Friday, April 28, 2006

Residential VoIP - Facts and Figures

A colleague of mine passed along a very recent report published by eMarketer about the U.S. residential VoIP market. No 'aha' insights here, and much of the data is actually culled from other sources. However, sometimes it's nice to get an update on some basic facts and figures that you can pick up in one place. So, I'm going to do the same here, and share with you some of the numbers I found interesting.

- For 2005, there were 5.2 million residential VoIP subscribers in the US, and the penetration for broadband households was 12.3%. In other words, 12.3% - 1 in 8 - broadband HHs had VoIP.

- For 2010, the forecast is 32.6 million subs and a broadband penetration of 38.5%. So, 5 years from now, only 40% of broadband HHs will have VoIP. I would have thought the penetration will be much higher. 2010 is a long time away, and I'd think by then VoIP would be further along as a replacement for POTS. That said, these basic subscriber numbers work for me. When I was at Frost & Sullivan, I published a report in 2004 that pegged the number of subs as being quite comparable to these numbers.

- Landline telephony accounts for about half of all communications revenues in the US (2005). But interestingly, the ARPU for each type of market is fairly similar. No doubt this profile will change, as landline declines, video goes to digital and IPTV, and wireless goes to WiFi/WiMax.

Market type// Revenue, $billions// ARPU

Landline// $192// $50
Broadband Internet// $20// $40
Basic cable // $87// $45
Wireless // $119// $50

- In 2005, global VoIP numbers were as follows:

US - 5.5 million
Europe - 2.8
Asia Pac - 8.8
Total - 17.1 million

So, already, Asia Pac has over half of the world's VoIP subscribers.

- VoIP minutes is another good growth metric. The report cites TeleGeography data saying that VoIP traffic was 72 billion minutes in 2005, and will more than double to 183 billion this year. Their forecast shows the market basically doubling each year over the next few years.

- The report shows the mix of traffic (VoIP minutes) by two basic types of operators. One type is the network operators - telcos, cablecos and ISPs, and the other is the pureplays, including VoIP operators (Vonage, 8x8, etc.) and Skype. Including Skype can be misleading, but remember, the metric here is minutes, not dollars or subscribers.

Based on minutes, the mix at year end, 2005 between network operators and pureplays was 53% vs. 47% in North America. Europe had a pretty similar mix - 51% vs. 49%. The research doesn't break out the minutes by operator, so it's difficult to tell how much of the pureplay volume is driven by free P2P services like Skype and FWD. It's still interesting to note how much the pureplays account for total minutes overall, though.

- Market share by number of subscribers tells a different story, however, at least in the US. The report segments the market into 3 buckets - MSOs, Telcos/others, and Pureplays.

In 2005, MSOs had just over half of US VoIP subs, at 54%. Pureplays had most of the rest - 40%, with Telcos mopping up the remaining 6%. This is not really surprising given how little the RBOCs have done with residential VoIP - so far. Of course, the MSOs came on strong in 2005, and I suspect data for 2004 would have shown the Pureplays being the market leaders. That was then, and this is now.

The outlook for 2010 is a bit different. MSOs are still forecast to lead the market, actually growing their share slightly to 57%. Pureplays, as one might expect, lose ground to Telcos, with shares of 25% and 19% respectively. By then, one can only hope that the RBOCs will have a major focus on VoIP, as there won't likely be much left of their POTS business by then.

- The report takes a quick stab at the U.S. IM market, and there's nothing new here. However, when you've got your head in the VoIP numbers, the IM numbers provide some interesting context.

Using January 2006 as the benchmark, we see AOL having 53 million users to lead the Big 3 in the U.S. by a wide margin. MSN Messenger is next at 27 million, followed by Yahoo at 22 million. All told, then, these platforms have 102 million users in the U.S. For 2006, the U.S. VoIP subscriber market is forecast to hit 9.6 million, less than 1/10th of the number of IM users. And we're not even talking about Google.

Something else to think about. There are now more IM users in the U.S. than there are residential landlines. How many years has IM really been around? Just one of those things that hits home about how quickly Internet technologies are being adopted. And what's happening to voice is starting to happen now with video.

As a postscript, I just want to acknowledge that all the data herein was drawn from the eMarketer report. There's quite a bit more where that came from, and you can have it all for the princely sum of $695. It's all there on their website.


ipcom said...

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ipcom said...

Posted by: Corey H.

Do you think new, smaller, pure-play residential VOIP providers could fare well and gain some market share over the next few years against the larger MSO, existing (Vonage, etc...) and RBOC VOIP providers?

ipcom said...

Posted by: Corey H.

Do you think new, smaller pure-play residential VOIP providers could fare well and gain some market share over the next few years against the larger MSO, existing (Vonage, etc...) and RBOC VOIP providers?

ipcom said...

Posted by: Charlie Reed

I do not think that the pure play providers will gain ground on the larger Cable Co's and RBOC, but will against Vonage. First, Vonage has spent the most in advertising while the others have done relatively little. They are the first out of the gate and are in a position to only loose market share. Second customers enjoy convenience. The provider of broadband has a distinct advantage in offering VoIP services. RBOCs have done nothing to move customers to VoIP but will in 2 or 3 years. Once they do customers will have to consider them first and have a good reason not to chose them. Cable VoIP subscription is skyrocketing despite higher prices and only moderate marketing. Looking at Japan, who has 10.6 Million VoIP subs in 2005, Yahoo!BB leads globally by a long shot mostly because they just pushed VoIP on their Broadband subscribers.

The interesting thing to watch will be the Web portals such as Skype, IM, Facebook, google, Myspace, ect. (Which are pureplay) As seen with the friend making services, one of then can take off quickly. People may get comfortable enough to adopt Skype WiFi phones to use at home.