I was asked recently about my thoughts on Vonage. I promised to respond, but that led me to give some other thought to Skype, Freeworld Dialup and the state of VoIP in general. I’d considered reposting another excerpt from my book, but decided not to at this point.
Vonage
Perhaps first, let’s put Vonage’s success in perspective. We saw the news recentlyVonage Becomes First Broadband Telephony Provider To Activate Over 500,000 Lines. Lest that strike you as successful, consider that 500,000 lines is the real-world equivalent of the state of Vermont having IP phones while the rest of the US is left out. Significant yes. Interesting yes. A trend, not really. An interesting growth in a vocal, yet miniscule market.
Personally I don’t use Vonage. If I were working as an independent consultant, I might. Certainly their price plans are attractive for some. Take the base plan of $24.95 for unlimited calling within the US and Canada. If I’m tethered to an IP-connected workstation all the time, that’s not bad. Add voice mail, call waiting, 3-way calling and you have a budding wannabe telco. You have a player competing on price to enter a dead market that’s doomed to shrink. Yep, the wireline market will shrink, and quickly once momentum takes over in the US.
Sure, Vonage uses IP, and isn’t tied entirely to wired networks, but just how much wireless is there really? And when you factor in the cost of WiFi, is there a financial gain for me as a customer? I don’t see one. I don’t see new. I don’t see innovation. I see POTS over IP. Whoopee. I’m excited.
Sorry, but Vonage is a phone company that’s taking advantage of a brief window of opportunity to take boring, vanilla telco business from boring, vanilla telcos. And then become one and fade into the telecommunications museum of companies that passed through.
Their service struggles put them in danger. The market’s competitive and consumers are brutal. And becoming more so every day.
I’m not saying Vonage won’t provide good service or succeed. I believe they will. If you’re looking for leading innovation and enterprising new uses of technology, look somewhere else. Vonage’s play is to leverage what can be done in 2000 today, and do it well in competition with traditional telcos. That’s not a sustainable long-term business to my way of thinking. If I were to use it, it would be to save pennies for the short term. I wouldn’t and don’t use it as a residential consumer. I wouldn’t and don’t use it as an enterprise customer. I would use it as a small business that isn’t dependent on the telephone for business. That’s the leverage point I see.
No value add for me today.
Skype
Earlier I snipped a line where Skype CEO Niklas Zennström is back to taunting telecoms, this time at CeBIT. His rallying cry: “Free is good. Free service is very, very good. We think you cannot charge for phone calls.”
Free service is worth every penny. Caveat emptor. You get what you pay for. How many times have we learned this.
Skype is IM for voice. Sure the quality is good. And while it’s simple, it’s not grandma friendly and folks do struggle with making it work. IM and P2P meet voice in a blended possible way. The innovation? Take something that’s been around a long time (IM) and mix it with P2P (by folks who do know how to do P2P). Again, just not something I see as exciting. Interesting yes. Exciting no. Sustainable? Not from anything I’ve seen so far. I’ve looked at it yes, but it’s no longer installed on my systems.
No value add for me today.
Freeworld Dialup
Jeff Pulver is perhaps one of VoIP’s greatest friends. He launched Freeworkd Dialup and gained some immediate inroads among the tech community. It’s an interesting application that’s evolved over time. Now we have a blend of Skype-like IM networking, internal and external buddylisting capability, and increasing integration with the PSTN.
Is it ready for mom? Not hardly. It’s still something that requires a bit of geek factor to use well. It works, and seems as reliable as the others, but it too has drawbacks.
If there’s a benefit to FWD, it’s Jeff and his constant pressure with the FCC to minimize and elimnate undo regulation. I see FWD as a practical solution for keeping visibility and pressure on the regulators, and an approach to continually stretch the linkages of what can be done with VoIP and legacy technology integration.
Again, I’ve installed it, used it, tested it, but it’s not on my systems today.
No value add for me today.
Where is VoIP Working?
In the backbone. Traditional carriers using IP networks as a transport mechanism, over ATM, MPLS-IP networks and high capacity optical streams have been the real winners. Wait a minute? The old, dying telcos? The ones who are failing, cooking books and laying people off? Yep. As Om would call them The Broadbandits. They’re the real winners today in VoIP. They won’t hold a lead, but these are companies that know how to wring every dollar out of a penny invested and have shown that repeatedly. Don’t underestimate their ability to hang on investing less, profiting more, and gouging prices through market babble that sounds like new technology but isn’t.
Sleeping Giants
There are two sleeping giants to watch. They slumber, but barely. Cisco and Microsoft both play and want to play. Keep in mind, for these two play means dominate the market. They don’t dabble the way other companies dabble.
Cisco is focused on being a VoIP player, and they’re a far larger player than many people realize. If there’s a company winning in enterprise VoIP space today, it’s Cisco. They’re winning more and deploying more than the popular press notices. They are quietly become a force to be reckoned with in VoIP.
Microsoft isn’t as visible, but this could just be an area where MS is showing the smartest strategy they’ve ever used. Quietly build SIP into the market dominant OS and stealthily move into becoming the next generation IP phone as an integrated component. Microsoft is a company to watch in VoIP. We’ll see innovation from Redmon, but it will be very Microsoftish innovation, leveraging all their own internals that they leverage best.
Of course there are Nortel, Lucent and others that just continue to quietly thrash about. They lay people off. Their news is rarely good. They’re the historical centers of innovation, but they have no edge. No edge to win.
So where is the change? Where’s the action?
Cell phones are boring and PDAs are dying. But handheld devices are growing and winning. Whether it’s a Blackberry, a Treo, or a Pocket PC toy, the market is on the rise. Functionality keeps increasing. The networks fight over standards, but slowly progress. Look at the cost of cellular minutes and calling plans. They’re commodity prices. VoIP didn’t drive the cost of long distance down like we all thought. Wireless did. Wireless carriers killed the long distance business.
On the Internet, we are all equidistant. On the wireless network, the same applies. I’m as close to friends in Burlington or Atlanta as I am to my next door neighbor on my wireless phone. The death of distance hit both networks. Now the competition is to win the untethered market. Do consumers want to be untethered with a laptop, notebook or tablet PC? Or would they rather be untethered with a Blackberry, Treo or Pocket PC handheld? Do you want more functionality in your device or less? Supersize or portable size? If you can do more with less, why get the bigger package?
I haven’t stayed as vocal in VoIP as I once was for a reason. It’s a boring technology that’s going nowhere slowly. It’s taken so long to achieve critical mass that it’s mirroring the success of ISDN in the US. The most expensive technology to ever deploy over such a long timeframe that it never got off the ground. VoIP is struggling to achieve that kind of success. If that excites you, go for it. IP is a transport technology and VoIP is just using the transport. There’s nothing wondrous about it except that it’s taken so long to reach toddler capability. The next giant leap can only come from some wireless technology. Wireless networking (the 802.11barf family) is still a fixed network. It’s replication of what we already do. The gains are in bandwidth and throughput. Those beat old dialup POTS to death. But the mobility and ubiquity won’t come fast. They’ll be surpassed by other things.
Watch the mobile market. Think untethered. Untethered Internet. Untethered telephony. Untethered communications. 3G and 4G wireless. Slow advances. EVDO. Things happening in this environment are slowly doing two things. Shifting the network away from traditional networking deployments (telcos and traditional ISPs) and shifting workstations to portable devices.
We really want ubiquity more than we want mobility for data services, but we want both. We have them today and we’re getting more all the time. They’re being delivered by folks like Verizon, Sprint, Cingular and T-Mobile. If there’s a segment to watch in the telecom market, that’s it.