Traditional Carriers Endangered by Internet Telephony

The growing popularity of Internet telephony, or Voice over Internet Protocol (VoIP), threatens the fixed-line revenues of traditional carriers, especially for international calls, the OECD report concludes. In addition, however, VoIP presents a challenge to mobile telephones, which in many countries are now more numerous than fixed connections.

In 2003, for the first time ever, the number of fixed phone lines actually fell in OECD countries, with mobile operators gaining market share at the expense of the traditional telecoms companies, a trend which continued in 2004 and 2005. As for Internet telephony, a comparison of the cost of calls via Skype, a VoIP provider, and via traditional fixed-line carriers in OECD countries revealed an average saving of 80% using Skype, according to the OECD report. On a per capita basis, Denmark, Poland and the Netherlands are the largest users of Skype.

Looking ahead, the OECD predicts that new service offerings from traditional carriers, such as Wi-Fi hotspots in cities, will provide tougher competition for 3G mobile operators than these had been expecting when they obtained their licenses, in many cases for large sums. To maximize revenue, the report suggests, 3G operators may need to change their charging policies, for example by persuading customers to sign up for longer term contracts rather than purchasing calling time on an ad hoc basis, as is presently the case for a large percentage of customers relying on pre-paid cards.