Wave Issue 0415 /23/2004 Article 1-01

***VoIP is a Turning Point for US Telecoms, Says Analysys

Washington, DC
April 22, 2004

The rapid growth of voice over IP (VoIP) services in the USA
represents a turning point in the development of the US telecoms
market, according to a new report, VoIP in the US Market:
services, business models and regulation, from Analysys Research,
the global advisers on telecoms, IT and media (www.analysys.com).

"VoIP will have a fundamental impact on all aspects of US
telecoms because it causes fragmentation of supply and services
offered," says Michael Kende, co-author of the report and a
principal consultant within Analysys' Washington DC office. "The
US voice market will finally lose its monolithic character but
VoIP is unlikely to replace traditional PSTN voice during this
decade."

According to Analysys forecasts, by 2008, VoIP penetration is
expected to reach 17% of broadband-enabled households (growing
from under 1 million at the end of this year to 11.7 million in
2008), and 23% of broadband-enabled small-business establishments
(increasing from less than 100,000 in 2004 to 800,000 in 2008).
Together, consumers and small businesses are expected to provide
almost 13 million VoIP subscriptions and USD5.7 billion in annual
service revenue in 2008. Although this is a significant amount,
it represents 2.5% of the 2003 total US telecoms revenue of
USD224 billion.

For medium and large businesses VoIP growth is also very strong.
Analysys expects the estimated installed base of IP station lines
to increase from just over 3 million in 2004 to more than 18
million by the end of 2008. This represents a compound annual
growth rate of over 50%.

The report states that during 2003, VoIP broke simultaneously
into the market consciousness of the US consumer, major industry
telecoms players and regulators with its promise of huge cost
savings. Major service providers, such as AT&T, MCI, Time Warner
Cable, Verizon and others, made startling announcements to roll
out and expand VoIP services and network deployment.

"VoIP has now moved from a behind-the-scenes network-migration
strategy to a distinct billable service, separable from the
underlying network, controllable by the end user, and with its
own pricing schemes, features and terminal equipment," says
Michael Kende. "In doing so it has the potential to shift market
power to the end user and new service providers, to disrupt the
balance of universal service subsidies, and to redefine the
geographical and technological basis of the US telecoms industry
and its regulatory structure."

The report acknowledges that VoIP providers face a raft of
potential regulatory impositions and decisions that will have a
major impact on their business models.

"Actions undertaken in 2004 could represent a turning point in
the development of the US telecommunications sector as decisions
made by the FCC will determine the playing field under which
operators can compete with the incumbent," says Michael Kende.

"Unsurprisingly, with the historical US voice business model
potentially facing a sudden collapse, the FCC has placed VoIP at
the top of its agenda," he adds. "But it is a difficult call for
the FCC, caught as it is between its interest in promoting

The report is available to purchase online at

research.analysys.com/store.

An extended version of this release is available on request or
from http://www.analysys.com.