Fixed phone services heading for an early death

Stuart Corner
Tuesday, 31 July 2007 03:04

Your IT - Home IT

The latest market research coming out of Europe forecasts rapid substitution of fixed service services with mobile, lead by Finland where 90 percent of call minutes are expected to originate on cellphones within a year.

The forecast comes from Analysys in its report "The Acceleration of Fixed-Mobile Substitution in Western Europe: facts and figures." Co-author, Dr Alastair Brydon, commented: "In many markets it looks as if fixed voice is going to suffer not the slow and lingering decline many have predicted, but a rather rapid one...At the current rate of traffic migration, 90 percent of all voice minutes in Finland will originate on mobile phones by 2008."

Rupert Wood,  principal analyst at Analysys Research, commented: "What is particularly worrying for fixed-line operations is not that FMS is happening, but the pace at which it is happening. Of course, fixed-network operators are looking to different sources of revenue for growth, but the accelerating decline in core voice revenue is damaging at a time when they are embarking on long and expensive next-generation network re-engineering programmes."

In the early nineties when cellular usage was accelerating dramatically in developed nations, the Scandinavian countries were at the forefront, but Australia was not far behind. This suggests that the trends identified by Analysys could be repeated here.  And Telstra is embarking on one of the most ambitious and rapid next-generation network re-engineering programmes of any major carrier.

Certainly, the recent launch by Virgin Mobile of a 'fixed line' service carried over the cellular network of parent Optus will accelerate fixed mobile substitution. Virgin Mobile presently has only around 500,000 customers, but a strong brand and the ability to exploit synergies with other Virgin brands in Australia; Virgin Blue airline and Virgin Music. There are also suggestions that other providers will follow suit.

The huge popularity in Australia of zero dollar handsets linked to lock-in contracts for capped plans also encourages callers to opt for making mobile rather than fixed line calls as these occur no charge until the monthly cap is reached.

According to Analysys, Finland had the highest level of fixed-mobile traffic substitution in Western Europe in the fourth quarter of 2005 - mobile-originated calls accounted for 64.6 percent of voice traffic. Finland also experienced the greatest increase in this proportion during 2006, to reach 74.6 percent in the fourth quarter of 2006.

Analysys found that, in five Western European markets, more voice minutes already originate on mobile networks than on traditional voice and broadband networks combined. It also found that, rather than slowing the migration of traffic from fixed to mobile networks VoIP might actually be accelerating it. " [VoIP] appears to release consumer cash for additional spending on mobile services," Analysys said.

The migration of traffic to mobile networks is also accelerating in those countries that had been slow starters. "Germany has experienced much less traffic substitution than the Western European average; only 17.5 percent of its voice traffic originated on mobile phones in the fourth quarter of 2005. However, this proportion increased by 6.8 percentage points - one of the highest increases in Western Europe - to reach 24.3 percent in the fourth quarter of 2006," Analysys repoted.

"The widespread introduction of home-zone tariffs in Germany is having a significant effect, which demonstrates that mobile operators' actions can significantly increase usage," said co-author Dr Mark Heath.