Beyond VoIP TMC

VoIP Providers' Gains are RBOCs' Losses

June 14, 2006

According to TeleGeography's comprehensive new U.S. VoIP 2006 study, VoIP service providers have a lot to cheer about, while incumbent RBOCs won't be celebrating any time soon.

According to the study, the market is changing at a stunning pace: in the first quarter of 2006, US RBOCs lost about 150,000 fixed lines per week, while VoIP based service providers gained about 100,000 subscribers each week.

For more information about this great resource, contact Stephen Beckert at TeleGeography at 202-741-0042, or email

Here are some nuggets from the Executive Summary of the study:

In the four years since Voice-over-IP pioneer Vonage introduced its service, consumer VoIP has developed from a niche service aimed at price conscious technophiles into a mainstream challenge to incumbent carriers. The number of VoIP subscribers grew 189 percent in 2005, from 1.9 million subscribers at the end of the first quarter of 2005 to 5.5 million by Q1 2006. Revenue growth actually outpaced subscriber growth in 2005, due to the growing market share of higher-priced cable VoIP offerings. Annual VoIP revenues in 2005 topped $1 billion, compared with revenues of $212 million in 2004.

VoIP providers are a new source of pressure on a telecom industry that is already in turmoil. The total number of fixed lines in service in the U.S. has declined from 192 million in 2000 to 178 million at year-end 2005. VoIP will accelerate this trend. A significant majority of new VoIP subscribers have canceled their switched local service rather than adding VoIP service to their existing wireline bills.

TeleGeography predicts that VoIP will capture 22 percent of LECs’ existing customers, contributing to a cumulative loss of $18.2 billion in local service revenues between 2006 and 2010. Loss of access charge revenue and consumer long-distance service revenue will result in several billions of dollars of additional damage to traditional telephone service providers.

TeleGeography projects that VoIP subscribers will grow from 5.5 million at the end of the first quarter of 2006 to 9.6 million by the end of 2006. VoIP subscribers are projected to reach 23.7 million by 2010. VoIP revenues, which totaled $212 million in 2004 and $1.0 billion in 2005, are projected to reach $2.6 billion in 2006 and $8.1 billion by 2010. These figures still represent only a limited share of a large market. VoIP revenues in 2006 are projected to equate to only 7 percent of the combined revenues of traditional local and long-distance service providers. By 2010, though, VoIP service providers’ revenues would be equivalent to 31 percent of switched network operators’ combined local and long-distance subscriber-based revenues.

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