Fixed voice cut off as FMS takes hold

Fixed voice is beginning to disappear in many mature markets as fixed-mobile substitution (FMS) continues its relentless progress and shows every sign of accelerating, according to industry analysts.

A report released this week by telecoms research house Analysys, warns that fixed voice faces extinction in those countries that have experienced the most traffic migration to mobile already.

“In many markets it looks as if fixed voice is going to suffer not the slow and lingering decline many have predicted, but a rather rapid one,” said report co-author, Alastair Brydon. “At the current rate of traffic migration, 90 per cent of all voice minutes in Finland will originate on mobile phones by 2008.”

Finland had the highest level of fixed-mobile substitution in Western Europe in the fourth quarter of 2005, with mobile-originated calls accounting for 64.6 per cent of voice traffic, Analysys said. The country also experienced the greatest increase in this proportion during 2006, by 10 percentage points, to reach 74.6 per cent in the fourth quarter of 2006.

According to the report, traffic substitution is also progressing rapidly in markets that have previously undergone little FMS. Germany has experienced much less traffic substitution than the Western European average, with only 17.5 per cent of its voice traffic originating on mobile phones in the fourth quarter of 2005. However, this proportion increased by 6.8 percentage points – one of the highest increases in Western Europe – to reach 24.3 per cent in the fourth quarter of 2006.

“The widespread introduction of home-zone tariffs in Germany is having a significant effect, which demonstrates that mobile operators’ actions can significantly increase usage,” said analyst and co-author Mark Heath. “Following years of usage stagnation, average outgoing mobile voice usage per subscriber increased by 23 per cent during 2006.”

Paradoxically, VoIP seems to have little impact on the migration of voice traffic to mobile networks and in fact appears to release consumer cash for additional spending on mobile services.

“What is particularly worrying for fixed line operations is not that FMS is happening but the pace at which it is happening,” said the analyst. “Of course, fixed network operators are looking to different sources of revenue for growth, but the accelerating decline in core voice revenue is damaging at a time when they are embarking on long and expensive next generation network re-engineering programmes.”