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VOIP services

Researchers Vet VOIP's Value

While more folks than ever are turning to VOIP services, VOIP's sway over the industry and its threat to traditional phone companies is now facing increased skepticism.

Insight Research Corp. says in a recent report that traditional phone companies will lose somewhere around $96 billion in revenues by 2010 thanks to the emergence of VOIP services. That's a huge number, but still relatively small compared to the total telecom service revenues of $1.8 trillion that phone companies are expected to pull in that year.

The lesson? VOIP is definitely having an impact on the telecom services world, but it won't be anything close to domination for several years to come.

Some researchers even see the VOIP market slipping from where they originally expected it to be. In 2004 Frost & Sullivan said the North American residential VOIP market would be worth $5.4 billion by 2008. But the firm’s July report had scaled back expectations significantly; it now predicts that the market will be worth only $4.1 billion by 2010 (see F&S Predicts NA VOIP Growth).

Most projections for growth in the number of North American residential VOIP subscribers seem to hover around 18 million by 2008. Infonetics Research Inc. says it expects about 17.4 million (see VOIP Subscriber Numbers Soar). The Yankee Group predicts 18 million by 2009.

That VOIP's place in the world isn't forecast to be any larger is somewhat surprising, given the variety of ways consumers can get VOIP service -- cable MSOs, satellite providers, telephone companies, ISPs, “bring-your-own-access” plays like Vonage Holdings Corp., and Internet-based peer-to-peer companies like Skype Technologies SA.

Network monitoring company Sandvine Inc. says Skype is the VOIP minutes leader in North America today (see Is Skype Worth $3B?). Sandvine says 35.8 percent of VOIP calls are now placed using Skype, and those calls comprise 46.2 percent of all VOIP minutes. The vendor says third-party VOIP providers like Vonage, and (NYSE: T) CallVantage together account for about 35.7 percent of VOIP calls.

But, analysts say, even with so many avenues to reach consumers, VOIP players won't have the direct connection and the regulatory backing that favors phone companies. Jon Arnold, principal analyst of J. Arnold & Associates, says: "A large part of VOIP’s growth will be through providers finding ways to bypass the copper or the coax to get into the home.”

What do you think about Skype's valuation? Take the brand new Light Reading poll: Skype Hype.

— Mark Sullivan, Reporter, Light Reading

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