Could HD Voice Boost Wireline Revenues?

By Fedor Smith, ATLANTIC-ACM

Wired carriers are justifiably concerned about where their future revenue growth will come from. On the voice side, consumers are abandoning landline services at a steady rate, and the per-minute prices continue to fall. On the data side there is still growth, despite the troubled economy, but the price per meg continues to decline. Since there is no clear boom product in the stable of traditional wired carriers, maybe they should look at ways to get more revenue from the services that customers already buy, in particular, voice.

Voice standards have remained unchanged since virtually the dawn of telephony. In fact, in some respects we have regressed. Look at how voice services are marketed: We have gone from Sprint’s pin drop to Verizon’s “can you hear me now.” Of course, wireless voice is held to a different standard, but what does it say about wired voice that so many customers are willing to depend only on the hit-or-miss quality and sometimes spotty coverage of wireless to save a few bucks by eliminating their landlines? Perhaps if wired voice actually offered a noticeably superior level of voice quality, more customers would retain landline services.

Like so many enhanced versions of existing products, high-definition (HD) voice will not be something customers see as necessary until they experience it. Just like broadband, high-definition TV, CD quality audio and heated car seats, HD voice is something that will start small, but have exponential growth if it is readily available. The most obvious application is business voice, where more customers have advanced IP phone systems, and are more likely to use desk-based handsets. The cost of voice services has become so low that it is hard to imagine that any business that depends on phone calls to drive revenues would not be willing to pay a reasonable premium for higher quality calls.

HD voice obviously presents some challenges to carriers. Ignoring the technical details, the most obvious hurdle is critical mass penetration. An HD voice service does not enhance the customer experience unless both parties are equipped to send and receive codec. While this obviously will contribute to slower uptake, if the carriers make the service a priority and push hardware providers to make necessary upgrades available, it would not take long for a meaningful percentage of customers would be capable of turning up HD voice. With the rapid movement of consumers to IP voice services and businesses converting to IP phone systems, a large number of endpoints could be HD voice ready in only a few years.

I have not seen any good data on consumer interest in HD voice, but like so many other products of this nature, only first-hand experience of higher-quality voice would make people realize the value of this type of product. In the absence of other growth products it makes sense for carriers to look at opportunities to generate revenues from, or simply retain, existing voice customers. An enhanced voice product might be a good place to start.

Fedor Smith is president of ATLANTIC-ACM, a provider of strategy research, consulting and benchmarking services to telecommunications and information industry companies. An expert in niche- and channel-based marketing and operations management, Smith specializes in customer satisfaction and benchmarking projects for ATLANTIC-ACM, where he oversees proprietary projects as well as the firm's Carrier Report Card series, which serves as the telecommunications industry's principle source of benchmarking tools. In addition, he has authored several studies on telecommunications industry growth and opportunities. Prior to joining ATLANTIC-ACM, he worked at Alloy Media and Marketing in New York developing youth-oriented marketing programs around the evolving technology consumption and adoption habits of high-school and college-age consumers. He holds a degree in history and economics from Hamilton College.