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Consumer VoIP services grow in Q3

But cable operators' success with VoIP may have peaked

Convergence & VoIP Alert By , Network World
November 28, 2011 11:34 AM ET
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VoIP, unified messaging, products and services

Network World - Company results from wireline voice service providers are in from Q3 2011, and the results for VoIP-based services growth are mixed. Legacy voice services from phone companies have continued to decline, while "digital voice" line growth from cable operators has slowed.

As of Q3 2011, AT&T lost 10.5% of its wireline connection from the year-earlier period, Verizon lost 7.6% of its total wired voice lines, and CenturyLink reported losses that would total about 6.8% annually on a pro forma basis for the 12-month period ending September 2011. If there is a bright spot, it is that consumer VoIP services are growing. For example, AT&T's U-verse Voice connections increased by 119,000 from Q2 2011 to Q3 2011 and by U-verse Voice added 648,000 subscribers over 12 months.

MORE FINDINGS: HD Voice makes steady progress in mobile networks

Cable operators have continued to add VoIP lines; however, the growth rate has slowed to a trickle compared to previous years' successes. These operators cite "cord cutters" who substitute wireless voice for wireline services as one culprit for slow growth; economic conditions were also a factor. As examples:

• Comcast, the largest domestic cable operator, now has 9.196 million VoIP lines in service representing a 17.6% penetration rate of homes passed as of Q3 2011; the company's share has grown from a 16.1% penetration rate from the year-earlier period.

• Time Warner Cable, the second-largest cable provider serving 4.6 million voice customers, added only 5,000 new VoIP lines in Q3 2011-- inclusive of 13,000 business lines that offset 5,000 residential line losses.

• Charter reported 5.3 million voice subscriber lines, growing from a 16% penetration rate in Q3 2010 to 16.3% penetration for homes passed in Q3 2011.

Our observations: Cable operators' success with VoIP may have peaked, especially for residential services. However, we believe opportunities for growth still abound in the business VoIP market. Wireless substitution by consumers continues to drive "cord cutting" (according to the CDC, 29.7% of homes had only wireless telephones during the last half of 2010). Meanwhile, the effect of wireless substitution is less of a concern in the business market sector -- yet the integration of VoIP features and mobile devices remains very important for the enterprise and midsize business.

Read more about voip & convergence in Network World's VoIP & Convergence section.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick, an independent analyst and consultant, is a 30-year industry veteran. He has covered VoIP and UC at Network World for 12 years.

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