US fixed-line telecom losses to VOIP could reach $5.5 bln by 2010

McKinsey Consulting warns the telecom operators that if the regulators encourage the further adoption of broadband, a vast market awaits VoIP providers because the cost of making calls is so much lower. Even in the absence of any additional impetus, VoIP will gradually erode fixed-telephony revenues. Taking into account the calling patterns of different population segments, we have estimated the number of users, by country, who would save money using VoIP. The market share at risk was then assessed on the assumption that half of them would consider switching.

At current trends in the adoption of both broadband and VoIP, 10 to 20% of users in Japan, the United Kingdom, and the United States may switch to VoIP in the timespan of 2007 to 2010. For fixed-line incumbents, this translates into threatened voice revenues of approximately $2 bln to $2.7 bln in Japan, $500 mln to $700 mln in the United Kingdom, and $4.3 bln to $5.5 bln in the United States.

VOIP adoption rates and
potential telecom losses

Country % of users who
might switch to VOIP
Landline telecom
revenues at stake, bln.$
Japan 19-26 2.0-2.7
USA 18-23 4.3-5.5
Sweden 8-13 0.1
UK 8-11 0.5-0.7
Italy 5-8 0.2-0.3
Spain 5-7 0.1-0.2
France 4-7 0.2-0.3
Source: McKinsey Consulting