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SUMMARY

Maintaining Profitability Proves Challenging in the Toll-free Services Market

Intense competition among service providers in the toll-free services market has been exerting a downward pressure on price for both switched and dedicated services. The entrance of regional bell operating companies (RBOCs), offering lower priced services has proved challenging for traditional toll-free providers, especially within the medium to large enterprise segment. Despite the impact on profit margins, a number of toll-free providers have been compelled to waive installation fees and/or monthly recurring charges and provide larger discounts in a bid to sustain market share. Service providers need to consider bundling voice and data services and migrating to IP-based toll-free service in order to remain competitive and maintain profitability. Consolidation of voice and data networks provides cost savings that can help service providers offset the impact of price erosion on their operating margins.

This Frost & Sullivan research offers a comprehensive analysis of current dynamics in the toll-free services market. The study identifies key market and technology trends, industry challenges, and factors that drive overall growth. It also includes toll-free minutes, revenue forecasts, and strategic recommendations that can assist service providers in capturing market share.

Toll-free Services to Sustain Demand in a Competitive Market

The ability of toll-free services to provide a virtual storefront that is independent of time and geographic boundaries is probably its most compelling value proposition. This has enabled the service to remain competitive despite the emergence of the Internet and other online communication channels such as e-mail. "While the Internet is reducing toll-free traffic in the retail and consumer goods segment, the insurance, finance, and healthcare transactions that require personalized information continue to prefer toll-free usage," says the analyst of this research.

Toll-free service providers are also using vanity toll-free numbers (usually spelling a person's or company's name) in a bid to differentiate themselves from their competitors. In the large enterprise and call center outsourcing segments, advanced toll-free features such as customized routing applications, disaster recovery, and call detailing reports are providing opportunities to increase revenue and traffic in a saturated market.

Falling Demand for Toll-free Services in the Residential Segment

The toll-free services market is expected to register declining minutes of use (MOU), particularly among residential customers that favor wireless services. "The rapid decline in prices for wireless plans and large buckets of minutes provided by wireless carriers are limiting the need for the relatively more expensive personal toll-free services," explains the analyst. Additionally, the utilization of advanced routing techniques will further reduce the average call length for inbound toll-free calls, thereby affecting traffic growth.

However, reduced demand from the residential segment is expected to be offset by growth in traffic in the international toll-free services market. Moreover, the call center industry, which is the largest customer segment for dedicated services, is also boosting growth in minutes and revenue. Adoption by relatively new segments such as regulatory bodies, federal associations, educational institutions, government sectors, and emerging applications such as unified communications is expected to ensure continued expansion in the toll-free services market.

TABLE OF CONTENTS

• 1. An Analysis of the Retail Toll-Free Services Market
  • 1. Introduction & Scope of the Study
    • 1. Introduction
    • 2. Scope of the Study
    • 3. Research Methodology
    • 4. Product Definitions
  • 2. State of the Market
    • 1. Toll-Free Services Market
    • 2. Major Findings
  • 3. Key Market Trends
    • 1. Dedicated and Switched Toll-Free Minutes
    • 2. Distribution of Domestic Toll-Free Minutes
    • 3. Total Working and Available Toll-Free Numbers (1996 to 2004)
    • 4. Total Working and Available Toll-Free Numbers Forecast (2000 to 2007)
    • 5. Total Toll-Free Calls with Domestic Origination
    • 6. Total Business and Domestic Business Minutes
    • 7. Penetration of Regional Bell Operating Companies (RBOCs)
    • 8. Penetration of Wireless Services
  • 4. Toll-Free Market Characteristics
    • 1. Industry Challenges
    • 2. Market Engineering Measurements (2004)
  • 5. Toll-Free Market Analysis
    • 1. Market Drivers
    • 2. Market Restraints
    • 3. Distribution of Total Traffic by Verticals
    • 4. Distribution of Domestic Minutes by Call/Contact Centers
    • 5. Distribution of Domestic Minutes by End-User Segments
  • 6. Toll-Free Market Forecasts
    • 1. Total Toll-Free Market Forecast
    • 2. Domestic and International Minutes Forecast
    • 3. Domestic Toll-Free Revenue Forecast
  • 7. Conclusion
    • 1. Critical Success Factors
    • 2. Strategic Recommendations
    • 3. Frost & Sullivan Awards