Europe forecast to spend £2.67bn on IP telephony

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The economic downturn will result in a rise in IP Telephony service revenue as there will be less of a "free telephony" culture within the service provider community.

According to "IP Telephony Services in Western Europe" (IDC #HT01J) from IDC, end-user spending on IP telephony services in 2001 amounted to £167m in Western Europe. This should rise at 74% to £2.67bn in 2006.

"The economic turbulence being experienced in the telecoms sector means that the opportunities offered by IP Telephony services are featuring highly in the minds of service providers, said Nicky Walton, Research Analyst with IDC's European Telecoms Service.

"Increasingly, operators are seeking to capitalise on the expansion in Internet-related usage and the economies of scale offered by consolidating voice and data traffic on a common IP platform."

Revenue from international calls represented the highest portion of IP Telephony revenue in 2001, as this is where most significant cost savings can be offered. However, by 2006 enhanced services will represent the greatest revenue (54%), given that long-distance call tariffs will have declined. This evolution is essential to maintain the viability of IP telephony services into the latter half of the decade.

IDC believes the use of advanced IP Telephony-based services will grow significantly - including messaging and conferencing at the low end and call-centre services at the high end. The provisioning of IP-based enhanced services to larger businesses will attract the major service providers, including PTTs, over the next few years. The use of IP phones within enterprises will also boost traffic as it will attract major players who will emphasise quality of service and enhanced services. Business users would likely pay more for higher quality and enhanced services.

"Competition for the provisioning of voice services in Europe has intensified over the last three years or so following the liberalisation of most European voice markets," said Walton. However, voice telephony represents over 80% of end-user expenditure on fixed-line services in Europe, and in the current economic climate is one of the most secure forms of revenue for service providers, among which the incumbent PTTs dominate. Walton claims that "because the reduction in PTT competitors has resulted in a slowdown in PSTN tariff reductions, there is still a significant market for IP telephony arbitrage services providers in Europe.

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