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Decline in fixed line services putting the squeeze on telcos

Decline in fixed line services putting the squeeze on telcos

IDC report shows telcos under pressure as customers look to alternative communication tools

Australian telecommunications companies are under pressure from emerging technologies and are seeing reduced profitability in a fast moving communications market.

Analyst firm IDC detailed a 2.3 per cent decline in the Australian fixed line market in 2013 year-on-year (YoY), according to its “Fixed Line Market Analysis and Forecast, 2013 – 2018.”

IDC said the drop was due mostly to the decline in traditional voice such as public switched data network (PSTN) and integrated services digital network (ISDN) services. The firm also said the reduction of legacy data such as ATM, frame relay and leased line services also played a role.

In the fixed business data market, IDC said price erosion subdued growth as telcos competed over customers. The report stated internet access was the strongest performing segment, growing at 7.4 per cent over the year.

"Competition is heightening as telcos are aggressively pursuing market share. In some cases, we have seen contracts discounted upwards of 25 per cent on renewal. Pricing needs to be rationalised in the market and telcos need to start building differentiation around customer support, stronger account management and integrated solutions," IDC Australia associate market analyst, Bradley Murray, said.

The state of the economy played a pivotal role. According to the report, the weaker business environment forced organisations to cut ICT budgets. CIOs had apparently responded by looking for technologies that helped to lower costs, for example migrating PSTN to voice over internet protocol (VoIP).

Similarly, IDC claimed customers expected telcos to offer steeper discounts to keep the cost in check as they continued to expand their network connectivity and increase bandwidth. Service providers are following suit by lowering prices in a bid to maintain market share.

The NBN has remains a hotly debated topic. While the rollout remains behind schedule, IDC said the discussion has moved towards the proposed new mixed technology NBN put forward by the strategic review. The recommended blended technology has been endorsed by the Government and will consist of hybrid fiber-coaxial (HFC), fixed wireless access (FWA), fiber-to-the-node (FTTN), fibre-to-the-premises (FTTP) and satellite.

IDC claims this is targeted to bring down the implementation cost from the original FTTP NBN. IDC expects the lower price of bandwidth and better quality of service to entice end users to higher use broadband plans as they become increasingly digital. However, the firm said the government has some work to do to get the proposed changes through the senate and a drawn out parliamentary debate will further delay the rollout.

IDC forecasts the fixed-line market to decline at CAGR of 3% over the next five years to $11.3 billion. Fixed voice revenue is the largest contributor as it continues on the downward trend.

Both the fixed business data and Internet access markets are expected to grow at CAGR of 0.6% and 3.9% respectively over the next 5 years. Adoption of Cloud, mobility, applications is driving the demand of data services according to the report.

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Tags broadbandNBNISDNtelecommunicationpstntelcosfixed-line services

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