Report: Users Pulling Plug on Landlines

Landline telephones may soon need a lifeline as more people cut the cord in favor of Voice over IP (VoIP) and wireless phone alternatives.

VoIP subscribers in the U.S. are expected to hit the 32.6 million mark by 2010, which means that roughly 40 percent of all broadband households in the country will be using VoIP systems from Vonage, AT&T and others in the field.

This compares with about 5.2 million VoIP subscribers with an expected 9.6 million by the end of this year, according to a report just released by eMarketer.

Sitting in the line of fire is the $190 billion fixed-line telephony industry, which is expected to lose users and revenues as cable companies, ISPs and others take a piece of the pie.

A “fierce battle is emerging in the VoIP market,” said senior analyst and report author Ben Macklin in a statement. “At stake is the so-called ‘triple-play’ of residential voice, video and data services, which is a market worth approximately $300 billion.”

The Telecommunications Industry Association (TIA) also tracks VoIP activity in the U.S., but is a bit more conservative when it comes to market projections.

The trade group said VoIP usage in the U.S. will grow at a compound annual rate of 43.9 percent, and will most likely only reach 18 million subscribers by 2009.

However, the TIA does not track only telephone-based VoIP activity and not PC-to-PC related systems offered by Skype Communications, Microsoft’s MSN Messenger, Yahoo and others.

Consumers and businesses are mainly attracted by VoIP systems because of their lower cost, which averages about $20 to $40 per month per subscriber, noted the eMarketer report.

The average monthly local and long distance residential phone bill in the U.S. in 2005 was a little less than $51, according to J.D. Power and Associates, a marketing information firm.

Another factor driving the VoIP market includes an increasing use of broadband Internet services, which will have 69.2 million subscribers in the U.S. by 2009, according to the TIA.

There are also a lot fewer regulations and taxes associated with VoIP than traditional telephone services, noted the TIA.

Doom-and-gloom projections for the fixed-line folks may not be too surprising, since revenues and subscriber rates have been falling for the last five years, according to TIA based on its telecommunications market forecast released earlier this year.

The number of mobile phone subscribers, 194.5 million, surpassed the number of landline users, 172.1 million, for the first time in 2005. This means that more than two-thirds of the U.S. population now subscribes to some kind of wireless service, said the TIA.

Wireless penetration in total is expected to rise to 88 percent by 2009, or 270 million subscribers, said the report.

“While VoIP is not the cause of the falling fixed-line market,” said Macklin in a statement, “it is acting as an accelerant and the widespread availability and attractive price of VoIP services is compelling to both consumers and businesses.”

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