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Google Gives Telcos a Wakeup Call

Sarah Thomas
8/26/2010

If landline erosion weren't bad enough for telcos, it may be getting worse .

Google (Nasdaq: GOOG)'s new PC-based VoIP calling service went live this week, letting users make phone calls from within the Gmail interface, for free until the end of the year. International call costs will vary depending on the country, but start at 2 cents.

Google has always been a player in the voice market, with its semi-successful Google Talk and Google Voice products, and the acquisition of Global IP Solutions . But, to date, users could only call PC-to-PC. Google says the new PC-to-phone service will be useful in "areas with bad reception," but its appeal could stretch further into the home. (See Google Ups the Ante on VoIP, HD Voice .)



This move makes Google Voice potentially an even bigger threat to telcos than Skype Ltd. , according to Heavy Reading contributing analyst Robert Poe. While Skype hurt the telcos by undercutting their international rates, it still charged for outbound calls to domestic numbers, something Google is offering for free at launch.

"Since it also apparently allows answering of incoming calls to Google Voice numbers, it makes it possible for users to abandon their landlines altogether, and get their phone service for free," Poe said in an email interview. Of course, it does require users to have their computers on to make and receive calls, so average households may not want to use it exclusively, he adds.

Incidentally, Skype now stands to lose the most, although Forrester Research Inc. analyst Charles Golvin says the impact has been overblown. The market leader, which is also prepping for an IPO, makes its money from outbound domestic calls and from providing inbound numbers. But the cost savings it enabled over landline were sizable, versus the pennies Google is promising to save, Golvin says. (See Skype Dials Into a Public Future .)

Socializing voice calls
Regardless of how much of an impact Google's new service has, it should serve as a wakeup call to the telcos. Initial VoIP services mirrored landline telephony, but it is quickly beginning to seem that landline services should mirror VoIP -- in business model, integration, and social features -- to be effective. As telcos move away from the public-switched telephone network to all-IP networks, this could become easier to do. (See VoIP Still Threatens Legacy Carriers.)

The blurring of lines among data, video, and voice is something that VoIP startups like C2Call are banking on. The company recently raised $2 million in VC funding and today passed the 1 million users milestone. The company's simple browser-based VoIP service, FriendCaller, lets users make a free call via a link in an email, IM, social network, blog, or Website. It also has iPhone and Android apps, whereby it has gotten most of its new customers.

C2Call founder Martin Feuerhahn says that, while the global telecom market is huge, PC-based VoIP is currently used by only a small percentage of Internet households, but the services are infiltrating all parts of the online experience. For example, FriendCaller connects callers within social networks or to advertisers through click-to-call. Google's new service, which combines Gmail with social networking and calling and, most likely, advertisements, is a big step in this direction as well. (See Google's Listening .)

Telcos have explored this idea of unified communications (UC) in the past, but they have not been as aggressive. Verizon Communications Inc. (NYSE: VZ) launched iobi, a UC suite connecting the PC, laptop, and home phone, back in 2005, but the service -- which required both Verizon landline and mobile service -- never took hold. Likewise, AT&T Inc. (NYSE: T) has a unique opportunity to leverage its IP-based U-Verse for UC, but again the potential impact is limited to its small subscriber base.

"If the carriers haven’t realized that one of their businesses is about connecting people with each other, and increasingly those people don’t care about the individual method -- they just want to communicate with the people they care about, love, do business with, whatever -- then their head is in the sand," Golvin says.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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sarahthomas1011
sarahthomas1011
12/5/2012 | 4:25:31 PM
re: Google Gives Telcos a Wakeup Call


Google says that over 1 million calls have already been placed with Google Voice

Pete Baldwin
Pete Baldwin
12/5/2012 | 4:25:30 PM
re: Google Gives Telcos a Wakeup Call


999,900 of them consisted of, "Dude! I'm using Google Voice!"

Jeff Baumgartner
Jeff Baumgartner
12/5/2012 | 4:25:29 PM
re: Google Gives Telcos a Wakeup Call


There's something to that. I remember calling friends on my dad's car phone in the 1980s just to tell them I was calling them on a car phone.... for 50 cents a minute.  And it came with a base station that took up a nice chunk of trunk real estate.  JB

jwmarc123
jwmarc123
12/5/2012 | 4:25:26 PM
re: Google Gives Telcos a Wakeup Call


What is nice is that when I call out now the caller ID shows that it is from my goggle voice account  ( my assigned nos.)... B4 it showed the trunk facility nos. and allot of people dismissed the call... Hey Google give a year of free calling like Skype did years ago!!

sarahthomas1011
sarahthomas1011
12/5/2012 | 4:25:26 PM
re: Google Gives Telcos a Wakeup Call


IDC analyst Stephane Teral made a good point that the appeal of this would be greater if Gmail was more easily accessible on mobile phones and you could use it there. But, as is, it's limited to Gmail users in the US, so it won't have a huge effect.


[As a side note, I remember being really upset when my carpool friend asked where my dad's carphone was, and I had to admit he didn't have one. They were expensive!]

sarahthomas1011
sarahthomas1011
12/5/2012 | 4:25:23 PM
re: Google Gives Telcos a Wakeup Call


He was looking at it from a global basis, and his point was that this is a wireline play while all the action is on the wireless front. Does the calling service work from your Android phone? Doesn't on mine.

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:25:23 PM
re: Google Gives Telcos a Wakeup Call


 


I am guessing that you and your analysts do not have Android phones?


Gmail is about as integrated on my G1 as I can imagine.


seven


 

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:25:22 PM
re: Google Gives Telcos a Wakeup Call


 


I use the dialpad?  It doesn't really make sense on a phone to go to a mail program to dial a phone that has a dialpad.  The one thing they might do is have a way of using the Google Voice number as your dialing party number.


 


seven


 

rjmcmahon
rjmcmahon
12/5/2012 | 4:25:21 PM
re: Google Gives Telcos a Wakeup Call


It won't be integrated well into android until after VZ and GOOG have worked out their revenue share deal.

quicktime
quicktime
12/5/2012 | 4:25:16 PM
re: Google Gives Telcos a Wakeup Call


Lol, in telecom,  such service exists a few years ago.


The connection time is long, and I don't feel the experience is exciting.


As to embedthe VOIP into gmail, I don't understand how google's


genius engineers  come out this idea,  maybe young fans


will buy it, but I am still used to skype and also won't call while


I am reading the E-mail.


Also, not sure how telcom companies could co-operate with


Google on this business. Without a good revenue-share model,


telcoms will yield their interest and open their network to Google?


Nobody will think so unless Google build their own network infrastructure


--;)

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