TeleGeography: Skype rises while traditional long-distance revenues continue landslide

Skype maybe had initially been dismissed as a technologist hobbyist's toy, but its influence continues as traditional service provider long-distance voice traffic declines.

According to a new report from TeleGeography, international telephone traffic growth declined slightly from five percent in 2009 to about four percent in 2010. These figures are a significant decline from the usual 15 percent average growth rate seen in the 1990s and 1980s.

TeleGeography attributes the ongoing long-distance voice slump to two short and long-term factors. The near-term factor that's driving down traditional long-distance service was the recent economic recession that not only prompted businesses to cut back on their international calling spending and consumers who could not afford their traditional long-distance bills.

From a long-term perspective, Internet-based voice service providers such as Skype are a growing threat to traditional international long-distance voice service providers. In 2010, TeleGeography forecast that Skype would "grow by an astonishing 45 billion minutes in 2010."  

Stephan Beckert, TeleGeography analyst, said that while the "demand for international communications remains strong" it's clear that "more people are discovering that they can communicate without the services of a telco."

Despite the gloomy outlook for long-distance voice minutes, traditional service providers including AT&T (NYSE: T), Sprint (NYSE: S) and Verizon (NYSE: VZ) have been making efforts to offset declining TDM-based voice revenues with new IP-based business services (Ethernet) and consumer broadband and video. The ongoing movement towards IP-based services not only creates new potential revenue opportunities, but it also lowers overall operating costs.

For more:
- see TeleGeography's research note

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