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Meg Whitman, former CEO of eBay, once famously said that voice was going to be free. She was wrong in ponying up billions of dollars for Skype, but she was right in her assertion about voice. Thanks to European broadband service providers treating voice as a loss leader to attract triple-play customers, local voice has become almost free in Europe, according to research conducted by Telegeography, a division of market research firm PriMetrica.
In 2008, VoIP represented 26 percent of total fixed lines in Europe but brought in only 10 percent of the total fixed-line revenues. I bet a big chunk of the VoIP-related revenues are coming from VoIP-to-mobile phone calls. Mobile calls are seriously expensive in Europe, and as a result, any attempts by mobile VoIP companies such as Truphone have been met with resistance by the carriers.
Telegeography estimates that there were more than 35 million European households with VoIP service in 2008. That’s up from just 1.9 million VoIP lines in service in Europe in 2004. Telegeography also estimates that, during every quarter of 2008, more than 2 million homes signed up for VoIP service. Just to give context, in the U.S., we had about 19.4 million VoIP subscribers at the end of 2008. In 2004, there were 1.2 million VoIP lines. Telegeography analysts estimate that Europe will continue to exceed U.S. growth in VoIP lines.
Household penetration of VoIP telephony at mid-year 2008 ranged from slightly less than 50 percent in France to less than 3 percent in Spain, and annual subscriber growth rates ranged from 544 percent in Portugal to a comparatively anemic 13 percent in Norway.
One of the main reasons why France is so far ahead of rest of Europe is because of the presence of a truly disruptive company: Iliad, which offers a flat rate triple rate service under the brand Free. (Related article: Xavier Niel, France’s Broadband Maverick). Free’s offering forced everyone — including incumbent France Telecom — to offer similar, simpler triple-play plans, resulting in increased VoIP penetration.