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The number of U.S. households using Voice over IP
(define) will rocket from 400,000 to 12 million over the next
five years, a new report from JupiterResearch predicts. But certain service
providers are better positioned to grab new customers than others.
Analysts say established telecom carriers like AT&T and
Verizon hold two key advantages over startups like Vonage:
they have strong relationships with customers; and younger consumers prefer
wireless telephony to landlines, making the case to switch to VoIP more
difficult.
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Joe Laszlo, a senior analyst at JupiterResearch, said VoIP adoption will
likely play out like the digital subscriber line (define) subscriptions
did five years ago. VoIP startups will be important in jump-starting the
market, and will motivate established carriers to develop their own VoIP
services, he said.
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But it's unlikely that VoIP startups will become a significant threat to the
incumbent phone companies. That doesn't mean they can't still be
"successful, profitable businesses even serving a relatively small- to
mid-sized audience," Laszlo told Fortnightly - May 30, 2007::
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internetnews.com, which is owned by
the same parent company as JupiterResearch.
One concern Laszlo has is customer acquisition costs. Vonage, which to date
has had no trouble raising
venture capital, has embarked on a massive online ad campaign. Customer
support costs and the ability to avoid price wars will also factor into
Vonage's success, Laszlo said.
Laszlo said many broadband consumers value quality and reliability over
price and features, and the ability to sell VoIP in a bundle with DSL and
other services favors telecoms.
Despite JupiterResearch's finding that price cuts won't result in a large
boost in sign-ups, there's a VoIP price war brewing. Vonage and AT&T last
week slashed
monthly subscription rates by $5 to $24.99 and $29.99, respectively.
An AT&T spokesman told internetnews.com that he believes consumers
will see AT&T as "a better value proposition" when taking into account call
quality, reliability and features.
And just yesterday, ISP EarthLink announced
free VoIP calls for its 1.2 million broadband customers. The caveat is that
it applies only between SIP-enabled (define) phones.
The JupiterResearch report also identifies challenges in getting 18- to
24-year-olds on board. Twelve percent of the age group already say their
wireless phone is their only phone.
"I think price is going to be key to attracting these users," Laszlo said.
"While we haven't done a great deal of price sensitivity trending for the
age segment, I'd tend to say that pricing a service below $20 is going to be
very helpful."
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