Is Telephony Dying? Depends on How You Look at It (Pt 1)

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We hear it all the time- telephony is dead or, at the least, dying. Not long for the world. On its way out. It’s a story that people like to tell, but like most stories there isn’t much truth to it, and the truth that lies in this statement has been heavily distorted, misrepresented, and viewed through the wrong lens.

The most recent news of telephony’s untimely demise comes from a report released by Infonetics, which found that the telephony market took a skydive in the first quarter of 2013. But is that what really happened, or are there more factors at play here than Infonetics took into account? Could the telephony market actually be growing at a rapid rate, even if this one set of data makes it look like it’s plummeting into obscurity?

By the Numbers

The report by Infonetics is pretty clear in the data it presents- the telephony market fell at a 10% year-over-year rate last quarter, dropping down to just $1.8 billion in revenue. What’s more, enterprise PBX spending fell to their lowest levels since 2009.

Pretty distressing numbers, aren’t they? Sounds like it’s time to roll out the casket for the telephony market.

Though, a deeper look at these stats and how they come about frames this discussion in a much different light.

Growing Markets and Dropping Revenues

First of all, falling revenues does not necessarily equate to a dying market. Even Infonetics’ report hints at this fact, noting a big potential reason for this drop – the price of voice phone services is falling.

Why is the price of telephony services falling? Competition. More and more companies are entering the market, and these companies are driving the price of phone systems down. With lowered prices across the board, the voice phone market may actually be growing and expanding even if it’s reporting lower overall revenues.

These sorts of price drops can seem like warning signals to analysts but they actually signal positive developments in the market. Prices are dropping due to increased competition, and which, in turn increasing due to growing demand. More and more enterprises are demanding updated VoIP and Unified Communications services, and the market is responding with new hosted PBX providers offering services at lower prices. This is a pretty basic, and entirely natural, response to the telephony market’s continuing evolution, and it isn’t cause for alarm.

Think about it this way- does anyone cry out that the market for soft drinks is dying, even though a 2-liter of coca-cola costs less today than it did two decades ago? Has anyone argued the personal computer market is on its way out because the price of high-powered laptops has reliably dropped over the years? Of course not. Falling prices do not necessarily equate to dying markets, and it’s highly likely the dip in PBX revenues last quarter come from falling prices generated by increased competition.

Conservative Spending Never Lasts

The Infonetics report also stated that businesses are being pretty conservative with their spending right now, across the board, and this forms another good clue as to the recent dip in the telephony market. When businesses tighten their purse-strings you usually see dips in big infrastructure investments- the sorts of big infrastructure investments forming the backbone of the telephony market. Just because some businesses decided to put off this investment doesn’t mean they’re never going to make the investment- it just means economic recovery continues to be uneven across the world.

Both of these are solid explanations of why the dip in the telephony market isn’t cause for alarm, but stay tuned for our next blog post to understand the biggest reason why this Infonetics report doesn’t represent reality.