Consumers are turning away from secondary telephone lines in favor of cheaper wireless service and widely available broadband, marking the beginning of the end for conventional telecommunications networks. New communication options already displace telephone service in 1.7 percent of households. According to new research from Forrester Research, Inc. (Nasdaq: FORR), more than 5 million American households will migrate to mobile and high-speed broadband networks for their primary connection by 2006, costing today’s telecom giants nearly $9 billion.
“Half of this loss — more than $4.5 billion — will come out of lost revenue from highly profitable services such as voicemail and call waiting,” said Charles Golvin, senior analyst at Forrester. “This means that traditional service providers, which today own 57 percent of the consumer telecom budget, will see their share reduced to 36 percent in the next five years.”
During the next five years, wireless will gain 11 percent of household spending as the average number of mobile phones grows to 2.2 per household. Five and a half million consumers will give up their second land lines and 2.3 million will drop their primary line.
By 2006, broadband will also take revenues away from fixed-line providers and dial-up ISPs when more than 50 percent of households subscribe to high-speed Internet access for voice and data. Cable and DSL will maintain their 60/40 split of this business by offering pricing alternatives that make broadband affordable for more households.
As a result of these telecom options, fixed-line operators and ISPs will feel the effects as early as this year. A second wave of displacement — pushing voice to broadband networks and making wireless the preferred data channel — will further challenge carriers.
“Broadband providers will also take voice business away from traditional service providers as they begin to offer voice over IP service in 2002,” added Golvin. “By 2006, these packet voice offerings will displace 4.26 million traditional lines and nearly $1.5 billion in annual revenue.”to broadband networks and making wireless the preferred data channel — will further challenge carriers.