Revenge of the Nerds

Carl Weinschenk

We've written before about the importance of the decision that favored Verizon in its patent infringement suit against VoIP provider Vonage. It's an important topic, and worthy of another look.


The theme of this BusinessWeek piece is that the decision will change the dynamic of the VoIP industry. It almost sounds like a generational conflict: The early wave of VoIP was created by those crazy kids with little regard for intellectual property considerations. Now that the courts have found that such legal niceties indeed do mean something, the phone companies -- the grownups in this drama -- are in position to regain control by chilling innovation and reining in competition.


So what will all this mean to the evolution of corporate VoIP? Potentially, a lot. Intellectual property concerns -- either the inability to use certain technologies or the high cost of licenses -- would make it more difficult for small and innovative VoIP companies in a number of ways. For instance, such an unfavorable climate would make it more difficult for upstarts to gain funding from venture capitalists and other sources.


This is similar to theNet neutrality debate over the conditions under which network bandwidth is made available. In both cases, fledgling and comparatively insecure companies may suffer by marketplace issues that are beyond their control.


The optimist in us feels that entrepreneurs will devise work-arounds for the patented technology and that some of the intellectual property holders will be reasonable in their demands.


Looking ahead, however, it's important to deal in reality -- at least as it stands now -- and not hopeful speculation. If things stand they way they are now, VoIP offerings from big companies, such as AT&T's CallVantage, will be ascendant. Indeed, they may buy out many of the smaller independent firms -- or hire the smart people they now employ. That's not good news. There never would have been a CallVantage if there wasn't a Vonage or a Skype first.


IT departments and planners need to make sure that prospective VoIP suppliers are knowledgeable about these issues and have a plan in case they receive an unpleasant letter from a big company's law firm. And, even more importantly, they have to make sure that the plan isn't simply to pass increased licensing costs to customers.

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