In Europe, They Like Their VoIP


[qi:86] Voice over Internet Protocol is a fast-growing business in the United States, but it’s growing even faster in Europe, and its traction in the old world is only going to increase. With competitive broadband service providers (such as France’s Free and Talk Talk in the UK) offering flat-rate voice plans over their high-speed pipes and wireless carriers embracing triple-play offerings, Europe is poised to emerge as one of the regions where VoIP has a major impact.

According to market research firm Telegeography, consumer VoIP subscribers in Europe will reach 40 percent market penetration by 2011. That’s compared with the U.S., where total VoIP market penetration is forecast to top just 20 percent by the same year.

One of the main reasons for this is divergence: U.S. telecom incumbents AT&T (T) and Verizon (VZ) have more or less stayed out of the VoIP game, leaving the big push to come from cable operators such as Comcast (CMCSA) and Time Warner Cable (TWC). In the meantime, the independent voice service providers Vonage (VG) and SunRocket have fallen on hard times. Taken together, there were just 11.8 million VoIP subscribers in the U.S. at the end of the second quarter.

Conversely, the European incumbents — Britain’s BT Group (BT), France Telecom (FTE) and Deutsche Telekom (DT) of Germany — have responded to pressure from upstarts like Free, who have easier access to local loops, by becoming more active in their respective markets. And of course there’s Skype, which is extremely popular in Europe.


VoIP in Europe is also getting a boost from tiny tots such as Truphone, Fring, Jajah, Rebtel, Cellity — an ever-growing army of startups that is looking to lower the costs of making calls over wireless networks across Europe. The popularity of Wi-Fi enabled mobile phones is only going to accelerate the growth of VoIP on the old continent that much more.


Raymond Padilla

“This is incorrect.”

Uh, no John Thacker. I said “several” European countries, not all. I specifically pointed out Finland and Estonia.


Good observation, John. Metered local and LD calling is a key reason for the advance of VoIP services. Many European VoIP service providers are now offering unmetered domestic calls and calls to neighboring countries (fixed lines, only). While per minute calling rates on traditional switched lines are not particularly high (often about a penny or two a minute), it’s an important psychological distinction, and has clearly struck a nerve.

I was recently reading Handelsblatt, Germany’s main business newspaper, and noticed that “Flat rate” was one of the five most common search terms on their website that day.

John Thacker

I’m not surprised that it’s not taking off as quickly in America as it is in Europe. It’s similar to Internet proliferation. In the ’90s, several European countries had way higher percentages of Internet penetration than the US–even crap ones like Estonia and Finland (just kidding, I love both those countries).

This is incorrect. Internet penetration was much higher in the US than in Europe in the age of the modem, due to unmetered local calling. For the same reason, there was faster uptake of DSL in Europe, due to understandable customer wishes to avoid metered local calls. (BT did not have local flat rate calling until 2000 in the UK, for instance, and only on certain plans and I believe currently limited to calls for up to an hour). Throughout the ’90s, the majority of people worldwide who accessed the Internet did so through the PSTN and modems, and unmetered calling gave the US (and other countries like Canada) an advantage in Internet adoption.

It’s no wonder than Skype and other VoIP services are more popular in countries that still have metered local calls. Also, most European countries have “incoming calls free” on cellular phones, which means that calling from a fixed line to a cell phone is more expensive than calling a landline, since the originator pays the extra costs of the network, unless you use various workarounds like VoIP. In addition, there are the various issues of international calls to consider; many people I know who use Skype use it for their international calls, and it’s easier to make more international calls when you’re a smaller countries. Calling France from the UK is expensive off standard BT PSTN service. That’s one reason why people use Skype or other services.


Do new houses in the US still get traditonal phone lines built in or do they get fiber (with voip)?

In Sweden the old monopoly company Telia stopped offering traditional phone lines a few years back. Now they only offer fiber (with voip), or wireless if you live deep down in the woods.


I think the claim is a bit premature. After all the 40% and 20% are predicted numbers and it is not clear how dependable they are. Q1’07 numbers seem to be more like 15% and 10%.

Secondly, it is not clear what is meant by VoIP. You include Jajah as a VoIP provider, but as I understand it, PSTN users can be their customers as well.

Thirdly, Moshe asks us to focus on unique capabilities like mashup. Of course the ultimate mashup is to combine PSTN for carrying voice and use IP connectivity for control signaling. So if mashups are going to inherit the world, then nobody will care about PSTN and VoIP dichotomy.

Tom Coseven

Om, voice tariffs (wireline and mobile) and roaming charges are a lot higher in Europe, so there is more motivation to go with VoIP. Free local calling in the US also has a big affect on VoIP consumer service uptake.


Just returning from the World Economic Forum in Dalian where I used exclusively mobile VoIP from truphone to connect back home. Great experience. So it does work anywhere in the world ;-)

Moshe Maeir

It really matter how you define VoIP. If VoIP is just using a different type of pipe to give the same service, then there are millions of voip users. If VoIP is calls sent by carriers over dedicated IP pipes then there are tens or hundreds of millions that use VoIP. But, if you define VoIP as applications enable by IP, applications or functions that you could not do on the traditional PSTN, there are not too many. There are only a few companies such as Fring and Truphone who are starting to explore that path. Skype is also doing that to a certain extent, but their proprietary platform goes against my belief, that merging voice and IP will bring us to a new level of collaboration and productivity. Only open standards can do that.
At the Flat Planet Phone Company we believe that the possibilities today are tremendous, once we realize that with the internet your communication network is unlimited, no matter where you are or what you do
Voice mashups such as those being done by Thomas Howe are a glimpse of the future, not flat rate calls by some big telco.

Raymond Padilla

VoIP rules. I’m not surprised that it’s not taking off as quickly in America as it is in Europe. It’s similar to Internet proliferation. In the ’90s, several European countries had way higher percentages of Internet penetration than the US–even crap ones like Estonia and Finland (just kidding, I love both those countries). A lot of telecomm technology is held up in the US because of sluggish regulation and large/powerful companies that try to inhibit the growth of new tech that hurts their old businesses.

Markus Göbel's Tech News Comments

In Europe we also like your headlines. :)

It was already time to show what’s going on in European VoIP. The market seems much more competitive and interesting to me. Yet the devices for fixed line replacement come unlocked and can hold more than 1 or 2 providers, like it is normally in the US.

It’s a standard to use up to 10 VoIP providers at the same time, making use of the cheapest routes that your device chooses automatically accordant to a dial plan.

I already heard of a mobile VoIP startup that left the US and concentrates entirely on Europe because “the market is more advanced and the handsets are unlocked”.

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