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.
- 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.
- 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.