* VoIP service growth is stagnant to declining; annual VoIP market share growth for the cable companies has slowed to single digits while traditional voice services from telcos continue with double-digit losses
Earnings reports have rolled in over the last two weeks, and we’ve spotted a few key indicators about the progress of VoIP services based on results from U.S. competitors including Vonage, telcos such as AT&T and Verizon, and cable providers such as Comcast and Time Warner Cable.
Vonage continues to maintain a delicate financial balance with a recent round of debt refinancing to lower its interest rates. It reported roughly flat year-over-year subscriber line acquisition costs (still running at about $302 per subscriber), slightly increased telephony costs as its international calling plans grow in popularity, and a relatively static customer base or about 2.4 million access lines. The good news is that Vonage has kept about the same number of customers for several years; the bad news is that it is still reporting net losses, with a Q3 2010 net loss of $55 million (using GAAP rules) compared to net loss of $55 million in the third quarter of 2009.
Comcast and Time Warner Cable, the largest cable operators in the United States, both showed that demand for their VoIP services has slowed. Comcast grew its VoIP base by about 2 million each year in 2006, 2007 and 2008, but in 2009 growth slowed and so far in 2010, it has added only about 731,000 VoIP subscribers. From 2007 through 2009, Time Warner Cable averaged aver 750,000 “Digital Voice” (VoIP) customer additions each year, but so far in 2010 it has added only about 171,000 net new subscribers.
AT&T and Verizon continued to show losses in legacy voice access lines. AT&T has lost 2.4 million primary consumer voice lines so far in 2010, while Verizon has lost 837 million primary residential lines in the first three quarters. (Verizon results are pro forma following a mid-year spinoff of 4.8 million access lines to Frontier.) The silver lining in an otherwise cloudy future for telco wireline losses: AT&T reported that U-verse Voice (a VoIP-based service) increased by 166,000 subscribers in the third quarter and 759,000 over the past four quarters.
The bottom line: Over-the-top VoIP service growth (like the Vonage service) is stagnant to declining; annual VoIP market share growth for the cable companies has slowed to single digits while traditional voice services from telcos continue with double-digit losses; and telcos just might be able to fight back against wireline voice losses by bundling a VoIP-based service with their triple play offers.
