& cplSiteName &

AOL VOIP: You've Got Apathy

Light Reading
News Analysis
Light Reading
4/7/2005
50%
50%

Time Warner Inc.'s AOL division finally rolled out its consumer VOIP service today, and even though the service isn't a big deal to analysts, its existence, backed by AOL's marketing muscle, is forcing the VOIP issues with incumbent carriers.

New AOL users can get AOL with phone service for $29.99 per month for the first six months. Existing AOL members can buy the VOIP service alone at introductory prices of $19 for a local plan, $30 for an unlimited U.S./Canada plan, or $30 for an unlimited global plan.

AOL’s entry into the VOIP business is an indicator that consumer awareness of, and interest in, low-cost telephony services is growing. IDC research predicts the number of U.S. VOIP subscribers will grow from 3 million in 2005 to 27 million by the end of 2009.

That won't make anyone a pile of money, but it will force competitors to ante up. For example, Verizon Communications Inc. (NYSE: VZ), which rolled out a new pricing scheme for its VoiceWing VOIP service this week, won't talk about how quickly its service is going to make money. "I won't speak to it in terms of profitability," says Verizon spokesperson Bill Kula. "It's necessary for us to offer a VOIP service to balance out our overall broadband portfolio.

“AOL is a terribly formidable brand… but we think the Verizon brand is very helpful when we introduce any kind of new service," he adds. VoiceWing is available nationwide, and users can get phone numbers with area codes representing 37 of the 50 states.

AOL's new service essentially adds voice as a communications option to its popular instant messaging and email “dashboard” software application. The AOL Voice kit includes a Motorola Inc. (NYSE: MOT) telephone terminal adapter/broadband router, which AOL members use to link their broadband connection to their phone.

Even if competitors are moving to keep from being underpriced, analysts aren't terribly impressed with another AOL add-on service. “VOIP is still in its infancy now, and that’s why I don’t think this is that big a deal,” says Argus Research analyst Joe Bonner.

“This is probably a relatively negligible event,” says analyst Aaron Chew of J.P. Morgan Chase & Co. “It’s more of an incremental change to their service, but nothing transformational.

“Obviously they are trying to add some value-added services for the existing subscribers. But one thing we haven’t been able to figure out, based on the information we’ve gotten from the company, is whether this service will be cashflow positive, or if it’s something where they will take a small loss but do it anyway to make their customers happy.”

Indeed, AOL members haven't exactly been asking for VOIP -- in fact, most of them don't know what it is. "Over 60 percent of consumers don’t know what VOIP is or don’t understand what it is, but it is possible they could be sold on it," AOL CEO Jonathan Miller said during a conference last month (see AOL: We've Got VOIP ).

But a VOIP offer may help AOL stem its subscriber loss. J.P. Morgan's Chew says AOL’s combined dialup and broadband subscriber base shrunk from 24 million to 22 million at the end of 2004, and J.P. Morgan expects AOL to loose 12 percent of its compound membership every year for the next five years, bringing the number of subscribers down to “ten or eleven” million in 2010.

So, for now, AOL's moves in VOIP are of primary interest to competitors, such as Verizon; network partners, such as Level 3 Communications Inc. (Nasdaq: LVLT); and the equipment vendors powering AOL's VOIP network, such as Sonus Networks Inc. (Nasdaq: SONS).

Level 3 provides the telephony infrastructure over which AOL members’ calls will terminate or be passed on to other networks around the world. The company also contributes the emergency 911 and number portability services to ensure that the new service complies with Federal Communications Commission (FCC) requirements.

AOL has deployed Sonus's softswitches, which include the ASX and PSX, and its EMS management systems. Sonus was well entrenched with Level 3 before AOL's Voice product existed, supplying the carrier with just about every product in its portfolio. Sonus chief marketing officer Steven Edwards says his company developed what it calls an “ISP software release” especially for the AOL account.

Sonus hopes to sell the release to other ISPs such as Yahoo and MSN, which are widely rumored to be preparing to enter the voice market.

— Mark Sullivan, Reporter, Light Reading

(14)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
OldPOTS
50%
50%
OldPOTS,
User Rank: Light Beer
12/5/2012 | 3:19:43 AM
re: AOL VOIP: You've Got Apathy
Is there going to be any profit in VoIP with all the various competitors, or is it a must have to keep customers loyalty?? Market Projections?

OldPOTS
falsecut
50%
50%
falsecut,
User Rank: Light Beer
12/5/2012 | 3:19:42 AM
re: AOL VOIP: You've Got Apathy
I don't think that I have much in the way of marketing projections to offer but it certainly is one more way that revenue is being pushed down for the RBOCs. My experience with VoIP in my company is that the initial set up of the system is sometimes painful and generates calls to the provider. If there isn't good margin in the business after that initial set up cost are tallyed up, then you'll never recoup your up front investment. If it maintains customer loyalty or other factors come in, then that's a plus that someone can factor in. I hope someone here can elaborate on both declining set up costs, if any, and the overall profit picture.
falsecut
50%
50%
falsecut,
User Rank: Light Beer
12/5/2012 | 3:19:40 AM
re: AOL VOIP: You've Got Apathy
Perhaps it is a feature on the engineering side but it is most definitely a product to people determining whether to offer it or not. Anytime you decide to offer anything to a customer which provides a radically different functionality, which voice does for consumers at least, then you had better do some homework on profitability.
materialgirl
50%
50%
materialgirl,
User Rank: Light Beer
12/5/2012 | 3:19:40 AM
re: AOL VOIP: You've Got Apathy
Profit? What product? In the IP world, voice is a feature, not a product.
optoslob
50%
50%
optoslob,
User Rank: Light Beer
12/5/2012 | 3:19:38 AM
re: AOL VOIP: You've Got Apathy
I have to agree with Materialgirl, Voice is a dead product.

If your business plan is requires that VOIP be a revenue generating stream than I would focus on the corporate market. LD voice revenues will only continue to decline regardless of if it is VOIP or POTS. I know that my cell phone contract included so many off peak "nation wide" minutes that I would use a cell phone for most of my personal LD needs. This equals no LD revenue for VOIP and no LD revenue for POTS.

The problem with third party GÇ£consumer VOIPGÇ¥ is that the pipe is supplied by either RBOC's or MSO's and neither is happy about enabling local competition. This means we can expect legislation granting RBOC's and MSO's the right, better still the obligation, to monitor and police the contents of their IP network. Look at what is happening in the P2P arena where laws are quickly being written to require service providers and server operators to monitor content and police "acceptable usage rules", this is all happening at the behest of the RIAA. The RIAA and MPAA are championing the notion that "P2P network = Child porn" and so laws will be developed which require the ISP to "examine" any suspected P2P traffic (BTW. VOIP is a form of P2P data). This will be accompanied with appropriate delay / shaping effectively destroying local consumer VOIP as a product.


Anyway I've started raving on, the truth is that AOL has no choice, they need to sweeten their "value proposition" so that they can hang on to customers for a little longer. The notion that they can provide voice services will probably slow the drift away from AOL, for a while.

Sorry but no profit from this product!

optoslob
rjmcmahon
50%
50%
rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:19:37 AM
re: AOL VOIP: You've Got Apathy
Materialgirl; The free rider problem of television resulted in advertisers funding the content production. That funding model distorts a neutral point of view in the reporting. It's seems likely that the production of content for the internet will go down this path unless we find a better funding model. Annual fund drives, public donations, and tip jars don't seem to be enough. Do you have an opinion on solving this problem?
DZED
50%
50%
DZED,
User Rank: Light Beer
12/5/2012 | 3:19:36 AM
re: AOL VOIP: You've Got Apathy
Find the killer app and you solve all these problems!!!!

eg Videophone/video conferencing.
It seems to me once you have a broadband connection it would be a doddle, and novel extra content people might be prepared to pay a premium for compared to voice.
People have video capability on their mobiles now, it seems to be a no-brainer.
Unless someone has a better idea of course.
iponthebrain
50%
50%
iponthebrain,
User Rank: Light Beer
12/5/2012 | 3:19:35 AM
re: AOL VOIP: You've Got Apathy
This announcement would have been exciting two years ago. Now its just a "me-too" announcment for a zero-sum game product offering. AOL has to find its differentiation at a quicker pace or it will continue its slide. They need to get a leapfrog product offering - maybe get into the IPTV space like Yahoo is doing with SBC.
dljvjbsl
50%
50%
dljvjbsl,
User Rank: Light Beer
12/5/2012 | 3:19:35 AM
re: AOL VOIP: You've Got Apathy

Find the killer app and you solve all these problems!!!!

eg Videophone/video conferencing.
It seems to me once you have a broadband connection it would be a doddle, and novel extra content people might be prepared to pay a premium for compared to voice.


The problem with this kind of analysis is that it is all based on the capabilities and needs of the supplier. The supplier needs a new source of revenue and the suppliers equipment can now do video. Therefore customers are going to pay for video.

Customers do not see it that way. They have their own application needs and d not give two figs about the revenue needs of the supplier. The fact is that video either as video-telephony or video-conferencing offers next to nothing to the customer. In fact, video-telephony creates enough issues for privacy and the like that the video component actively works against the types of collaboration that voice can provide.

Customers buy applications because they are useful to themselves not to provide revenue to the supplier. A great deal of research has proven that video is of next to no use to the vast majority of customers. Why does this industry keep trying to force it onto them?
DZED
50%
50%
DZED,
User Rank: Light Beer
12/5/2012 | 3:19:34 AM
re: AOL VOIP: You've Got Apathy
"Customers buy applications because they are useful to themselves not to provide revenue to the supplier."

Exactly, find the application customers want, which requires high bandwidth, and you have a lever for revenue.

Video was just an example, since its the most bandwidth hungry thing I can think of.
Page 1 / 2   >   >>
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
UPCOMING COURSE SCHEDULE
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
Wednesday, August 17, 1:00PM EDT
Using Open Source for Data Centers and Cloud Services
Roz Roseboro, Senior Analyst, Heavy Reading
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (0) comments


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Verizon Sports Big Plans for Yahoo
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/26/2016
Light Reading Beyond
Steve Saunders, CEO and founder, Light Reading, 7/28/2016
Yahoo Signing Off in $4.83B Sale to Verizon
Mari Silbey, Senior Editor, Cable/Video, 7/25/2016
Ericsson Board Has Been Asleep at the Wheel – Consultant
Ray Le Maistre, Editor-in-chief, 7/25/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.