The cost of using voice services and messaging continues to fall. At some point, that means the cost of running the old public switched telephone network will exceed the revenue earned by the PSTN. It’s no wonder there are growing calls to plan for a shutdown of the PSTN.
What seems like continual expansion of over the top IP-based calling and messaging reveals the problem.
Virgin Media (News - Alert) says it will be launching “SmartCall,” a Wi-Fi calling service, in early 2013, that will allow customers to make unlimited mobile calls to U.K. landline telephone numbers, using any U.K. mobile operator’s service – so long as customers also are subscribes to Virgin Media’s landline calling service.
The SmartCall app also supports calling back to the United Kingdom from abroad.
That’s just one more example of how revenue is being drained from the fixed network business. In part, calling is shifting to mobile devices. In part, calling is shifting to messaging. In part, calling is shifting to over the top apps. And in part, people communicate without calling.
Up to this point, regulatory costs have made mobile calling more expensive than fixed network calling. But even that is changing. Virgin Media is also introducing a new talk plan that Virgin Media says offers, for the first time in the United Kingdom, unlimited calls to all U.K. mobiles.
Separately, AT&T now allows smartphone customers to use “FaceTime (News - Alert),” the Applie iOS video conferencing app, on the AT&T Long Term Evolution network. In the past, use of FaceTime has been restricted to Wi-Fi access.
Both of those developments are examples of a rapidly-changing global communications business that is approaching a point of diminishing returns from supporting the legacy public switched telephone network.
As more and more customers abandon landline voice services for mobile and IP voice services, it is becoming more costly by the day to support an aging network with ever-higher costs, fewer customers and less revenue.
Revenue compression faced by telcos is one element of the problem posed by IP-based, over the top voice and messaging. It is but one problem. Since all services can be supported over the IP network, it increasingly is the case that operation of the older PSTN is financially hazardous.
For one thing, common costs increase as each customer drops off the network. In other words, the overhead of operating the network is spread over a smaller number of paying customers. The absence of government subsidies means both less profit from serving those customers and higher potential costs for the customers that remain.
Since all services can be provided over the new broadband IP network, the older network simply is redundant. It essentially represents cost with zero revenue, incrementally, since all services can be delivered using the newer IP broadband network.
If you think about it, nearly all services businesses and consumers buy now are supplied by the IP broadband network. That includes video entertainment, broadband Internet access, fixed network VoIP, mobile broadband, mobile voice and mobile messaging.
Only fixed network voice, and a very small amount of dial-up Internet access or fax, currently uses the PSTN. Everything else already has shifted to IP and broadband. Big changes will come as more countries decide it is time to start shutting down the PSTN.
Edited by Braden Becker