The growth of triple-play strategies in the Asia-Pacific region is the key driver of VoIP growth, according to new research by Ovum.

"While the VoIP market is still at an early stage, it is becoming more prevalent in this region. We are seeing more operators launching VoIP, primarily as a means of challenging the PSTN dominance of the incumbents," said David Kennedy, Research Director at Ovum, based in Melbourne.

Growth in broadband penetration is necessary for VoIP to develop, but it is not sufficient. New fixed operators are driving VoIP uptake in most markets, as they implement triple-play strategies to compete with incumbents. Most incumbents are taking a defensive position, cutting PSTN prices and strengthening their content offerings.

"In summary, we are seeing incumbents' and challengers' strategies starting to converge on a triple-play model," said Kennedy. "VoIP is giving smaller fixed challengers the opportunity to build up true triple-play offers without having to rely on resale of incumbent wholesale services, and to exploit IP technology to do so at a lower cost. This is giving more price flexibility to challengers and allowing them to compete on a more even footing."

VoIP's selling point is its low price, but VoIP prices are consistently low. PSTN prices are also falling, reducing VoIP's price advantage. The scope for using fixed voice as a competitive differentiator is therefore shrinking. Instead, broadband access and content are increasingly central to product and marketing strategy.

"But VoIP still faces some challenges," added Kennedy. The main inhibitors to VoIP uptake are falling PSTN prices, and VoIP's poor reputation for quality and reliability (based on consumer experience with soft-client VoIP). There is still uncertainty about the imposition of PSTN-style regulatory requirements on VoIP providers in areas such as such as call interception, emergency calls, and service quality. These requirements push up costs.

Ovum believes that infrastructure-based VoIP operators must differentiate themselves from soft client VoIP providers, and manage the regulatory side of the business carefully to avoid costly delays or imposts.

While VoIP provides opportunities for challengers, it creates a dilemma for incumbents. The PSTN network is still a major source of competitive advantage, despite the decline of PSTN revenues.

"Nevertheless, the transition from PSTN to VoIP must happen at some point," said Kennedy. In recent years, incumbent triple-play strategies have been an important strategic response to fixed-to-mobile substitution and competition from single-play fixed operators. This has allowed operators like PCCW to stabilise PSTN revenues in recent years. However, the growing ability of challengers to make their own low-cost triple-play offers will erode this advantage. As this erosion proceeds, the economics of delivering voice on a unified IP platform will become more attractive, and the final abandonment of PSTN will come closer.

The 'wild card', however, is the introduction of fibre to the node (FTTN) or fibre to the home (FTTH). Once the copper local loop is cut or removed, some form of digital voice service will be required, and probably an IP-based voice service. The growth of fibre access will be a particularly strong driver of VoIP in the region. This could lead to a major acceleration of VoIP growth in markets like Australia and Singapore, where it is now government policy to accelerate the construction of fibre access networks.