Say what you want about the local wireline telephone business – dying on the vine, melting ice cube, past its prime, etc. – it’s still the primary business for hundreds of phone companies across the U.S., with a couple Fortune 500 companies among them (CenturyLink, Qwest, and probably Frontier, post Verizon transaction). Many a telecom analyst will indict wireline voice as a dying business – one with no future. But is it?

There’s no question that if left alone, traditional dial tone is losing favor with consumers. While certainly in no danger of extinction, dial tone does have to change for it to remain a relevant service going forward. So what are traditional telcos to do? Throw in the towel? Waive the white flag? Hardly.

The future of wireline voice lies in IP voice, and there are a couple of good examples to look to. Probably the highest profile IP voice products among incumbent telcos belong to SureWest and AT&T. Both of these companies have rolled out a primary line IP voice product to specifically address traditional wireline loss, and the early indications are promising. While not acting as a one-for-one replacement, these IP Voice initiatives are stemming the loss of traditional wirelines, but maybe more importantly helping to drive bundle penetration and ARPU growth.

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Take a look at the latest numbers from AT&T and SureWest on their IP voice products, U-verse Voice and Digital Phone respectively:

AT&T

  • Added 191K U-verse Voice customers in 1Q10, now totaling 751K. U-verse voice help slow their total wireline voice loss by 17%, meaning without it, their wireline loss (by line count) for 1Q10 would have been 17% higher.
  • 75% of new U-verse customers (broadband or TV) also take U-verse voice, helping AT&T grow IP based revenue to 37.4% of total consumer wireline revenue, up from 27.8% from a year earlier.
  • U-verse voice net adds grew by 26% in 1Q10.

SureWest

  • Of the 3,000 access lines SureWest lost in 1Q10, they managed to convert 1,100 (37%) of them to IP voice.
  • Among eligible homes in SureWest’s footprint, Digital Phone now represents 33% of their wireline voice customers, up from 17% a year earlier.
  • SureWest Digital Phone net adds grew by 21% in 1Q10

What other voice product is growing north of 20% for incumbent phone companies? One only has to look the cable industry to see the power of IP voice. Comcast didn’t become a top five telephone company by selling traditional dial tone. They did it by offering an innovative voice product at a competitive price point through an effective bundling strategy. In short, they and other MSOs changed the game for voice services.

Don’t miss the message. I’m not suggesting that IP voice alone will save the local wireline telephone business, replacing dollar for dollar losses. It won’t. But early indications suggest IP voice can help slow traditional wireline erosion, while also helping grow IP based revenue, which is the future of the business. AT&T and SureWest seem to be leading the way.

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8 thoughts on “What’s a Remedy for Wireline Voice Losses? IP Voice

  1. What specifically about their IP Voice is contributing to these trends? Vonage has IP voice also, but not seeing this type of growth.

    1. I've talked with SureWest at length about this. They credit their bundling strategy as the primary driver of adoption, specifically bundling broadband with Digital Phone. I believe AT&T would agree, considering 75% of new U-verse customers bundle U-verse voice. It's so much easier to sell an IP voice product when you can bundle it with broadband and/or video, as opposed to a stand alone product.

    2. I've talked with SureWest at length about this. They credit their bundling strategy as the primary driver of adoption, specifically bundling broadband with Digital Phone. I believe AT&T would agree, considering 75% of new U-verse customers bundle U-verse voice. It's so much easier to sell an IP voice product when you can bundle it with broadband and/or video, as opposed to a stand alone product.

  2. Would it be fair to label fiber-delivered dial-tone as digital voice? It would give those rural LECs doing FTTH a perceptual "leg up".

    1. Probably not. Verizon's current FiOS service relies on POTS-esque phone service, though it's delivered over fiber. Digital voice is quite different from that…

      1. Calix's FTTH POTS can be done over AAL5 (ATM) or IP — both defensibly digital.

        When we did the FTTH to replace our copper we could have couched it in new terms. We didn't, though.

        Frank

      2. Actually, Verizon does/did offer an IP Voice product for FiOS – FiOS Digital Voice. They don't talk about it much, so not sure how its going for them.

        Regardless, per Frank's post, one of the things we advocate ILECs to do is take a hard look at their voice product, regardless of whether they actually do IP voice or not. Many of the features that IP voice can offer can also be done with a traditional TDM voice product. Features like sim ring, find me/follow/me, unlimited LD, etc. don't need to be IP based. By 'refreshing' or 'relaunching' a TDM voice product as 'Digital Voice,' telcos may be able to see some of these same positive results.

        Consumer product companies are masters at this – refreshing a traditional product as 'new" or 'new and improved.' In my opinion, there's no reason why telcos can't do that with voice,

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