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Tuesday, April 07, 2015

We are past the point of Peak Telephony

The telecom industry has a huge and under-examined problem: lack of demand for its core product, phone calls. We often talk about oversupply - competition/consolidation, MVNOs, replacement by Skype etc - and also about updated telephony (eg VoLTE), but we miss the elephant in the room: users are simply bored with phone calls. They aren't very useful or desirable any more, when there are other alternatives available.

The UK telecom regulator Ofcom publishes very comprehensive market reports, not just covering UK communications revenues and usage, but also giving international comparisons, partly based on data collated by another research firm IHS. But while it gives charts of trends in telephony usage (outgoing minutes) for both fixed and mobile services, it only does so separately. The data in the most recent 2014 report compares 2008 and 2013 call volumes for a broad range of countries, including major European nations but also US, China, India, Japan and Korea. (See pages 27 & 40 for fixed & mobile numbers)

I've gone a step further. I've added the datasets together, to look at the aggregate use of phone calls, both fixed and mobile. As far as I can see, nobody else bothers to do this, which is odd because it hides a very clear and interesting picture.

(There are a few grey areas in terms of definitions, but the Ofcom data does include "managed VoIP" - ie telephony based on VoIP/IMS run by operators. It appears to exclude non-operator VoIP such as on-net Skype, and I'm not sure what happens to SIP-trunk enterprise traffic, SkypeOut VoIP-to-PSTN termination etc.)

In other words, between 2008 and 2013, the total net amount of outbound phone traffic in the UK, Spain, Sweden, Netherlands and US fell in absolute terms. In Italy, Germany and Korea it was flat. We are past the point of "peak telephony" in many markets.

Indeed, looking at the last reported quarterly stats from Ofcom, the fall may be accelerating. In Q3'2014, the aggregate UK fixed & mobile volumes fell 8.5% from a year earlier. Within that, mobile volumes rose 1.5%, but that was against a 1.1% increase in subscription numbers, plus a broad (one-off) shift to unlimited plans.

Some countries buck the trend, because of elasticity effects. Increased competition in France brought much cheaper mobile calls from around 2012, and a certain amount of pent-up demand was  filled - but in Q4'2014, French aggregate telephony volumes fell too (see page 3, here), with fixed telephony declines outstripping mobile growth. Obviously in developing markets such as India, there is still plenty of unmet need for telephony.

But in places such as the UK, cheaper phone calls don't translate to more usage any more. Almost everyone has "more than enough minutes". Instead, people are switching to messaging, apps (who phones for a taxi these days?), social networks and so forth. For many social interactions, there are better ways of doing it than a clunky, interruptive old phone call. I still remember a friend telling me a couple of years ago "the only people who call me are my parents, or people I don't want to talk to".

In fact, I suspect that if we took out pre-arranged calls (eg conference calls for business at a specific time), that the numbers would be even more bleak.

This has some huge implications & observations:

  • Fixed-to-mobile substitution of telephony is still occurring
  • Mobile calling has natural limits & saturation near or past
  • VoLTE deployments are expensive investments in a declining market
  • Telecom operators largely fail to market & promote use of their core product
  • Big "minute buckets" or unlimited plans give a temporary blip
  • The perceived value of the telephony element of bundles will fall
  • This is not just "competition from OTTs". Mobile Skype/Viber use is relatively low
  • This is a fundamental problem that phone calls aren't optimal for some use-cases
  • Users (consumer & business) pick the best tool for the job. Which is often cheaper, too
  • Regulators think in terms of "voice competition", not comms use-cases and purposes
  • Communications value & effectiveness is not best measured in minutes
  • New forms of voice communication (eg embedded into apps) may help reverse the decline. APIs - notably WebRTC - will help here.
  • HD Telephony is nice, but unlikely to solve the underlying problem of lack of demand
  • All involved in voice (& video) communications need to understand why people use realtime spoken calls - and try every trick to make the human outcome better
  • Contextual communications, analytics and new user-interaction models are critical
Above all, we need to stop thinking that voice=telephony. We are past "peak telephony". But we do not need to be past "peak voice", if we think how and why the spoken word is actually being used.

Dean Bubley will be speaking or moderating at the following upcoming public events

If you would like a private workshop on the impact of Peak Telephony, The Future of Voice & the potential from WebRTC & Contextual Communications, please contact me via information AT disruptive-analysis DOT com

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