Analysts: Skype could generate $2 billion a year in 2016

Skype already provides dedicated devices which makes it easy to substitute traditional voice lines with VOIP.

Fixed line VOIP is set to grow from a $17.3 billion business in 2010 to $40 billion in 5 years time says research firm Point Topic, with VOIP set to replace traditional fixed telephone lines. 

"The growth of VoIP has been bumpy but shows signs of acceleration," said John Bosnell, Senior Analyst at Point Topic. "VoIP has all the hallmarks of a classic substitution commodity."

Skype, which Microsoft is buying for $8.5 billion, is often used for such VOIP calls, and provides a number of appliance-like devices which makes such substitution easier.

The U.S. Federal Communications Commission (FCC) said in March that consumer and business use of VoIP rose 21 percent in the year to June 2010. Usage via traditional lines fell 8 percent.

"We expect there to be over three quarters of a billion fixed line broadband subscribers by the end of 2015, in theory all of them are targets for VoIP," Bosnell said.

He warned however that users may be replacing fixed lines with mobile phones, limited to growth of the business.  Skype of course is very well placed to provide mobile VOIP also, and is likely to see deep integration in Windows Phone eventually.

"If Skype continues to grow as it has been and manages to keep its ARPU (average revenue per user) at the current level then it will be generating in the region of $2 billion a year by the start of 2016," Bosnell said.

If Microsoft executes well their Skype purchase may be seen as one of their best deals yet.


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