It’s hard to tell precisely what is happening in the U.S. residential VoIP market. According to the most recent Federal Communications Commission data, there were 32 million VoIP subscriptions in service at the end of 2010, representing a growth rate overall of about 22 percent.FCC data
But it does not seem, based on third quarter 2011 reports from leading telcos and cable operators, that growth rates will be as high for all of 2011. In fact, it appears the growth rate has been slowing all year. We will have to wait for the fourth quarter data, but that is what appears to be happening.

The FCC says that, of the 149 million wireline retail local telephone service connections in December 2010, there were included 40 percent residential switched access lines, 38 percent business switched access lines, 18 percent residential VoIP subscriptions, and three percent business VoIP subscriptions.

The FCC data suggests that 81 percent of VoIP services bought in bundles, representing in turn about 84 percent of all VoIP subscriptions, were supplied using cable modems, meaning that cable operators sell about 81 percent of VoIP connections in bundles, which in turn represent at least 84 percent of all VoIP subscriptions sold in the U.S. market.

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But third quarter 2011 data at the company might suggest either that the adoption rate has slowed fairly dramatically in 2011, or that suppliers other than cable operators or telcos have suddenly begun adding more subscribers than ever before. That seems highly unlikely, based on what has been happening in the U.S. VoIP market so far.

Though telcos and independent VoIP providers have represented some VoIP market share up to this point, the FCC data show it is the cable operators who have been responsible for most of the sales and customer volume.

But company results from major wireline voice service providers through the third quarter 2011 suggest that demand is moderating, since most new VoIP subscriptions are sold by cable operators, and cable sales of VoIP clearly are slowing.

“Digital voice” line growth from cable operators appear to have slowed, and it doesn’t appear that telco VoIP additions have grown enough to offset the slower growth on the part of cable operators. What’s happening in fixed line VoIP?

AT&T lost 10.5 percent of its wireline voice connections compared to the third quarter of 2010., Verizon lost 7.6 percent of its total wired voice lines, and CenturyLink reported losses that would total about 6.8 percent annually on a pro forma basis for the 12-month period ending September 2011.

Offsetting those loses are incremental new telco VoIP connections. AT&T’s U-verse Voice connections increased by 119,000 sequentially while 648,000 subscribers over 12 months.HD Voice makes steady progress in mobile networks

But the volume of activity in consumer VoIP has been driven by cable operators, and it now seems as though sluggish economic conditions or wireless substitution might be issues for cable VoIP services.

But there could be other factors at work. Perhaps few, if any observers think telco voice share will dwindle away to “nothing.” For any number of reasons, including product bundles and customer preferences, the likely ultimate outcome is some reasonably stable market share structure. That means cable will reach some “natural” limit in voice, as telcos might reach some “natural” limit in video share.

It could be that cable operators are reaching the “natural” limits of demand for cable voice products. Comcast, the largest domestic cable operator, now has 9.2 million VoIP lines in service representing a 17.6 percent penetration rate of homes passed at the end of the third quarter 2011, up from a 16.1 percent penetration rate in the third quarter of 2010.

Time Warner Cablehas 4.6 million voice customers, but added only 5,000 new VoIP lines in the third quarter of 2011.

That dramatic slowing suggests cable has reached a natural limit, but also that strong growth of wireless services now is simply as big a problem for cable operators as it has been for fixed-line telcos.

Wireless substitution continues to slowly grow virtually every year, according to the CDC, which estimated in 2010 that 29.7 of homes had only wireless telephones during the last half of 2010.

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