Troubling Days for VoIP Pure Plays

Carl Weinschenk

This post at GigaOm suggests what we think is an inexorable shift in the world of VoIP.

For years, the service has been dominated by entrepreneurial companies such as Vonage and SunRocket, the two providers on which the GigaOm report focuses. Increasingly, however, the landscape favors established telephone and cable companies.

The success of the entrepreneurs has proven that it's a business that deserves the attention of the big players. At the same time, the big companies recognized that if they don't pay attention, their market share would suffer.

Once engaged, these companies are formidable. Carriers with big brand names -- such as AT&T's CallVantage and Verizon's VoiceWing -- offer stable core networks, established vendor and sales channel relationships, and significant other economies of scale and related advantages.

Perhaps the greatest advantage they have is the ability to bundle services. The specific services vary on a case-by-case basis, but the established telecommunications companies in general can package wired and wireless voice, video, Internet access and wireless. They can put these all on one bill and centralize management. The often overlooked management element simplifies operations for consumers and reduces costs for operators.

This certainly doesn't mean that the standalones are doomed. The industry has evolved quickly during the past decade and won't simply fade away. Pure VoIP providers still can undercut established carriers on price. It's also important to remember that many people will resist giving all their business to one provider -- especially when the recipients of this largesse are traditionally unpopular groups such as phone companies and cable operators.

Those caveats aside, it's clear that the playing field is increasingly tilting in favor of the known brand names. At the same time, we are confident that the telecommunications world is broad enough that the standalones will survive. Indeed, they could thrive on a somewhat more modest scale.

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