RBOCs continue to have lower customer base as VoIP scales newer heights

The spread of VoIP across the United States is certainly on a high these days. Accroding to data released by TeleGeography's US VoIP Research Service, the three US Regional Bell operating Companies (RBOC's), namely AT&T, Verizon and Qwest have lost 17.3 million residential subscribers between Q1 2005 and Q1 2008, while cable companies and VoIP service providers have increased their user base by 14.5 million.


While VoIP has certainly been one of the major adversaries of landline companies, it is cable operators who have actually stolen the show this time around (For more info, check out my blog on Comcast) with their Triple Play programmes that include voice video and internet services, hence the reason that cable companies account for 80% of US IP telephony numbers. RBOCs on the other hand are continuously suffering losses. The example of Qwest is a most appropriate one. Reportedly, the company has lost 195,000 customers and about $83 million in the first quarter of 2008. While Verizon and AT&T have begun to work on their providing their own range of offerings based on the Triple Play model, Qwest apparently is not doing anything to prevent the situation from arising again.



Even when we shift our focus from VoIP, cellphones too have had a significant impact on the so-called 'extinction', if you will, of landlines in the US. According to the Centers for Disease Control,(Yes, it's true. Even I was shocked to see such stats revelad by something as wierd as the CDC!) at least 16 percent of US households have one or more cellphones, but no landlines.


Assessing the situation at a closer level, it is very clear to see why such a shift in telephony subscription is taking place. While landline telephones do, and would always continue to, have an edge over VoIP telephony due to a few technical knick-knacks, VoIP does prove to be indispensible in case of long distance calls. Applications such as Skype and Globe7 have indeed been very succesful in the last 3-4 years. Further, the triple play program being offered by cable companies is obviously very lucrative, since it combines internet access along with voice and video services. While the existence of landlines can nither be negated nor avoided, RBOCs have to come up with something fast if they are to remain a dominant force in the telecom sector.

Vonage’s resurgence with the return of JC

Vonage has recently undergone a flurry of changes in its marketing and operational strategy, according to the IP telephony company’s returning CEO, Jeffrey Citron (who is also, quite incidentally, the founder of the company). While stepping back into the shoes of the chief executive officer (he had left in February, 2006), Citron has admitted to observing that Vonage had somehow lost its way amid fighting lawsuits and the everlasting ambition to expand its business.
Citron is no stranger to the world of independent ventures. In 1992, he discovered the revolutionary Island ICN system, which allowed shareholders to trade shares by entering buy and sell orders into a single database, which he sold in 2002 for $503 million. Besides that, he founded an online brokerage firm, Datek Online, which was sold for $1.3 Billion, also in 2002. Although he got into an illegal trading dispute with the SEC which was settled after paying a fine of $22.5 million, I’m sure there are a lot of similar, and bigger things, to talk about in the world of entrepreneurship. After investing more than $50 million of his own money into Vonage, and bearing witness to its dwindling stock (below 89 percent from its IPO of $17 when in decided to allow public shareholding in 2006), it is quite obvious that he is concerned for his brainchild.
To begin with, the immediate issue at hand is most definitely Vonage’s failure to handle its customer base. While its subscriber base nearly doubled to 2.2 million in 2006 from 1.3 million in 2005, Vonage did not take any steps to enhance its customer service systems. This ultimately resulted in frustrated clients and cancellations, which were extremely expensive, costing upto $40 to some clients. Next on the list is Vonage’s ad-campaign, which was having both an inflated budget and ineffectiveness. Despite the budget jumping from $56 million in 2004 to $365 million in 2006, the focus was still on expanding its customer base, which again, left little room for upgrades in the interface to make Vonage’s service better. While starting off on the rehabilitation task, Mr. Citron has been actively involved in developing new software to make the customer service more reliable. There is also a better grip on the marketing budget for 2007, estimated to be somewhere close to $284 million. Apart from the lawsuits that were worth $239 million, Vonage is now gearing up for the next step. It’s rolling out new products, including an international long-distance calling plan.
While on one hand big plans are being made, investors are clearly not too keen, probably scared of the fact that now cable providers are also pulling their socks to actively enter the VoIP domain. In Canada and the USA, cable operators have made a significant impact with an array of services which apparently, Vonage can’t match. While the Mr. Citron is quite confident that both cable providers as well as Vonage can survive simultaneously in the market, the stats tell a different story. According to Convergence Consulting, Canada had about 150,000 VoIP residential phone customers till the end of 2007, half of which belonged to Vonage. However, Canadian cable operators clearly outnumbering Vonage with an estimated figure of 2.4 million residential users, with the latter’s figures not even close.
So that’s the whole story in a nutshell. On one side you have an entirely pumped-up CEO who has a couple of big success stories to be the reason for his confidence, and on the other side there is a market that has clearly no faith on the once-popular VoIP service provider. It is often seen that owners are always optimistic about their product, it is always left for time to take its own due course. Hopefully, Vonage would come up to the same level as it was before it started going down in 2006.


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VoIP popularity index : Not quite upto the mark

We have all witnessed the phenomenal rise of VoIP from being a relatively lesser known technology to being the new voice of telecommunication (quite literally). However, it is a general observation that VoIP still hasn’t been able to live up to the expectations of industry experts, and has not been able to outgrow normal telephony, which still reigns as the preferred medium of communication, inspite of mobile phones and computers being used extensively all throughout the world. Below are a few points that have been responsible for this lag in the reach of one of the most influential technologies of the 20th (and the 21st) century, as reported by tmcnet.

Bad marketing
Business houses have always been top on the priority list of a majority of VoIP providers. While players like Skype do acknowledge the benefit of selling their services to individual households, many others are still marketing theirs effectively to organizations only, in order to obtain fat contracts and even fatter bank balances. Result : the quintessential household user is often unaware of the technology and has to stick to normal telephony.

Industry situation
There are many players in the industry but very few are considered to be upto the mark. SunRocket shut down early last year, leaving its customers out in the cold; Skype, the most prominent player, is being sold to Google; Vonage, another big player, is having trouble with customer relations. With so many problems regularly cropping up, it comes as no surprise that VoIP is seem as an unreliable service, thanks to its wavering industry condition.

Mobile broadband
The concept of mobile broadband and smartphones is relatively new, and one of the major attractions of VoIP is the fact that it makes calling from a computer to a cell-phone considerably cheap.

Confusing plans
Analyzing a calling plan by a VoIP provider often requires an IQ of 150. there are so many fine prints related to how many lines you are using, which location are you calling from, which location are you calling to, the features you are using, and so on. If VoIP companies could figure out a way to simplify their calling plans (which, I don’t think, is a big thing), they might be able to attract more individual consumers.

VoIP security
I have written a blog post specifically on the above. This most definitely is a growing area of concern, although more so for organizations, but nevertheless proves to be a deterrent in attracting customers.

Call quality
There is an omnipresent thought reigning in the telecom market that VoIP users have to sacrifice somewhat on the voice quality, which nullifies its utility as a low-cost communication medium. While this was true until early last year, VoIP providers have now got a grip on the technology, and the voice quality is now at par with your normal telephone or mobile.

Lack of attention and information
There is a dearth of awareness regarding VoIP, and part of the blame goes to the media, since they have not given it prior attention in their crusade for the welfare of the society, as they would like to call it.

All the above issues, if addressed properly, would most definitely remove quite a few bottlenecks for the VoIP industry, and would allow it to realize its true potential.

Want a free VoIP platform? * Conditions apply

Many of you might have guessed what I’m talking about by reading just the title of this post, as the phenomenon called Asterisk is not new to the world of IP telephony. For those who haven’t, pay heed. Listed on both the good and the bad sides of people, it has proven to be a blessing for upcoming ventures who don’t have enough funding, and a shape of things to come for the likes of established businesses such as those of Cisco, Nortel or Avaya.

Asterisk was developed by Mark Spencer, a 29 year old Computer Engineering graduate from Auburn university while still in college. He is presently the CTO and Chairman of the Board for Digium, the parent organisation of this open source application for VoIP, which currently has over 2 million users, according to their official website. The company had mainly been operating as a Linux consultant when it was started, but the IT crash in 2001 led to Spencer taking Asterisk seriously, since the organisation’s future was at stake now. What transpired since then is history. Asterisk is today the fountainhead of many popular SMEs operating in the VoIP arena. With Asterisk, a company can take out 80% of its telephone related costs and negate the requirement of a traditional phone switch, as the free software establishes phone calls over the Internet and handles voicemail, caller ID, teleconferencing and many other telecom features. Digium now has 50 employees and an annual turnover of $10 million by selling hardware installed with tested versions of applications based on Asterisk. With enterprise VoIP deployment reaching an all-time high, the future for this organisation is clearly very bright.
A few fast facts are listed below :

• Electric utility Southern Co. is using Asterisk in a pilot program to translate voicemail into text messages for 30 managers’ BlackBerrys.

• Manchester, Connecticut is about to begin using Asterisk to run an application tied to the 911 service that will cost less than $1 million, half the price it would have paid had it used traditional phone equipment, and at 10% of the operating costs.

• Intel now makes Asterisk-compatible cards for computers and has tested large deployments

• IBM, which itself resells internal telephony gear for Cisco, admits to have a “positive but very informal” relationship with Digium.

Spencer was actually ‘forced’ to develop Asterisk because he could not afford standard PBX systems that were very expensive. This is a classic example of necessity is the mother of invention combining with a case of intended serendipity, which led Asterisk to become one of the most popular platform on which many budding organisations have based their systems (an apt example would be SwitchVox, which used Asterisk’s system and was later acquired last year under a unification plan by Digium). While I might be going slightly off-track, it is truly a commendable effort by Mark Spencer towards expanding the application and usability of VoIP. While many websites have termed it as a threat, I would most certainly support the development of Asterisk as a saviour for small and medium business houses.