It's not often that we wade through Federal Communications Commission reports, but a recent FCC study on local telephone competition caught our attention because it highlights how successful Voice over IP (VoIP) has been in displacing traditional telecom services.
The study, released this month and titled "Local Telephone Competition: Status as of December 31, 2011," confirms our decade-old assertion that "the transition to VoIP isn't a matter of if, but when." The widespread adoption of VoIP is also apparent for both business and residential customers, although the percentage of business customers who use VoIP is lower than the percentage of residential VoIP subscribers.
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Among the study's key findings:
- In December 2011, there were 107 million traditional (switched access) lines in service and 37 million interconnected VoIP subscriptions.
- Between 2008 and 2011, VoIP subscriptions increased at a compound annual growth rate of 19.0%, while switched access lines declined at about 8.8% a year.
- As of December 2011, 37% of residential wireline customers used a VoIP service, while slightly fewer than 10% of wireline business lines used VoIP in lieu of traditional local telephone service connections.
- Incumbent local exchange companies (ILECs) still had about 62% of wireline voice market share at the end of 2011 (counting both residential and business lines) with the remainder served by non-ILEC providers.
The FCC results also confirm the widespread adoption of wireless voice services, with 298 million mobile subscriptions in the United States at the end of 2011. A separate study, issued in December 2012 by the Centers for Disease Control (CDC), showed that over one-third of American homes (35.8%) had only wireless telephones.
Our observations: Given the adoption curves for VoIP and the decline of traditional access lines, we believe the U.S. is nearing the tipping point where VoIP will be used for more calls that legacy switched access lines. Small wonder, then that AT&T has asked the FCC for regulatory relief to help speed the transition to VoIP services, joined by the United States Telecom Association. We look forward to the day when "VoIP Rules" and we encourage the industry and regulators to work together on making the transition a smooth one.