Traditional phone services soon to be thing of the past

Traditional phone services face “extinction” in as little as three years with the growing popularity of services offered by Skype and other voice applications that run over the Internet free of charge, the country’s leading mobile network said.

At the Asian Carriers’ Conference (ACC) in Cebu this week, Smart Communications said traditional telcos “badly need” to find a new business model if profits and revenues were to grow over the next decade.

“Transforming to the new telecom wholesale-retail ecosystem is, in my view, a polite way of saying: It’s the end of the world for our old business model,” Smart chief wireless adviser Orlando B. Vea said.

Delivering a speech by Smart chairman Manuel V. Pangilinan, who was originally slated as the event’s key note speaker, Vea said the growing popularity of Skype, Google Talk and other services posed the biggest risk to the growth of telcos around the world.

While Skype runs on paid Internet services, telcos still enjoy higher margins from voice calls, for long-distance connections. Voice services also strain a telco’s network, leading to the deterioration of service quality.

“The current voice business of traditional operators faces extinction as more customers turn to these low-cost or free services to connect,” Vea said.

“Traffic volumes will not rise fast enough to compensate for the continuing slide in prices,” he said.

Citing data from research firm Ovum, Vea said 75 percent of all voice traffic in 2010 was carried using voice over Internet protocol (VOIP) services like Skype.

“The figure is expected to rise even further, to virtually 100 percent by 2015.  That is just three short years away,” Vea said.

Given the threatening prospects, he said, telcos would have no choice but to reposition themselves in the emerging wholesale ecosystem.

For PLDT, Vea said the transformation would come in the form of going “retail,” or charging subscribers for the use of VOIP services over telco networks.

He said over 10 million Filipinos are working abroad.

“Given the global demographic forces at work, that number is likely to even increase for the foreseeable future. That provides us with a ready-made customer base abroad,” Vea said.

In the Philippines, Vea said, PLDT can leverage its 70-million strong mobile subscriber base to continue capturing voice minutes as traffic shifts from fixed to mobile.