International IP telephony is no moneyspinner

Citation

(1999), "International IP telephony is no moneyspinner", Work Study, Vol. 48 No. 1. https://doi.org/10.1108/ws.1999.07948aaf.004

International IP telephony is no moneyspinner

International IP telephony is no moneyspinner

The use of IP (Internet Protocol) telephony technology for international calls will surge in Europe over the next five years, although this alone will not generate significant profit for new IP telephony service providers (ITSPs) in the long term. To achieve this high level of growth in the first instance, ITSPs will need to undercut the PSTN by up to 50 per cent, at a time when PSTN charges themselves are being driven down by market dynamics. Significant profit will only be achieved after ITSPs become established and can offer a range of value-added services.

These are some of the findings from the latest part of a major new study entitled Communications in the Internet Era: The Market for IP-based Services in Europe, by independent telecommunications consultancy, Schema. The study examines new trends developing in the Internet and intranet/extranet markets in Europe based on extensive original research among business users, service providers and suppliers to the industry.

According to Schema, by 2003 over 20 per cent of international calls from the main European countries will be made using IP technology, at dramatically lower prices than today's PSTN tariffs, which are themselves expected to fall to less than half of current levels as deregulation forces greater competition within the EU.

The effect of falling PSTN charges means the surge in IP telephony alone will not be the big knockout blow for telco profit margins that is often predicted. However, telcos will need to enter the IP market if they are to take advantage of new service opportunities.

The study's project director and senior consultant at Schema, Robin Duke-Woolley, explains: "Using IP telephony for international calls will turn out to be a race against falling tariffs, with service providers needing to become established quickly and then extending their offerings to include a range of new voice and multimedia-related value added services. ITSPs will not survive for long by offering basic international calling services alone."

The main impact of IP telephony will be in the corporate network market, where it represents a real threat to telcos' leased line businesses. As part of the study, Schema interviewed over 500 businesses throughout Europe to identify how corporate sector use of IP services will develop over the next five years. As a result of this and other factors, Schema estimates that IP telephony use on corporate networks will grow from a virtually zero base today to over two million business sites across Europe by 2003.

According to Duke-Woolley, IP telephony in the corporate sector will grow strongly, offering the opportunity to optimise bandwidth utilisation and introduce a range of new multimedia services: "The industry has been striving to deliver the inherent benefits of integrated voice/data networks all the way to the desktop for many years. Offerings to date have been only partially successful. IP technology now offers the opportunity to overcome the technical difficulties involved whilst at the same time introducing many new and useful services."

Communications in the Internet Era: The Market for IP-based Services in Europe is the most comprehensive study so far conducted across the whole of the IP service arena in Europe. It incorporates an in-depth survey of over 500 European businesses in 11 European countries, and detailed case studies of leading IP service users. It also includes primary research with more than 50 major service providers, telecom operators and key industry suppliers. Copies of the report are available from Schema priced at £9,500. For more information, please contact Robin Duke-Woolley of Schema on 0171 497 0708.