Consumers Trade in Home Phones for Mobile and Web
Wed Aug 25,11:48 AM ET
By Lucas van Grinsven, European Technology Correspondent AMSTERDAM (Reuters) -
Laura Bekke moved into her new Amsterdam flat last week and declined to have a fixed phone line installed. Merijn Groenhart, a disc jockey in the same city, has lived without a home phone for over a year.
"I have my mobile phone for calls, and broadband Internet I get from my cable provider," said Bekke, whose corporate job involves frequent telephone conversations.
Young consumers like these are the reason incumbent telecoms operators are hurting. Consumers are figuring out that the 15 euros ($18) to 20 euros a month they have to pay in line rental, before call charges, could just as well be spent on mobile calls or a broadband Internet subscription. In the Netherlands 8 percent of households already no longer have a fixed telephone line, incumbent operator KPN said. It is a trend also emerging elsewhere in Europe, Asia and North America.
The former "Baby Bells," the U.S. regional telecoms operators, have lost millions of phone lines in recent years.
The money spent on traditional fixed telephone lines is moving to cable TV providers offering telephony, to mobile phones, and increasingly to always-on broadband Internet connections now available from prices as low as 15 euros a month.
Luxembourg-based software company Skype offers a small computer program for free that lets personal computer users make free voice calls to other Skype users behind PCs anywhere around the world, using Voice over Internet Protocol (VoIP) technology.
"The call is carried over the Internet at no incremental cost, because the broadband connection has already been paid for," said Michael Jackson, director of paid services at Skype.
Within a year, Skype has been installed by more than seven million customers around the world, generating voice call traffic which is already similar to that of a small country. Voice quality, once regarded as poor, is no longer a concern.
CHEAP, CHEAPER, CHEAPEST
Jackson exemplifies the transition in the telecoms industry as he recently joined Skype from Sweden's Tele2, one of the main resellers of telecoms services that have helped to slash phone bills in many households over recent years.
He said Skype would bring down the cost of voice calls even further. Skype clinched deals with four key carriers last month, allowing calls from a PC to normal phone lines, fixed or mobile, at local call charges anywhere around the world.
"Last week I rang a friend in the United Kingdom from my computer in an Estonian hotel for 90 minutes at 1.7 cents a minute. It cost me a grand total of 1.57 euros," he said.
Some incumbent operators like Britain's BT Group have decided to jump on the bandwagon themselves with a cheap offering, to avoid worse.
"We saw what would happen with Voice over Internet Protocol. Rather than allow it to happen to us, we decided to embrace the technology," a BT spokesman said. The reason Skype, BT and others can offer a low-priced PC to phone call is that it piggybacks on the Internet, which carries the call almost all the way to its destination before the tiny Internet packets are reassembled into coherent sentences.
By doing so, they have outdone Tele2 and other discount carriers that brought competition to the telecoms market in the late 1990s. The VoIP player pays only for call termination and not for call initiation or international transport. Incumbent telecoms providers hope they can make up for the lost voice communications business by selling broadband Internet and mobile communications, but threats are looming there too.
Discount mobile service providers such as easyMobile and Denmark's Telmore and TDC are reselling cheap mobile telephony.
"Consumers are switching to an offering with significantly lower prices," said Copenhagen-based telecoms consultant John Strand.
A few years down the road, VoIP call services like Skype will come to mobile devices, further cannibalizing mobile calling business.
It is already possible to place an Internet call from a tiny handheld computer connected to a wireless Internet, such as the WiFi networks offered by hotels and cafes, giving consumers much more flexibility to make cheap calls. (Additional reporting by Bernhard Warner in London) ($1=.8271 Euro)