Surveys point to increased adoption of VoIP and wireless substitution

ILECs continue to lose voice market share.

Recent reports from the U. S. government and the U. S. Telecom Association provide insights into the ongoing evolution of the PSTN with 2013 results for VoIP adoption and wireless substitution rates, also providing a picture of ILEC market share for wireline voice services.

The Federal Communications Commission (FCC) published its annual Local Telephone Competition report last month based on data available through June 30, 2013. It found that 47% of residential customers who have a wireline voice service are now using VoIP and that nearly 38% are buying that VoIP service from someone other than their incumbent phone company.

When it comes to business customers, the FCC found that only 15% of business voice lines are using VoIP. Incumbent carriers have the edge for providing business voice services overall, with 57% market share of business wireline customers. However, competitive carriers owned 8 million business VoIP lines in mid 2013, while ILECs sold 837,000 VoIP lines to business customers for the same period.

Each year, the Centers for Disease Control (CDC) measures how many consumers have wireless vs. wireline phones. In its annual survey, the CDC found that “two in every five American homes (41.0%) had only wireless telephones (also known as cellular telephones, cell phones, or mobile phones) during the second half of 2013.” However, the CDC report also found that the uptake or wireless substitution had slowed slightly in 2013 compared to previous years.

Even before these government surveys were released, the U.S. Telecom Association projected that “based on trends, from 2000 to 2015 ILECs will have lost a projected 70 percent of switched access lines and 79% of switched retail residential access lines...due to facilities-based competition from wireless and cable.”

Our observations: while there are no surprises in any of these data points since they represent ongoing trends, we find it interesting that the take rate for residential voice services is three times greater than for business. And while we know that mobile devices and enterprise mobility are important as a complement to wired business voice services, we have not found evidence that business voice customers are quite as willing as consumers to “cut the cord” in favor of wireless substitution.

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