The Future of Voice: Framing the debate

1
The Future of VoiceFraming the debate

• ITU New Initiatives Workshop
• 15-16 January 2007, Geneva
• Tim Kelly and Jaroslaw Ponder
• Strategy and Policy Unit
• International Telecommunication Union

2
Framing the Debate Agenda

• Trends in traditional voice communication
• Revenue and price trends for voice and data
• Is the pricing per minute business model
  sustainable?
• Some questions for discussion

3
Local telephone minutesper capita in US still
growing
18'000
In US continuous growth of local traffic. During
last 15 years number of generated local call
minutes per capita grew more than 4 times.
France
16'000
Japan
14'000
12'000
New
Zealand
10'000
Spain
8'000
Switzerland
6'000
Tentative US Trend
United
4'000
Kingdom
2'000
United
States
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source ITU World Information Society Statistics
4
Local telephone minutesper capita in other
countries
2'000
France
1'800
1'600
Japan
1'400
New
1'200
Zealand
1'000
Spain
800
600
Switzerland
General tendency of local fixed-line traffic to
fall esp. since end of 1990s
400
Tentative Trend
United
200
Kingdom
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source ITU World Information Society Statistics
5
National telephone minutes per capita (long
distance)
3'500
Australia
General tendency of national fixed line traffic
to fall since end of 1990s
3'000
France
2'500
Japan
New
2'000
Zealand
Spain
1'500
Switzerland
1'000
Tentative Trend
United
Kingdom
500
United
States
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source ITU World Information Society Statistics
6
International outgoing traffic minutes per capita
In Korea, international outgoing traffic grew
more than 12 times in last 15 years (tendency
growing) in USA more than 5 times.
400
Australia
350
France
300
Japan
Korea (Rep. of)
250
New
200
Zealand
Spain
Tentative Trend
150
Switzerland
100
United
Kingdom
50
United
States
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source ITU World Telecommunication Indicators
7
Factors underlying traffic trends?

• Overall expansion of user base
• The pressure of competition and market
  liberalisation
• Emerging alternative communication platforms
  (e.g., mobile, VoIP)
• Influence of the Internet, esp. Voice over
  Internet Protocol and peering
• Peer-to-peer technologies (e.g., Skype)
• Overall migration to the all-IP environment

Do people communicate more now?
8
Long-term telecom revenue trends
Revenue
(US billion)
1'400
1'200
1'000
Other (e.g., non-voice)
800
Mobile
600
International PSTN
400
200
Domestic PSTN
0
1991
1993
1995
1997
1999
2001
2003
Source ITU Information Society Statistics
Database.
9
Voice revenues stable as of total revenue
Revenue
(US billion)
Voice as a of total
1'400
100
90
1'200
80
1'000
70
60
800
50
600
40
30
400
20
200
10
0
0
1991
1993
1995
1997
1999
2001
2003
Source ITU Information Society Statistics
Database.
10
Broadband price trends

• International survey of broadband prices
• Based on 133 economies that had broadband as
  early as 2004
• Methodology
• Based on price in US per 100 kbit/s
• Price trends
• Median price has fallen by 41 p.a.
• Median speed has risen by 66 p.a.
• Faster than Moores Law

Source ITU Internet Reports 2006 Digital.Life.
11
The trend towards flat-rate pricing

• Broadband pricing
• Flat-rate is now preferred to both time-based and
  data capped
• Similar trends towards bundling and flat-rate in
  voice market too
• Voice offered free with internet and premium TV
  services

Source ITU Internet Reports 2006 Digital.Life.
12
Is the price per minute business model
sustainable?

• Yes
• Well understood and simple (both for retail and
  wholesale)
• Proven cash generator for telcos
• Can accommodate different classes of service

• No
• Pricing per minute is based on scarcity
• Users want predictable monthly bills
• Pricing per minute hinders take-up of
  data/content services

13
Some questions for discussion

• Will voice remain a trillion dollar business or
  will the business model collapse under pressure
  from VoIP?
• How can voice service be profitably extended
  (e.g., premium quality, chat, integration with
  other services, universal access, etc)
• Will voice drive NGNs? (just like it drove ISDN,
  freephone, 3G etc)

14

• International
• Telecommunication
• Union

Connect the World