insights into the drivers for this market along with challenges faced by the vendors and recommendations to overcome them. Detailed revenue analysis includes a breakdown by service type while market forecasts include both the U.S. and Canadian markets.
Declining Prices for TDM-based Domestic and International Voice Services to Promote their Usage
Service providers are offering flat rate long distance (LD) plans to businesses that provide either unlimited or large volumes of transaction for a fixed monthly charge. An increase in competition combined with bundling and alternative mediums (wireless and VoIP) have compelled TDM-based voice services providers to substantially reduce per minute rate for business LD carriers, which was always higher than residential rates.
The average domestic LD rates in the United States have dropped from 15 cents a minute in 1992 when promotions and bundling were introduced to nearly 6 cents currently, says the analyst of this research service. International LD rates have also been falling due to the deregulation of the global telecommunications sector, which is leading to a decline in terminating costs. Such drastically reduced prices are going a long way in promoting the usage of traditional wireline local and long distance voice services.
TDM-based Voice Services to Dominate the Enterprise Voice Service Markets in the Short-Term
Despite aggressive marketing from telecom carriers, the adoption rate of IP telephony among enterprises is limited. This market is dominated by traditional TDM-based voice services in terms of the number of customers, revenues, and traffic (minutes of use). However, this trend is not likely to continue in the long-term, as VoIP services, due to technological advancements that enhance service quality, are expected to make inroads into the business segments for local and long distance voice services. This could lead to a significant erosion of revenue for the TDM-based wireline voice services market.
However, the overall rate of decline is expected to remain relatively low over the next 24 months due to limited VoIP adoption among small, medium, and large organizations, concludes the analyst.
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