Insider Sees VOIP Battle Royal

The battle for residential VOIP customers is set to heat up big-time in 2005, according to the latest Light Reading Insider report, “Residential VOIP Services Explosion.”

Just about everyone is rushing to get into the VOIP game, trying to grab their share of consumers' communication dollars away from incumbent carriers that are also scrambling to roll out their own VOIP strategies.

According to the Insider, multiple system operators (MSOs) like Cablevision Systems Corp. (NYSE: CVC), Cox Communications Inc. (NYSE: COX), and Time Warner Cable, currently lead the VOIP pack, with fellow MSO Comcast Corp. (Nasdaq: CMCSA, CMCSK) making a big push to capture its share of the market by rolling out VOIP services to its more than 40 million customers by the end of 2006. MSOs have the advantage of being able to offer bundled triple-play services to the customers now, while RBOCs are scrambling to upgrade their networks to offer next-generation voice and video services.

Pure-play VOIP providers like Vonage Holdings Corp., 8x8 Inc. (Nasdaq: EGHT), and SunRocket Inc. are making strides, thanks mainly to early adopters who are taking advantage of their low-cost, feature-rich calling plans. But their lead may be short lived as MSOs and RBOCs roll out their VOIP offerings en masse, causing downward price pressure. The pure-players also face competition from large providers that can offer their customers bundled deals on their services.

The report looks at the different technologies powering VOIP deployments –- Session Initiation Protocol (SIP), Media Gateway Control Protocol (MGCP), and Peer-to-Peer (P2P) -- noting that the one with the most promise and feature flexibility is not the technology with the most deployments.

Other report highlights include:

  • While the number of VOIP subscribers in 2004 topped 1 million, that number could grow to 16 million within four years.
  • Cisco Systems Inc. (Nasdaq: CSCO) could drive the consumer VOIP market by marketing new dual-mode devices that combine VOIP and WiFi capabilities.
  • Skype Technologies SA remains unique in its use of P2P technology, giving it a proprietary edge -- and risk.
  • Comcast is pursuing a unique business model, offering VOIP as an add-on feature to a larger bundle of digital services.
  • While the number of VOIP offerings is growing by leaps and bounds, that has not translated into explosive growth for infrastructure gear.
In the end, the Insider concludes, the market may well be driven by end-user technology. The goal is for equipment manufacturers to come up with a VOIP phone that looks and works like any cordless phone, plugs into the co-ax or Category 5 Ethernet jack in the wall, and can be found on the shelf at Target. This task is being pursued by Cisco, Motorola Inc. (NYSE: MOT), and other manufacturers.

Cisco's Linksys unit could be crucial in the role of producing a phone that you can take out of the box, plug in, and start using right away. Watch in 2005 for the killer VOIP consumer device that propels the market forward.

— Chris Somerville, Senior Editor, Next-Generation Services

Residential VOIP Services Explosion is available as part of an annual subscription (12 monthly issues) to Light Reading Insider, priced at $1,350. Individual reports are available for $900. To subscribe, please visit: www.lightreading.com/insider.

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