Over the next five years, all of the major US telcos and cable TV companies are expected to lose small business customers to independent hosted IP telephony providers, according to Insight Research Corp.
In early 2012, hosted PBX revenue might amount to about $500 million annually, but that revenue wil grow to about $1.2 billion by 2015, Insight Research predicts.
“The hosted PBX/VoIP service providers had only garnered less than four percent of the small business lines (seats) as of year end 2010,” Insight Research says. “This low penetration level, can be attributed to the lack of knowledge about the cost and functionality benefits of hosted PBX/VoIP services among the business community.”
Insight Research Corp. analysts apparently believe that understanding will grow, and so will acceptance. In fact, Insight expects a compounded annual growth rate of almost 25 percent between 2012 and 2015.
Growth of the whole market to about $1 billion by 2015 is within the bounds of reason, one might argue. In 2012, U.S. enterprises will spend about $1.7 billion on unified communications services, for example, after more than a decade of sales activity. So growth to about $1 billion annually wouldn’t be unrealistic.
On the other hand, the market is not by any means static. Traditionally, the value proposition for a hosted IP telephony system has been the ability to avoid capital investment while gaining the features available to larger businesses using full-featured private branch exchanges (business phone systems).
But phone system suppliers have been working hard to reduce the cost of such premises-based systems, eroding the capital investment hurdles.
One wonders, not whether the forecast is correct, but whether cable companies actually will lose lines to the independent providers. In fact, cable companies, which have only begun to sell services to small business customers, are themselves primary providers of hosted IP telephony services to small businesses, and simply do not have all that many customers to lose.
A better case can be made that telcos will lose lines, though, as most small business lines are provided by telcos of one sort or another, whether incumbents or competitive local exchange carriers. On the other hand, many CLECs are themselves active providers of hosted IP telephony services.
The point is that it simply isn’t so clear to some that third-party providers will win market share from incumbent telcos, CLECs or cable companies. One might argue that it is precisely cable companies and CLECs that are best positioned to take market share.
The issue is whose market share is “taken.” Whether a voice service is provided by a premises switch or on a hosted basis, there is a need for access bandwidth. One might argue that what is “displaced” by hosted IP telephony is the premises phone system, not necessarily the trunk lines.
Insight Research Corp. does note that, up to this point, only about four percent of small business “seats” were served by hosted PBX services in 2010, out of perhaps 40 million U.S. small business lines in total.
It is possible to conclude that hosted IP telephony will grow, without assuming independent providers will take share from cable companies (who have little share) or CLECs (who have other assets). It is most reasonable to assume that hosted services will take some share of lines from telcos, and some share of “seats” from business phone system suppliers.