After months of speculation, announcements of corporate visions and market domination by upstart Vonage Holdings Corp., the curtain is rising on brand-name VoIP rollouts from incumbents and other facilities-based carriers.
“There is no denying that the world is moving to a broadband voice infrastructure,” says Michael O’Hara, vice president of marketing at Sonus Networks. “This is not a migratory strategy for service providers — broadband is truly a disruptive technology that is reshaping the competitive dynamics of the telecommunications market.”
In one of the more notable recent developments on the VoIP front, Qwest Communications International Inc. announced at SUPERCOMM this summer offering IP telephony-based local and long-distance bundles with broadband nationwide.
Qwest’s VoIP service, dubbed OneFlex, targets businesses and became available in mid-July in Boise, Idaho; Denver; Minneapolis; and Phoenix. The company plans to roll out OneFlex to 22 more metropolitan areas, including Albuquerque, N.M., and Washington, D.C., by the end of the year.
The managed and hosted solution relies on Qwest’s national IP network and requires no CPE beyond IP phones. It allows self-service via a Web portal for conference calling; adds, moves and changes; voice mail setup; and other features. It also provides some quality of service controls, given that the traffic stays on the Qwest network.
Acme Packet, IBM, Sonus Networks and Sylantro Systems will flesh out the infrastructure, back-office functions and technology integration.
Verizon, meanwhile, has announced a move to replace its TDM local switching infrastructure with six Nortel Networks VoIP switches. The RBOC expects to serve California and Washington businesses and consumers with advanced IP-enabled services such as unified communications and automatic call logging.
“They’re starting to feel competition from the Vonages of the world,” says Thom Baker, product line manager at Nortel. “Verizon is on the cusp of a curve; VoIP technologies and strategies are starting to actually happen now.”
Globalcom announced at SUPERCOMM it will use the VocalData application server to roll out hosted PBX and IP Centrex as part of its OneConnect IP family of products.
BellSouth Corp. announced IP PBXs and an IP Centrex offer in May, and began testing a hosted softswitch offer based on Siemens and BroadSoft technology in June, in Columbia, S.C., and Miami. BellSouth expects to roll out the service to other metropolitan areas later this year if those trials are deemed a success.
The service employs BellSouth’s regional IP backbone to carry business customer traffic rather than putting it across the Internet. “This is an inregion announcement, but when we go out of region we will still keep customers off the public Internet,” says Mark Kaish, vice president of nextgeneration solutions for BellSouth.
And the market may become more crowded as VoIP becomes the go-to play for competitive service providers in the wake of the U.S. Solicitor General’s decision on June 9, not to ask the Supreme Court to review federal rules governing UNE-P.
Worldwide financial firm UBS predicts consumers in most major markets will have a choice of at least half a dozen VoIP providers within two years, making for Coke-or-Pepsi-style VoIP wars in the near future.
“To me, the technology is secondary,” says Frost & Sullivan analyst Jon Arnold, who contends marketing mite will become the biggest driver behind VoIP growth among service providers once prices stabilize.
AT&T may have the advantage, considering its early-to-market position with CallVantage, customer base and brand name. “I think it’s their race to lose right now,” IDC analyst Will Stofega says.
But Comcast Corp., the biggest cable and broadband provider, plans to give the nation’s oldest phone company a run for its branding money. Comcast will equip half its systems with VoIP capabilities by the end of the year and cover 95 percent of its plant by the end of 2005, the company disclosed in June. The Philadelphia-based cable company has three VoIP trials under way in Coatesville, Pa.; Indianapolis, Ind., and Springfield, Mass.
“We’re beginning to trial the product. And if we don’t meet with good success, then we won’t go that fast,” Comcast CEO Brian Roberts said at the annual shareholders meeting. “But we believe that new products are what power the company’s growth, and we’re optimistic. But we’ll take it one step at a time.”
Although the VoIP market is poised to be the hit of this season and many more seasons to come, some analysts say regulatory uncertainty continues to limit opportunities. The FCC has not decided how to regulate broadband phone companies. “Until all of the regulatory issues surrounding broadband IP telephony are resolved, potential investors will be wary of putting their money into a service provider that could lose its entire market advantage due to an unfavorable ruling,” In-Stat/MDR analyst Daryl Schoolar says in a research note. He adds many Americans are using the technology as a second phone line because, in part, 911 services are not as reliable as the PSTN. Vonage, he says, reports half its customers are keeping their old phone numbers.
Nonetheless, the race is clearly on to offer VoIP. “The handwriting is on the wall for traditional circuit-switched operators,” says a New Paradigm Resources Group Inc. spokesperson. “Revenue from wireline POTS is already on the decline.... Now they’re getting hammered from the other side by VoIP. Without their own VoIP service offerings, the old phone companies will not be able to compete.”
