Voice-Over-Internet, for Investors

[December 29, 2004]
2005 VoIP Predictions
BY TOM KEATING



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I've been thinking about making predictions for 2005 for some time now. I had a few ideas jotted down back in November but just never got around to compiling everything together and then sitting down and writing my VoIP predictions. Well, with New Year’s Eve almost upon us and then 2005, I guess I can procrastinate no longer.





Here are my Top 10 VoIP predictions and ponderings for 2005.

1) VoIP providers will continue to run to the FCC (a VoIP proponent) for protection from the big bad bully RBOCs, ILECs, CLECs, etc., as they try and lobby Congress to regulate VoIP. It will be a fun battle to watch.

2) VoIP providers will continue to harp that the government shouldn't impose any regulations on VoIP and that the industry should be open and free, while simultaneously VoIP providers will continue to alienate their customers by password-protecting and locking the customer's ATA (analog telephony adaptor), thus preventing customers from easily switching to another VoIP provider and using the same ATA. This is hypocrisy at its worst! Customers will continue to be left with useless ATA "bricks" which eventually will make it the local landfill when they switch to a better VoIP provider.

3) With millions of customers using VoIP and with the ability to now easily switch to another voice provider and keep your existing phone number, more customers will switch to the best value , which means more ATAs will make it to the landfill, drawing attention from the EPA. Rather than let the EPA regulate recycling of ATAs, in 2005 VoIP providers will offer a rebate or discount to "turn in" your old ATA so they can recycle it. It can even be a selling point to get you to switch from a competitor -- "Be green! Send us your old VoIP ATA and we will give you the first month for free!"

4) 2005 -- The Year Triple Play Took Off
Other than WiMAX, the Triple Play has got to be one of the most hyped technologies of 2004. Well, watch out in 2005. The Triple Play will take off in 2005, you can bank on it. I examined one Triple Play technology provider (Pannaway) in the labs recently and the technology is ready. The technology used by them is ADSL2+, targeting the DSL providers (typically phone companies). This company already has some actual deployments -- not trials -- across the country. I did a test drive of Pannaway's product last week and plan on writing the first ever product review of a Triple Play offering in an upcoming issue of Internet Telephony Magazine.

5) Return of the Jedi (Return of telemarketing calls to switch providers) Remember the days when MCI, AT&T, etc., would call you at home and ask you to switch phone carriers and they'd often bribe you with $50 or even $100? Have you noticed that the volume of these calls has dramatically gone down? In fact, I haven't received a "switch carriers" phone call in over one and a half years! Want to know why? It just costs too much money for the carriers to pay a call center agent to call you and get you to switch. The conversion rate isn't that great to begin with and with the ROI going way down with the price of voice minutes tanking, it just doesn't make sense. Of course the Federal Do Not Call list could have something to do with the call volume drop as well. But does this mean the end of telemarketers trying to get you to switch?

Unfortunately, I don't think so. There is a loophole in the DNC that lets companies call you if they have done business with you in the past 6 months, which surely will be exploited. As I mentioned in Prediction #4, the phone companies will soon offer Triple Play voice/video/data. If the phone companies don't already have you as a DSL customer, they could in the near future have you as an ADSL2+ TV customer. If they have you as a customer in ANY of the Triple Play offerings, they can call you and upsell you on the other services. So if you are one of the millions of DSL users, watch out in 2005! Your DSL provider WILL BE calling you to offer you TV access bundled with voice and/or data.

This is a huge competitive advantage for the "big boys" to go after Vonage, which has cut into the carrier's marketshare. I suppose the Triple Play offering is one way of striking revenge against Vonage and the other Internet phone providers.

6) The Empire Strikes Back Phone companies (The Empire) will go after the cable companies' TV business just as the cable companies have successfully gone after the phone companies' voice and data business. This is related to my Triple Play prediction, but I just had to work Star Wars somewhere into these predictions.

7) Colleges ramp up on VoIP
When I was in college 11 years ago they just added Ethernet to the dorm rooms. Too bad VoIP didn't exist back then, as I often had $100 phone bills. But that's nothing. Many students had $200-$500 phone bills due to the ridiculous prices charged by colleges. Most colleges built their own phone system acting as their own little phone companies so they could charge students a "premium" and rake in the profits. Well, the colleges are really starting to hurt with cell phone market penetration as well as students using Skype and other VoIP solutions. Many colleges spent millions on their legacy phone systems and haven't recouped that investment. Well, if you can't beat em' join em'! Many colleges have already started deploying VoIP, often giving the students a Cisco IP phone or other IP phone to use. You can expect more of this in 2005. Fortunately, the easier administration (as compared to traditional PBX/phone systems) as well as the ability to partner with less expensive VoIP termination providers such as Level3 could make the colleges more competitive and with good margins.

8) Cities become their own phone companies
You will start to see more cities not only offering high-speed wireless broadband using WiMAX and other high-speed wireless technologies, but you will start to see cities offering their own phone services as well. Just think of the loyalty they can build! If I have my choice between paying a private VoIP company based in New Jersey versus paying my local town, heck, I'll give the money to my local town. My local town can simply send out an ad in one of those "coupon mailers" that most of us in the country receive and say, "Use us as your phone company and your property taxes will go down." SOLD! End of story. I'd drop my current VoIP provider in a heartbeat! I'd tell my neighbors to join so we could reduce our property taxes and they in turn would tell other neighbors in the town. The old "peer-to-peer" system if you will! : )

I predict if cities wise-up and become their own phone companies, this could be the most revolutionary change in the telecom industry ever. Instead of a few dozen phone companies you could have thousands of phone companies -- with each town being its own phone company.

9) VoIP Spam + 1st VoIP spam lawsuit
2005 will mark the first really bad VoIP spam incident. Often referred to as SPIT (Spam Internet Telephony), I predict someone looking for a quick buck will send automated recorded messages (.WAV file) to thousands of SIP addresses. If the VoIP call is IP-to-IP and never touches the PSTN, the stringent laws governing the PSTN won't apply. The first lawsuit will ensure, and the spammer will win, since VoIP is still classified as an "information service" not bound by the Federal Do-Not-Call rules. The DNC law will be amended as a result. Perish the thought, but the FCC may be forced to reclassify all VoIP calls (IP-to-IP, IP-to-PSTN, PSTN-to-IP) not as an "information service" but as a telecom service bound by all telecom regulation. It's a scary thought and not necessarily a prediction.

10) Microsoft tries its hand again at VoIP
Let's recap -- Microsoft develops NetMeeting, which has VoIP & video capabilities, but doesn't really capture the imagination of the market. Microsoft launches MSN Messenger with VoIP features and video, and although many people use MSN Messenger, it's primarily used for instant messages. Yet another Microsoft VoIP failure. Next, in the Fall of this year, Microsoft pushed Live Communications Server (LCS) which boasts VoIP with SIP capabilities and collaboration features. It's a good product, but very complex to install and requires integration with Active Directory.

I foresee Microsoft taking another shot at the VoIP market. I predict Longhorn, which has had its deadline pushed back several times, will have some nifty VoIP features. Longhorn was supposed to come out in early 2005, but word is it won't come out until 2006. I predict even if it does come out in 2006 that we will see betas in mid-to-late 2005 that demonstrate some cool VoIP capabilities.

I should point out that Microsoft does have one VoIP success -- the XBOX Live service, using Level3's backbone, and which lets gamers talk trash over the Internet as they frag one of their buddies.

Another point to ponder ... SBC and Microsoft Corp. recently announced a $400 million, 10-year agreement that calls for Microsoft to provide the software SBC will use to provide television services to U.S. consumers. The technology will let the company deliver 1,000 or more new TV channels, far more than cable-TV providers currently offer. But could this be Microsoft's Trojan horse? Microsoft getting paid to develop the software to provide digital TV services -- no doubt a Triple Play-type offering and using ADSL2+ is my guess. So what's to prevent Microsoft from using the experienced gained and then launching their own Triple Play offering? Of course, Microsoft doesn't own any last-mile copper connections (phone wire or coax) to the home, but with Microsoft's cash they could buy the last mile or simply deploy high-speed wireless.

That's all my VoIP predictions for 2005. 2005 will be a great year for VoIP, and that's not a prediction, it's a fact. It's an exciting year ahead and I'm proud to be covering one of the most exciting and hottest (probably the hottest) technologies on the market today.

[Editor’s Note:]

After Tom Keating originally published this article on his Weblog on Dec. 2004, he thought of another prediction, which you can read at:

Another VoIP Prediction: Microsoft Pushes Windows CE .NET for VoIP




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Tom Keating, CTO of TMC and Executive Technology Editor for TMC Labs, has over 10 years of experience within the call center industry and has been there since the "birth" of the Internet telephony industry. Tom is well known for writing informative and controversial articles within several of TMC's publications and also regularly writes for Internet Telephony Magazine. Tom Keating is the founder of TMC Labs, which was launched in 1996.