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Sunday, May 11, 2008

Vonage And The State Of The Residential VoIP Industry

Considering their recent legal and customer service issues....Vonage did no favors to the residential VoIP industry. Neither did the untimely and messy demise of SunRocket. So just where do things stand now...and where may they be headed?

Vonage's biggest competition (and other independent VoIP providers) continues to mainly be the larger phone and cable companies, especially the ones that are bundling all of the various features (tv, internet, and phone).

Outside of the cable companies, Baby Bells, I think right now there are too many companies to list and too many companies without a successful plan thrown in the mix (think SunRocket).

For budget VoIP, there are lots of options today still. However, the legal issues that hit Vonage will likely bankrupt any of the budget providers. Although there's a strength in numbers that reduces the odds of any major issues should that happen, unlike the SunRocket fiasco.

Right now the market is pretty much a free for all and too many people are jumping into the business without truly understanding it. E.g., "We have VoIP! It never works!" These companies don't do the research into networking. Any glitches on the network will affect calls, call quality, etc. They dish out mega bucks (SunRocket) and flunk out because they're so focused on solely one portion of it.

The common concern in VoIP applications is a flurry of issues from the home based segment: One Way Audio, dropped ATA connections, etc. If you really look at what is happening, specifically who is being used for the internet connection (e.g. Cable companies + VoIP = headache), and what equipment is used, you'll see a pattern. It's the internet provider not the VoIP service provide who is at fault in over 95% of the cases.

But the general public as a whole just doesn't understand this. Until they do it will continue to be an uphill battle for residential VoIP providers.

Far too many companies don't take this into consideration on the home segment. Think about Farmer John or Grandma Jane who know next to nothing about the technology calling your company for help that has nothing to do with you. "Your VoIP service sucks! Now I can't even get onto Yahoo!". As a courtesy you would help them even though their cable provider or ISP is to blame. So how do you offset costs from that?

Companies such as Cox, Comcast, Qwest, etc. are providing reliable service for a fair price and offer "all you can eat" packages with arguably descent customer service to boot. As companies such as Cisco further refine technology for the Cable/Carrier markets, more and more options are going to present themselves (such as DOCSIS 3.0 = 100Mbps +, etc), and the market for companies with the copper/fiber to your home are in a great position to control the experience and leverage existing business (think Verizon's Fios).

However, I would argue that wireless companies are in greater position to displace or contend with companies such as Vonage. Again, you have a company that owns the transport, technology evolving at an amazing pace (e.g. WiMax, etc), and now you have a mobile delivery that will get better with time. I believe that options allowing for mobility and a cheap delivery to the masses is incredibly important (who doesn't have a cell phone these days?), and I believe that if you own the delivery method, you are in a great position to provide cost effective solutions to the consumer.

Many arguments can be made about the current stability of wireless, but I'm optimistic that it cannot get worse :). In addition, many arguments can be made about regulation surrounding these markets and that too can sway arguments - but politics drive me nuts, so I digress. I'll stand by and argue that those in control of the delivery medium (wireless, copper, fiber, etc) are in the greatest position to provide good customer service, have the resources to ride thru legal issues, etc. because they have the benefit of an annuity stream .... and additional value added services should be a 'no brainer' for them.

Michael is the owner of FreedomFire Communications....including DS3-Bandwidth.com and Business-VoIP-Solution.com. Michael also authors Broadband Nation where you're always welcome to drop in and catch up on the latest BroadBand news, tips, insights, and ramblings for the masses.

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