Optical/IP Networks

VOIP or Die

Cheap services, lots of competitors, and thin (if not negative) margins. Sounds like fun, eh?

Well, that's not enough to deter dozens of competitors from entering the residential VOIP services market.

Whether you're tiny SunRocket Inc., which has surfaced promising unlimited U.S. calling with two phone lines for one yearly payment of $199, or Comcast Corp. (Nasdaq: CMCSA, CMCSK), a huge cable network that is tacking VOIP onto its bundle, everyone feels they need a piece of this game.

The fact is, even if VOIP's promise for profitabilty is difficult to discern, it's nevertheless emerging as a crucial function in any package of next-generation communications services.

In fact, it looks as though many large communications providers see VOIP as a kind of Trojan horse for entry into a wider-ranging suite of packet-based communications services. For example, Comcast sees VOIP as a value-added feature to a larger package of services – and it says that, rather than cutting prices, it will simply add more features to the bundle. Building upon VOIP, larger RBOCs and IXCs see the potential for SIP-based business communications services such as conferencing and messaging – and they need it as a checklist item to fend off the advance of cable providers.

The bottom line is that such problems will be moot if the VOIP market does not start to hit the mainstream. The current Light Reading Insider, Residential VOIP Services Explosion, shows that this market appears to be in the early stages of spectacular growth. Over the course of the next two years, VOIP will generate momentum as the technology becomes more sophisticated and yet more user-friendly, and as large service providers market the services to hundreds of millions of subscribers. Comcast alone expects to be in a position to market VOIP to nearly 15 million subscribers by the end of 2005.

On the technology side, the development of standards-based SIP gear and integrated, packet-based end-user devices will give VOIP a standard, reliable experience more akin to traditional voice. As large equipment providers such as Cisco Systems Inc. (Nasdaq: CSCO) turn up the marketing of VOIP gear, look for the residential VOIP market to gain serious traction in 2005.

— R. Scott Raynovich, US Editor, Light Reading

Residential VOIP Services Explosion, a 13-page report in PDF format, 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.

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