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Telecommunications and VoIP in the Americas: A Market Perspective on the Major Economies 2005-2011
a market research report
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In its analysis of the effects of Voice over the Internet Protocol (VoIP) on North American telecommunications, Insight Research expects annual per subscriber revenue to decline only slightly in the years to come, as a plethora of new services are introduced to the market. Because of the increase in the mobile subscriber base, however, sector revenues are forecasted to increase to about $476.4 billion by 2011. Thus, the estimated North American revenue lost to VoIP has passed its peak and will continue to decline. The report’s forecasts, which span from 2005 to 2011, also include totals on wireline access lines, wireless subscribers, inbound and outbound minutes of use (MOUs) with and without VoIP, and capital expenditures.
In addition to Canada and the United States, Greenland, Bermuda, St. Pierre, and Miquelon have been included in the North American totals.
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Report Excerpt
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In our 1999 study of international calling, IP Telephony, ISR, and Callback: The Deregulated European Market 1998-2003, INSIGHT predicted a short lifespan for many of the rate arbitrage plays then in vogue, and said: “…if the supposition of some (that IP equipment and transport costs are cheaper than the equivalents in the PSTN) proves to be true, and quality issues can be resolved, then IP telephony will indeed be the wave of the future.” Today, Voice over Internet Protocol (VoIP) is indeed having a direct and measurable impact on international carrier revenues, just as we predicted. But VoIP’s near term impact as an international calling rate arbitrage mechanism is a second-order effect. The impacts we trace on international markets in this study are a precursor, the leading edge, of what telecom carriers will face in their local and long-distance national markets in the near future.
In its role as a key driver for electronic commerce, as well as a facilitator to the diffusion of the Internet, the telecommunications industry has transformed itself as well as economies worldwide. The importance of telecommunications is reflected in its growing share of world output, increasing over the last twenty-five years from 1.6 percent of an estimated $20 trillion in 1975 to 2.9 percent of an estimated $40 trillion in global GDP in 2000. The pace of growth quickened in the last decade of the twentieth century and became a period of unprecedented growth for the telecommunications sector. This growth came to a screeching halt in 2000. Since then, the sector has been through a series of shocks whose effects are still being felt.
Troubles for the telecommunications sector began with the bursting of the “dot.com” bubble in 2000 as a result of the exaggerated expectations placed on the Internet phenomenon. In its wake, many telecommunications companies, either betting on the exponential growth of Internet traffic or having expanded outside their core activities, collapsed. But perhaps the biggest shock for telecommunications sector stakeholders has been the fact that the industry is witnessing a decline in revenue growth rates, which after a twenty-year uninterrupted growth trajectory of unprecedented magnitude, came as a surprise.
This study will seek to determine how much of the decline in revenue growth rates is caused by the one-off factors, and how much is precipitated by structural changes affecting the traditional public switched telecommunications network (PSTN) business models of the incumbent telephone operators as the industry moves to VoIP technology.
In the context of this study, “VoIP” is used in a generic sense to indicate the use of packet switching of voice traffic over the Internet. Hence, VoIP “bypass losses” in this report pertain to that portion of international voice traffic that uses the Internet as a transport vehicle and appears at the termination point as local traffic. VoIP, as we refer to it in this study, is distinct from the packetizing of voice, which has been used in public networks for years, and is used to transport many type of protocols including voice using Internet protocols, voice over frame relay, and voice over ATM, plus combinations thereof (e.g., IP over ATM transport).
INSIGHT’s research suggests that the revenue shocks of the last few years were caused by one-off factors, such as a temporary imbalance between bandwidth supply and demand and the financial markets’ over-exuberance related to the rise of the public Internet. As far as carrier revenue is concerned, however, the downward pressure attributable to VoIP is going to play out over a very long period, and it will be irreversible. Even more importantly for the incumbent telephone operators, VoIP technology will require drastic cost containment action and the adoption of a “new” business model based on the Web service creation paradigm as VoIP technology gains traction.
As we will demonstrate in the chapters that follow, the number of minutes of use (MOUs) and revenue “lost” to VoIP bypass will continue to increase, thereby reducing service provider revenues and, more importantly, operating margins. These revenue declines will be offset by continued strong demand for wireless services worldwide and the addition of wireline customers in the less developed countries. The revenue gains in these segments will not produce a reversal in declining operating margins, however; this can only be achieved through cost reductions.
Hence, we have a revenue paradox: although sector revenues will increase in the aggregate, revenues from voice service will decline. INSIGHT’s research suggests that worldwide revenue losses due to international VoIP amounted to $74 billion in 2002, representing about seven percent of service revenues, which stood at $1.04 trillion. By 2011 INSIGHT Research projects that revenue losses associated with international VoIP bypass will have risen to $96 billion—but that loss will only represent five percent of total telecom service revenues of $1.8 trillion.
The percentage decline in international VoIP bypass revenues losses in terms of total service revenues is largely the result of international transport tariff reductions brought about by competition and the accelerated migration of voice traffic from circuit-switched to packet-switched networks. At the same time, international voice traffic volume will continue increasing, and will act to offset declining rates. Finally, telecommunications service revenues will actually increase, principally for three reasons: first, the growth of the wireless and wireline subscriber bases in developing nations; second, the shift of revenue recognition from usage to fixed charges, or flat...
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complete Executive Summary.
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Market Segmentation
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North America - USA
Wireline
Subscribers
Wireless
Subscribers
Terminating and
Originating Traffic
VoIP
Traffic
Market Revenues, Sector
Performance and Revenue Impact of VOIP
Access Lines, Population, and Teledensity, 2002-2011
Inbound and Outbound MOUs with VoIP
2002-2011
Revenue and Per
subscriber Revenue 2002-2011
Telecommunications Capital Expenditures 2002-2011
Caribbean
Wireline Subscribers
Wireless Subscribers
Terminating and Originating Traffic
VoIP Traffic
Market Revenues, Sector Performance and Revenue Impact of VOIP
Access Lines, Population, and Teledensity, 2002-2011
Inbound and Outbound MOUs with VoIP 2002-2011
Revenue and Per subscriber Revenue 2002-2011
Telecommunications Capital Expenditures 2002-2011
Central America - Mexico
Wireline Subscribers
Wireless Subscribers
Terminating and Originating Traffic
VoIP Traffic
Market Revenues, Sector Performance and Revenue Impact of VOIP
Access Lines, Population, and Teledensity, 2002-2011
Inbound and Outbound MOUs with VoIP 2002-2011
Revenue and Per subscriber Revenue 2002-2011
Telecommunications Capital Expenditures 2002-2011
Latin America - Argentina and Brazil
Wireline Subscribers
Wireless Subscribers
Terminating and Originating Traffic
VoIP Traffic
Market Revenues, Sector Performance and Revenue Impact of VOIP
Access Lines, Population, and Teledensity, 2002-2011
Inbound and Outbound MOUs with VoIP 2002-2011
Revenue and Per subscriber Revenue 2002-2011
Telecommunications Capital Expenditures 2002-2011
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Table of Contents
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Chapter I
Executive Summary
1.1 International Telecommunications & VoIP
1.2 The Forces of Change
1.3 International Calling Market Analysis
Chapter II
From Telephone Operator to Information Provider
2.1 Telecommunications Tectonic Shift
2.2 Fixed Access Services
2.2.1 North America Wireline Subscribers
2.2.1.1 United States
2.2.2 Caribbean Wireline Subscribers
2.2.3 Central America Wireline Subscribers
2.2.3.1 Mexico
2.2.4 Latin America Wireline Subscribers
2.2.4.1 Argentina
2.2.4.2 Brazil
2.3 Mobile Services
2.3.1 North America Wireless Subscribers
2.3.1.1 United States
2.3.2 Caribbean Wireless Subscribers
2.3.3 Central America Wireless Subscribers
2.3.3.1 Mexico
2.3.4 Latin America Wireless Subscribers
2.3.4.1 Argentina
2.3.4.2 Brazil
2.4 Forces of Change
2.4.1 The Internet
2.4.1.1 North America
2.4.1.2 Caribbean
2.4.1.3 Central America
2.4.1.4 Latin America
2.4.2 Regulation
2.4.3 An Engine of Economic Growth
2.5 The Collapse of the Old Telecom Business Model
2.6 VoIP as the New Paradigm
2.6.1 VoIP as Transport
2.6.2 VoIP Operational Advantage
2.6.3 VoIP as Value-Added Stage
2.6.4 The Impact of VoIP on Regulation
Chapter III
Traffic Trends & Future Growth
3.1 Trends and Growth Overview
3.2 North America Term and Orig Traffic
3.2.1 Terminating Traffic
3.2.2 Originating Traffic
3.2.3 United States Term and Orig Traffic
3.2.3.1 US Terminating Traffic
3.2.3.2 Originating Traffic
3.3 Caribbean Terminating and Orig Traffic
3.3.1 Terminating Traffic
3.3.2 Originating Traffic
3.4 Central American Termi and Orig Traffic
3.4.1 Terminating Traffic
3.4.2 Originating Traffic
3.4.3 Mexico Term and Orig Traffic
3.4.3.1 Terminating Traffic
3.4.3.2 Originating Traffic
3.5 Latin American Term and Orig Traffic
3.5.1 Terminating Traffic
3.5.2 Originating Traffic
3.5.3 Argentina Term and Orig Traffic
3.5.3.1 Terminating Traffic
3.5.3.2 Originating Traffic
3.5.4 Brazil Term and Orig Traffic
3.5.4.1 Terminating Traffic
3.5.4.2 Originating Traffic
Chapter IV
VoIP International Adoption Trends
4.1 VoIP Overview
4.2 North America VoIP Traffic
4.2.1 Terminating Traffic
4.2.2 Originating Traffic
4.2.3 United States VoIP Traffic
4.2.3.1 Terminating Traffic
4.2.3.2 Originating Traffic
4.3 Caribbean VoIP Traffic
4.3.1 Terminating Traffic
4.3.2 Originating Traffic
4.4 Central American VoIP Traffic
4.4.1 Terminating Traffic
4.4.2 Originating Traffic
4.4.3 Mexico Term and Orig Traffic
4.4.3.1 Terminating Traffic
4.4.3 2 Originating Traffic
4.5 Latin American Term and Orig Traffic
4.5.1 Terminating Traffic
4.5.2 Originating Traffic
4.5.3 Argentina Term and Orig Traffic
4.5.3.1 Terminating Traffic
4.5.3.2 Originating Traffic
4.5.4 Brazil VoIP Traffic
4.5.4.1 Terminating Traffic
4.5.4.2 Originating Traffic
Chapter V
International VoIP and Revenue Loss
5.1 The Migration of VoIP
5.2 North America Market Revenues
5.2.1 Sector Performance
5.2.2 Revenue Impact of VoIP
5.2.3 United States Market Revenues
5.2.3.1 Sector Performance
5.2.3.2 Revenue Impact of VoIP
5.3 Caribbean Market Revenues
5.3.1 Sector Performance
5.3.2 Revenue Impact of VoIP
5.4 Central America Market Revenues
5.4.1 Sector Performance
5.4.2 Revenue Impact of VoIP
5.4.3 Mexico Market Revenues
5.4.3.1 Sector Performance
5.4.3.2 Revenue Impact of VoIP
5.5 Latin America Market Revenues
5.5.1 Sector Performance
5.5.2 Revenue Impact of VoIP
5.5.3 Argentina Market Revenues
5.5.3.1 Sector Performance
5.5.3.2 Revenue Impact of VoIP
5.5.4 Brazil Market Revenues
5.5.4.1 Sector Performance
5.5.4.2 Revenue Impact of VoIP
Chapter VI
Capital Expenditures and VoIP
6.1 CAPEX Overview
6.2 North America CAPEX in Telecom
6.2.1 United States
6.3 Caribbean Capital Investments
6.4 Central America Capital Investments
6.4.1 Mexico
6.5 Latin America Investments
6.5.1 Argentina
6.5.2 Brazil
TABLE OF TABLES
Chapter I
I-1 Impacts of VoIP on Worldwide Telecom Rev
I-2 Impacts of VoIP on CAPEX Worldwide
Chapter II
II-1 North America Wireline Access Lines, Pop, and Teledensity, 2002-2011
II-2 United States Wireline Access Lines, 2002-2011
II-3 Caribbean Wireline Access Lines, Pop, and Teledensity, 2002-2011
II-4 Central America Wireline Access Lines, Pop, and Teledensity, 2002-2011
II-5 Mexico Wireline Access Lines, 2002-2011
II-6 Latin America Wireline Access Lines, Pop, and Teledensity, 2002-2011
II-7 Argentina Wireline Access Lines, 2002-2011
II-8 Brazil Wireline Access Lines, 2002-2011
II-9 North America Wireless Subscribers, Pop, and Pop Percentage, 2002-2011
II-10 United States Wireless Subscribers, 2002-2011
II-11 Caribbean Wireless Subscribers, Pop, and Pop Percentage, 2002-2011
II-12 Central America Wireless Subscribers, Pop, and Pop Perc, 2002-2011
II-13 Mexico Wireless Subscribers, 2002-2011
II-14 Latin America Wireless Subscribers, Pop, and Pop Percentage, 2002-2011
II-15 Argentina Wireless Subscribers, 2002-2011
II-16 Brazil Wireless Subscribers, 2002-2011
Chapter III
III-1 North American Inbound MOUs without VoIP 2002-2011
III-2 North American Outbound MOUs without VoIP 2002-2011
III-3 United States Inbound MOUs without VoIP 2002-2011
III-4 United States Outbound MOUs without VoIP 2002-2011
III-5 Caribbean Inbound MOUs without VoIP 2002-2011
III-6 Caribbean Outbound MOUs without VoIP 2002-2011
III-7 Central America Inbound MOUs without VoIP 2002-2011
III-8 Central America Outbound MOUs without VoIP 2002-2011
III-9 Mexico Inbound MOUs without VoIP 2002-2011
III-10 Mexico Outbound MOUs without VoIP 2002-2011
III-11 Latin America Inbound MOUs without VoIP 2002-2011
III-12 Latin America Outbound MOUs without VoIP 2002-2011
III-13 Argentina Inbound MOUs without VoIP 2002-2011
III-14 Argentina Outbound MOUs without VoIP 2002-2011
III-15 Brazil Inbound MOUs without VoIP 2002-2011
III-16 Brazil Outbound MOUs without VoIP 2002-2011
Chapter IV
IV-1 North American Inbound MOUs with VoIP 2002-2011
IV-2 North American Outbound MOUs with VoIP 2002-2011
IV-3 United States Inbound MOUs with VoIP 2002-2011
IV-4 United States Outbound MOUs with VoIP 2002-2011
IV-5 Caribbean Inbound MOUs with VoIP 2002-2011
IV-6 Caribbean Outbound MOUs with VoIP 2002-2011
IV-7 Central America Inbound MOUs with VoIP 2002-2011
IV-8 Central America Outbound MOUs with VoIP 2002-2011
IV-9 Mexico Inbound MOUs with VoIP 2002-2011
IV-10 Mexico Outbound MOUs with VoIP 2002-2011
IV-11 Latin America Inbound MOUs with VoIP 2002-2011
IV-12 Latin America Outbound MOUs with VoIP 2002-2011
IV-13 Argentina Inbound MOUs with VoIP 2002-2011
IV-14 Argentina Outbound MOUs with VoIP 2002-2011
IV-15 Brazil Inbound MOUs with VoIP 2002-2011
IV-16 Brazil Outbound MOUs with VoIP 2002-2011
Chapter V
V-1 North America Telecommunications Rev & Per Subs Rev 2002-2011
V-2 North American VoIP Revenue Loss 2002-2011
V-3 United State Telecommunications Rev & Per Subs Rev 2002-2011
V-4 United States VoIP Revenue Loss 2002-2011
V-5 Caribbean Telecommunications Rev & Per Subs Rev 2002-2011
V-6 Caribbean VoIP Revenue Loss 2002-2011
V-7 Central America Telecommunications Rev & Per Subs Rev 2002-2011
V-8 Central America VoIP Revenue Loss 2002-2011
V-9 Mexico Telecommunications Rev & Per Subs Rev 2002-2011
V-10 Mexico VoIP Revenue Loss 2002-2011
V-11 Latin America Telecommunications Rev & Per Subs Rev 2002-2011
V-12 Latin America VoIP Revenue Loss 2002-2011
V-13 Argentina Telecommunications Rev & Per Subs Rev 2002-2011
V-14 Argentina VoIP Revenue Loss 2002-2011
V-15 Brazil Telecommunications Rev & Per Subs Rev 2002-2011
V-16 Brazil VoIP Revenue Loss 2002-2011
Chapter VI
VI-1 North America Telecommunications Capital Exp 2002-2011
VI-2 United States Telecommunications Capital Exp 2002-2011
VI-3 Caribbean Telecommunications Capital Exp 2002-2011
VI-4 Central America Telecommunications Capital Exp 2002-2011
VI-5 Mexico Telecommunications Capital Exp 2002-2011
VI-6 Latin America Telecommunications Capital Exp 2002-2011
VI-7 Argentina Telecommunications Capital Exp 2002-2011
VI-8 Brazil Telecommunications Capital Exp 2002-2011
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