Just How Big Will VoIP Market Grow? (Part 2)

Continued from “Just How Big Will VoIP Market Grow (Part 1)

Falling price point primed to match consumer expectations isn’t the only reason Point Topic believes the global VoIP market is due to hit 40 billion dollars in annual revenue by the year 2015. After all, ideas of substitution commodities and ideal price points are a little academic, a little theoretical, and they don’t quite bring the hard-nosed proof that the global VoIP market is set for some big, big changes over the next couple of years. For that sort of proof, Point Topic looked at an area they considered an important “test bed” for rolling out the technology.

VoIP, Mon Amour

Point Topic looks to France as an example of a country that’s approached VoIP adoption with the absolute right attitude. According to Point Topic, French companies have succeeded in pushing an end-to-end IP solution to the country’s citizens by doing little more than making VoIP available to anyone who wants it by proliferating the technology and by setting it an attractive price point that comes bundled with a normal internet connection. This method of bundling VoIP with an existing internet connection allows for the sort of streamlined communication infrastructure and low prices the technology has been promising for years, and France proves this combination, when made readily available, is highly popular among the general population.

But how successful has France actually been at adopting VoIP, and if this sort of success rate translates globally will it result in the huge gains Point Topic expects the market to boast over the following 2-3 years?

Yes, actually. VoIP providers have been doing their best to push the technology in France over the last decade and they’ve been wildly successful. These days over half of all telephony traffic starting out from a fixed network in France comes from a VoIP phone, demonstrating just how rapidly and feverishly the population has turned away from their landlines and turned to VoIP when presented with this superior option at an attractive price point.

While an adoption rate sitting over 50% is certainly impressive and will surely inflate VoIP revenue streams if it translates directly onto the global stage, does it add up to over 35 billion dollars in extra revenue for global digital telephony?

Point Topic answers that question with an emphatic “yes!” Point Topic estimates that the global VoIP market will account for over seven hundred and fifty million, over three quarters of a billion fixed connections by the end of 2015. According to Point Topic, this sort of fixed line adoption alone is enough to translate to $40 billion a year in annual revenue.

This is a powerful projection and one that seems to work out just fine when you run the numbers, but it does fail to take a very important, very obvious point in mind, and that’s the fact that Point Topic is estimating revenue based on their projections of how VoIP is going to directly replace fixed line phones. With these projections Point Topic makes the very big assumption that all these organizations and consumers are actually going to replace their TDM-based phones and PBX systems when they decide to transition away from TDM trunks. And this prediction doesn’t necessarily hold a lot of weight.

It’s inaccurate to consider VoIP to be the only threat to traditional TDM trunks. Mobile technology (though also largely reliant on VoIP) is also putting  a squeeze on traditional TDM telephony. And if individuals and organizations chose to fully embrace mobile telephony technology, then will Point Topic’s bold predictions for 2015 still hold weight? Even by most optimistic projections, predictions of a 40 billion dollar pay-day for the global VoIP market ends up sounding ludicrous.

Is Point Topic Wilfully Ignorant On This Matter?

Point Topic isn’t as ignorant as they might initially seem. When they say the replacement of fixed line PSYN networks with VoIP lines will result in a huge jump for the global VoIP market they consider their 40 billion dollar prediction conservative. Or, as the company puts it in their own words, they arrived at the 40 billion dollar number while considering “…a number of assumptions,” as well as “relatively consistent ARPU,” and “regulatory easement,” bundled with “a cautious set of projections.”

So basically Point Topic believes the global VoIP market can hit 40 billion dollars in annual revenue if the market continues to grow at a consistent rate and sees favorable regulations, or as is sometimes the case deregulations, within the global telephony community. That’s a pretty big “if”, I might say. Over the course of the past 5 years in the United States, for example, VoIP had encountered “regulatory creep” or, simply put, increased regulatory requirements both at State and Federal levels.

Of course, if the conditions remain just right, then it is safe to assume the global VoIP market might reach the highs Point Topic predicts in a short period of time. But there are a couple big “ifs” embedded deep in those predictions. If people still use fixed line phones. If the market doesn’t shrink and actually grows. If governments pass favorable VoIP-centered legislation (which tends to look like a total gutting of telephony regulatory bodies, which can be a hard sell – after all these guys need SOMETHING to do, right?). If all the above works out, then fixed line VoIP systems could earn 40 billion dollars a year in average annual income over the next two to five years.

Truth be said, market will certainly grow by billions of dollars, over the next 2-5 years, and this growth is due to a pair of factors only briefly mentioned in Point Topic’s report.

The Dark Horses

First, we need to quickly talk about the fact Point Topic’s reports didn’t take internet-only VoIP networks, such as Skype, into account. Towards the end of their report Point Topic estimated that Skype alone could increase its global VoIP revenue up to about $2 billion a year by 2016, which represents a significant boost from the telephony service’s current numbers. If internet-only VoIP services really do take off then they will account for billions of dollars of additional revenue to count towards the global VoIP annual revenue total.

But the big jump in VoIP revenues will come when mobile users make the switch to VoIP. In the end – mobile networks are continuing to evolve into data-only networks with voice becoming just one of the applications running over it. Once these data networks become reliable enough, users may begin using VoIP over cellular networks. As the Point Topic report states very briefly towards the end of its document:

“If you work hard and manage to marry your internet telephony service with a major mobile device manufacturer and solve any number of technical and regulatory issues, the market could really explode.”

In the context of a report that considers an annual revenue stream of 40 billion dollars to be a fairly conservative estimate, what could the term “really explode” possibly refer to?

The future of VoIP, including the size of VoIP, is surely promising, but it’s very difficult, if not impossible to predict. Even Point Topic admits as much, stating; “…at this stage in the development of a market there are so many variables that forecasting models can easily be off by a significant margin.”

No one really knows how tomorrow’s VoIP market is really going to look, but we all know one thing- it’s going to be huge.