As with the voice market, the U.S. longdistance data industry is undergoing significant transformation. Unlike the voice market, though, the data side of the longdistance industry is on the growth side of regulatory- and technology-driven migration a reality that will drive growth in this segment even as overall long-distance industry revenue contracts. All in all, the data market will grow at a compound annual growth rate (CAGR 2004 – 2010) of 2.9 percent, according to new figures from ATLANTICACMs annual study of the U.S. long-distance markets (see Figure 1). Even on the data side of the industry, the changing nature of competition is set to dramatically and permanently alter the landscape.
While the emergence of VoIP is the single largest factor contributing to longdistance voice revenue shrinkage, the data side of the industry represents the opposite; VoIP growth equates to data industry growth. Beyond broad, contextual issues, however, VoIP opportunity is creating new types of telecom competitors. Within the telecom industry, VoIP players are thought of as competitive telcos, cablecos, VoIP pureplays, third-wire players and, to a certain extent, peer-to-peer (P2P) firms and P2P/VoIP hybrids.
The reality is a variety of players are jumping into the VoIP fray, and many view telephony as simply another application. Google and Yahoo!, for example, are getting in the game via messaging capabilities. eBay recently gained considerable attention for its acquisition of Skype because of its dot-com heyday-sized payout, while Microsoft Corp. quietly acquired Teleo, which had the same basic platform with built-in support for Microsofts Outlook and Internet Explorer applications. All of this suggests, at least at the retail level, the VoIP boom will coincide with fluid market share that will include names not previously associated with the telecom industry.
MPLS also is emerging as a major factor on the data side of the industry, with its anyto- any connectivity and ability to manage the convergence of multiple voice and data networks, combined with increased security options and applications, driving adoption. High entry costs on the equipment side make deployment by smaller firms unrealistic, but the sheer volume of usage of large customers deploying MPLS has a dramatic impact on overall industry adoption especially when considering its ability to enhance the management of services such as IP VPN.
Wireless data is finally taking off as well. The United States remains well behind Asia, but strong growth in Blackberry-style portable e-mail and future growth through companies new and expanded launches of video applications will drive expansion. For many years, there existed a general belief that the public would not watch video on tiny screens, such as mobile phones; however, the American consumer has demonstrated a willingness to watch any moving picture and sound in the right circumstances. With the future of music devices and other popular consumer applications pointing toward mobile telephony devices, the long-distance data industry will ride the growth of wireless data applications and transactions as consumers download reading materials, videos and songs.
For telecom industry players in the long-distance data markets, margins dont match those of the old voice services, so companies need to think in terms of broader audiences, segmented usage and further into the future to capture share in this centurys data markets.
Dr. Judy Reed Smith is CEO of Boston-based ATLANTIC-ACM, a research consultancy serving the telecommunications and information industries. She can be reached by e-mail at firstname.lastname@example.org.
eBay Inc. www.ebay.com
Microsoft Corp. www.microsoft.com
Skype Technologies S.A. www.skype.com
Yahoo! Inc. www.yahoo.com