For a long time, there was uncertainty about which industry sector would win the VoIP sweepstakes: standalone providers, cable operators or the telephone industry. This is a high-stakes game, with a lot of money on the table.
It increasingly looks like the cable guys have prevailed.
This JupiterResearch study says cable operators currently control 71 percent of the VoIP telephone market. Moreover, it suggests that the stage is set for them to make even greater gains as operators drop prices and more effectively bundle services with other offerings. The report says that the U.S. market for VoIP will reach 25 million households by 2012, and implies that cable will serve most of them.
A study by In-Stat released last month validates the strength of cable telephony. An interesting and telling finding is that a lot of cable's growth is recent. According to the study, 42 percent of U.S. cable telephone subscribers have signed up during the past year. That clearly suggests that the industry is opening up its lead.
The leading pure-play VoIP provider is a fading Vonage. It's safe to say the company is in a bit of trouble: Its recent highlight was a decision by a judge to let it continue signing customers as it appeals the loss of a patent infringement suit to Verizon. The press release for the JupiterResearch survey made little mention of telephone industry initiatives, but in general they can be perceived as being defensive plays meant to salvage as many defectors from their legacy networks as possible.
The cable industry, on the other hand, is perfectly positioned to make a killing in VoIP. It has the physical infrastructure, the back-office system and the marketing chops. Unlike the phone companies, it essentially has no voice business to protect. Every new customer is additional revenue. Even parallel developments are playing into its hands: Several years ago, the facts that cable's phone services would be unavailable if the broadband signal went down or if premise power failed were considered significant. Now it's not considered as big an issue because virtually every household has a cell phone that can be used in an emergency.
In the longer term, it remains to be seen whether the spectacular deals available now in "triple play" marketing initiatives will slowly disappear as the cable industry becomes increasingly dominant. After all, many operators began paying serious attention to its customers only once the direct broadband satellite (DBS) industry starting siphoning off customers. If competition fades, there is a good possibility that the good deals will, too.
With the marginalization of the pure-play VoIP industry, the only meaningful competitor to cable is the traditional telephone industry. While the cable versus telco fight will be more of an even match -- it always is -- the operators will prevail. Clearly, Verizon's FiOS, AT&Ts U-verse and other telco fiber projects will get plenty of customers.
In the long run, however, the telcos' strategy may be to focus on attacking cable's core video business, where many of these fundamentals may be reversed. In any case, it seems likely that the cable industry -- whose platform already is deployed -- will dominate in VoIP.