The first shot in the VoIP war has been launched…

A long long time ago, in a galaxy far far away I used to actually write posts about the industry I work in. It’s been a while since I’ve done so, but this morning’s news has prompted me to.

First some background. North America has long lagged behind Europe in promoting Voice over IP services thru the telco’s. For whatever reason, there just hasn’t been a compelling enough reason to convince the iLec’s to get behind this technology and begin advancing services. Part of the reason could be that the big VoIP only providers in North America missed the boat and chose to sell on price as opposed to features and quality of service. See the thing about VoIP that Vonage et al seem to have missed is that it’s computer based, giving it the opportunity to revolutionize communications via the various capabilities it has. Whole new realms are able to be opened up by utilizing the power of the internet and the personal computer, and the only guys who seem to get that are Skype (and even them not so much). Everyone else seems content to say one of two things: 1) Voip is cheaper so buy it, or 2) we’re not the telco so buy from us cuz they’re evil. The bad thing about this is that in a price war, eventually everyone loses. Even the consumer because service falls off to save costs. And trust me…the incumbents pockets are infinitely deeper than the discounters’, and they WILL win in the end if this continues to be the only play. Being the owner of the transport mechanism probably has some advantages too…

Skype does use price as a selling point as well, but advanced services are a big attraction too, and they don’t really put much of a hurt on North American telco’s. It’s different in Europe where landline calls are often toll charged (ie by the minute instead of unlimited monthly) and international borders are closer together. These two things have conspired over the years to force Europeans to be more wired; mobile is years ahead of us because they’ve need the roaming and travelling capabilities of GSM for years longer than we have. If your country is only 400 miles long and surrounded by other countries, there’s a lot more opportunity for you to be in a different country later today for business than if your country is 4000 miles long and bordered by one neighbour only. This need for more “cross-border-friendly” alternative communication methods has forced them to be a little more open to use of things like SMS and IM etc than us here. Enter Skype who gives them all that plus the added bonus of free or almost free calling. This has forced the Euro telco’s to develop their own alternatives, thereby promoting carrier based VoIP sooner.

Here in North America, we don’t have the same pressures for communication. For local calling, we pay a flat rate for unlimited minutes and deregulation of long distance years ago has made that very inexpensive. Skype and similar peer to peer systems just don’t have any affect on the carriers; the peer to peer customer base is smaller here because of local free toll calls. Yes, people with international family are somewhat more inclined to use skype, but even in those cases there isn’t a huge dent in the 200 million telco customers there are.

So there’s been no real threat to North America incumbent telco, hence no real urgency to create a solid VoIP offering with mass deployment. The cable guys are quickly becoming a thorn in the side, but Comcast’s 3 million telephony customers plus Vonages 2 million total 5 million customers. Out of 220 million. Do the math…it doesn’t hurt big telco enough to keep them up at night. But it’s been coming for a while, and one has to believe that all of the big telco’s do have some kind of strategy for VoIP even if they haven’t acted upon it much yet.

In the post mySpace and YouTube world, the market is changing. Copper wire revenues are being eroded by discounted long distance and these new technologies, and there needs to be a way to reclaim those profits. So called “Web2.0” applications become more and more important; they fit into the demographic and (more importantly) become a very good solution to the problem itself. In the circles I travel in, I don’t think I know more anyone who doesn’t utilize IM, MySpace, Flick’r, YouTube etc. I only know two people without cell phones. Both of whom use skype alot. Granted, I am in a particular demographic. But I’m also not 15 years old; I will be 40 this year… my demographic is not college kids and youth, and still everyone I know is wired. So there is desire and need for these new applications.

The terms triple play and quad play have been kicked around to death (they’re almost as annoying and overused as Walled Garden) , but until now no one in copper wire land has really acted on it, at least not in a full scale deployment. The ability to go one stop shopping for telephone, wireless, television and internet has been grasped at for some time, but few companies in Cable-land have all the components, and no one in Telco has completed the strategy. Companies have been building IMS strategies and networks, but no one has gotten to deployment level.

This morning the news came out that AT&T will be promoting their Call-Vantage VoIP service to their mobile customers in two particular regions. The two regions are in two other iLec’s various playgrounds, and the test bed regions appear to be strategically chosen to put an itch on the two competitors (but not too big of an itch). Obviously, somebody somewhere in the AT&T organization has said “Hey wait a minute…we got a product here that can get us some new revenue without cannibalizing our current revenue. Not only that, the big player in that space is down and out at least temporarily with a big lawsuit from Vz… maybe I should try and sell this!”

So, personally I veiw this as the very first little warning shot in a looming battle. The telco’s are all going to be thinking about this moving forwards, and if this test market is successful 3 things are going to happen: 1) AT&T will go broader with the initiative, 2) Competitors will say “heeyyyyy now…what’s up with this? We gotta move our plans a bit faster”. 3)Consumers who had been waiting for a real show of faith from a Ma Bell type of company will start to jump in. Over time this will snowball, and we will see VoIP as a viable mass market alternative in North America. The addition of features and “web 2.0” types of applications will just continue the growth, and we will see a little war develop between the incumbent telco’s, the cableco’s, and even the smaller mvno’s for the consumer IP Communications dollar. At first the telco’s will strive to grab the dissatisfied or scared off Vonage customers, but eventually that battle will end one way or another and they will start to have VoIP become an integral part of the customer experience. I see a world where feature rich text and file (transactional) communication, copper line voice communication, and wireless communication are all integrated seamlessly with the internet (and thus VoIP) being the enabler for that integration.

It’s exciting!


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