VoIP on the verge: with incumbents and new entrants alike capturing residential market share, VoIP is on the threshold of something big

Telecommunications Americas, Nov, 2004 by Jon Arnold

That said, each type has a distinct set of strengths and weaknesses, and at this time, there is room in the market for all of them.

How Will the Market Play Out?

In short, as long as the market remains lightly regulated, VoIP is on track for healthy growth over the next few years. That said, it is too early to tell how much of this growth will be at the expense of existing POTS lines, as opposed to ex-panding the wireline market through the growth of second lines. Either way, it is clear that the revenue picture for POTS is not bright.

Naked DSL is not widely available, and until that time comes, residential subscribers taking up VoIP with their RBOC will inevitably scale back their POTS lines to bare minimum. In markets where POTS is decoupled from broadband (such as with Qwest), we expect to see an increasing rate of dropping POTS as consumers become more comfortable--and confident--with VoIP.

As the major players make their moves into VoIP, the window for startups and virtual operators becomes smaller. On the bright side, there is still plenty of room for all types of providers, especially since overall U.S. broadband penetration is fairly low. However, as the majors shift into high gear, facilities-based operators may hold too much of an advantage, and will ultimately control most of the market. Furthermore, as VoIP matures, success will driven more by marketing and brand recognition than the underlying technology, which plays into the majors' favor. In that scenario, some of the virtual operators will be acquired or driven out of the market, and others will find a viable niche, probably on a regional basis. VoIP is still evolving, and we have not even begun to address the potential of wireless IP, or peer-to-peer offerings such as Skype or Free World Dialup. As such, we expect VoIP will support a rich and diverse ecosystem for some time to come.

RELATED ARTICLE: A Quantum Leap Forward

IPCC Chair discusses major initiatives, and why there will be VoIP winners and losers

As Michael Khalilian, chairman of the International Packet Communications Consortium, sees it, the move from TDM to IP is analogous to a switch from black-and-white TV directly to HDTV. Senior Editor Sean Buckley recently sat down with Khalilian to discuss the future of the IPCC and its role to advance the VoIP industry.

SB: What are the IPCC's major initiatives for 2005?

MK: The new IPCC is focused on IP technology deployment issues, including peering guidelines, which we are writing with our members, partner organizations and service providers. We're also looking at the implementation and definition of SBC (session border controllers), OSS, billing, CDR records and SLAs.

SB: What's your sense of the VoIP market as it stands now?

MK: The problem is that VoIP means different things to vendors, service providers and end users. This is a challenge and an opportunity. If VoIP means to me as end user flat, lower-cost long-distance service with an ILEC/RBOC, Vonage or a cable company, I really don't care if you're doing it via TDM or VoIP. Vonage is taking advantage of the all-you-can-eat concept. By bypassing the traditional process of meeting CableLabs-based infrastructure for broadband, Vonage changed the whole perspective of the market last year.