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Cisco Cautious on VOIP

Light Reading
News Analysis
Light Reading
3/28/2001

In the small pond of existing voice-over-IP (VOIP) equipment installations, Cisco Systems Inc. (Nasdaq: CSCO) is unquestionably one of the big fish. But even Cisco executives admit that it's going to take some time for the market to sustain a catch worth talking about.

At a press briefing held Tuesday at Cisco's San Jose campus, Cisco executives said that expanding the arena for VOIP equipment is going to be a slow, tough process, one that the biggest potential customers -- service providers -- may have to be dragged into, sometimes against their will.

Attractive to end-user customers as well as investors like Intel Corp. (Nasdaq: INTC) (see Intel Snatches VOIP Startup for $550M) for its potential cost-cutting and open-architecture attributes, VOIP is an ugly acronym to some service providers for the very same reasons, especially given the current whipsaw market conditions facing most sellers of telecom services.

Though some service providers (see C&W Bets $1.4 Billion on VOIP) and large-enterprise customers may be attracted to VOIP platforms as a way to increase functionality and reduce prices, even Cisco knows that large service providers (especially those with lucrative TDM businesses) are loath to spend money on new equipment that will ultimately drive down the tariffs they can charge their customers.

"Proceed with caution" is how most RBOCs and PTTs approach VOIP, says Mike Volpi, Cisco's chief strategy officer.

"Like any market, the incumbents will not be the ones that move first," says Volpi. According to Cisco, most of its early VOIP wins are coming in places like China and Latin America -- not North America, where the RBOCs reign.

"Our strategy is to [sell] to the new players first, then drag the bigger guys along the way," Volpi says.

Drag is the operative word. According to Volpi, the whole idea behind VOIP support is to increase sales of traditional Cisco routing and switching platforms, many of which are being VOIP-enabled.

"It's about the infrastructure," says Volpi, who estimates that VOIP-related equipment sales currently represent at best a single-digit percentage of Cisco's revenues.

"We don't expect it to be huge right now," says Volpi. "This is a long-term play for us."

According to Alistair Woodman, director of marketing for Cisco's service provider line of business, the company has already sunk $1 billion into VOIP-related development and acquisitions (see Cisco Turns Up Voice Signal) over the past five years, and currently has approximately 1,000 engineers dedicated to VOIP development. In order to prime the market, Cisco even manufactures IP telephones, of which it claims to have sold 280,000.

Cisco, which claims that 80 percent of its product line has some form of VOIP support, also says it has sold equipment that accounts for 1 million VOIP ports, a number it embraces as a sign of market leadership. Still, that's somewhat like bragging about leading a marathon after the first 100 meters -- a reservation from which Cisco doesn't hide.

And even though Cisco enthusiastically demonstrates cool VOIP applications -- like Dialpad.com's free Internet phone service -- Woodman knows that many service providers are going to cringe, not cheer, when they hear about the competitive possibilities that Cisco says VOIP technology could allow, such as Web-based dialtone portals, where customers could pick and choose among voice service providers.

Woodman, who brought up the service-portal idea during his presentation, jokes: "I don't show that slide to service providers, because I don't want to make them uncomfortable."

But to make the VOIP market succeed, Woodman says Cisco and others will have to develop new applications to convince service providers to embrace VOIP (and they'll have to be more entertaining than the in-house app that delivers Cisco stock quotes, which, when demonstrated Tuesday, returned a slightly embarrassing answer). Otherwise, VOIP will remain but a small stream in the overall river of telephony opportunity.

-- Paul Kapustka, Editor at Large, Light Reading http://www.lightreading.com

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I'mInShock
I'mInShock
12/5/2012 | 1:01:33 AM
re: Cisco Cautious on VOIP
I cannot believe that this stupid thread is still going strong. Give it up! Umm - just in case nobody told you, the company closed 3 years ago. I thought people were supposed to mature with age - it seems that stage in life has skipped you half wits by.

Although - while I rallied for Tachion and found all of this stupidituy offensive 3 years ago - now it's hysterical that you just haven't moved on.

Hmmmmmmm . . .
netskeptic
netskeptic
12/4/2012 | 8:39:27 PM
re: Cisco Cautious on VOIP
Thanks,

Netskeptic
fanfare
fanfare
12/4/2012 | 8:39:22 PM
re: Cisco Cautious on VOIP
Regional carriers like VZ have been dragging their feet and putting a stranglehold on last mile tech. While I was at VZ the reasoning behind this strategy was given as a function of return on investment (buildout) and time. I don't want to start harping on things like the 'conspiracy theory' but it seems clear that local carriers have reason to be afraid of changes that may occur when VOIP tech is more fully deployable. Lets face it ... RBOCs don't want to change the status quo. Failure of CLECs have them tickled pink right now .. and the last thing they want to hear about is why they should be spending money on a technology that may open avenues of further competition (and yeah .. not to mention lower costs for consumers).

Bottom line here is .. now that they have the CLECs on the run ... they seem to be worrying less about moving ahead in development. Why should they?

Word to the wise, however, if they don't provide that pipe to the curb ... eventually someone will.

DKP
DKP
12/4/2012 | 8:39:21 PM
re: Cisco Cautious on VOIP

fanfare,
I agree with your comments. " RBOCs don't want to change the status quo." Voice represents 70% of their revenue, so what incentive do they have to deploy VOIP! I have some exposure to international carriers, and they are moving much more quickly than the U.S. on VOIP. VOIP will happen, and it will replace POTS. The U.S. RBOCs have a little more breathing room this year, but a converged network (around IP) is inevitable.



kephill
kephill
12/4/2012 | 8:39:18 PM
re: Cisco Cautious on VOIP
Article neglected to mention that C&W provider for VoIP is Nortel, not Cisco.
fanfare
fanfare
12/4/2012 | 8:39:17 PM
re: Cisco Cautious on VOIP
Please keep us updated, when you have time, with what you know re international carrier buildouts.

I agree with you.. VOIP is inevitable. It's sad that we will lose some ground (time wise) because of the current situation. Hats off to those who are pushing forward in the face of staunch resistance.

I look forward to a more 'progressive' time in telecom.

regards,

ff
abcdefg
abcdefg
12/4/2012 | 8:39:14 PM
re: Cisco Cautious on VOIP
After you read the following article from CNET, which is considerred to be a plain reporter instead of a "commentor" like LR, you can easily find LR has a so biased tone on CSCO...

http://yahoofin.cnet.com/news/...
OpticalObesity
OpticalObesity
12/4/2012 | 8:39:13 PM
re: Cisco Cautious on VOIP
Hi:

Can Steve or Scott post their writers' background on the website?

I heard none of the staff has ever worked at a telecom services or equipment company.

Thanks guys
tink
tink
12/4/2012 | 8:39:01 PM
re: Cisco Cautious on VOIP
Paul,

On the LR home page, the quote of the week says:

>"Proceed with caution" - Mike Volpi, Cisco's >chief strategy officer, on how most RBOCs and >PTTs should approach VOIP

But in your article, it says:

>"Proceed with caution" is how most RBOCs and PTTs >approach VOIP, says Mike Volpi, Cisco's chief >strategy officer.

The addition of the word "should" on the home page changes the meaning. Which version correctly conveys Volpi's message?

Thanks,
Tink
pluckon
pluckon
12/4/2012 | 8:38:25 PM
re: Cisco Cautious on VOIP
The CLECs killed themselves by using 2B1Q on the copper UNEs, which caused them to depend on the RBOCs for conditioning -- which, by the way, was also carried high NREs and continuing highly monthly tariffs for "DSL loops."

If they'd used QAM instead, they could have deployed over unconditioned loops, which would have saved all kinds of time and money and would have been impossible for the RBOCs to stop.

As for VoIP, it's a great story with one small problem. It doesn't work.
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