VoIP in Europe: Its Bite is Worse Than Its Bark

July 30, 2009

New data from TeleGeography’s European VoIP & Triple Play Research Service reveal that voice over IP (VoIP) subscribers have grown from just over 6 million in 2005 to 34.6 million at year-end 2008. VoIP now accounts for more than 24 percent of fixed-line telephone subscribers in Europe.

VoIP service revenues of €4.1 billion are still dwarfed by the nearly €36 billion generated by traditional switched fixed-line services. However, the impact of VoIP on the European fixed-line market is greater than its relatively modest subscriber and revenue share would suggest, due to the strong downward pressure VoIP-based competitors place on voice service prices.

VoIP Effect on Switched Residential Fixed-Line Revenues, 2005—2013

Many European incumbent telephone companies have responded to this pressure by introducing discounted VoIP service, by slashing switched telephone service prices, and by marketing voice as one component of dual-play or triple-play bundles of voice, broadband, and video. These measures have helped incumbents to defend their market shares, but at the cost of sharply reduced voice revenues. Aggregate revenues from switched and VoIP telephone service have fallen from €49.4 billion in 2005 to €39.9 billion in 2008 and are projected to decline to only €26.2 billion by 2013.

According to TeleGeography analyst Paul Brodsky, "Fixed-line telephony was the cash cow that allowed incumbents to invest in mobile telephony, broadband, and video services. However, in Europe today, voice is increasingly just a loss leader, used to sell broadband and video services."

The European VoIP & Triple Play Research Service has been discontinued. For a full list of TeleGeography’s research services, please visit http://www.telegeography.com/research-services/.