Interconnected VoIP services have gained serious ground in the United States, according to the latest FCC report on local phone competition.
Released earlier this month, the FCC’s stats show a 10-percent jump in interconnected VoIP subscriptions during the first six months of 2009, as more consumers and businesses opted out of local phone service. Overall, that amounted to 23 million accounts, up from 21 million.
The increase is showing up at competitive service providers such as Vonage Holdings Corp., Comcast Corp. and 8x8 Inc.; incumbents such as AT&T Inc. and Qwest Communications International Inc., meanwhile, are struggling with their VoIP offerings. To be sure, these legacy carriers have seen the shift to IP voice coming and are scrambling to respond. But AT&T is far more interested in the lucrative wireless market than it is in trying to cling to a declining customer base; AT&T sells VoIP through its U-verse product but has re-focused its overall emphasis to wireless – and is reaping billions of dollars in revenue because of the shift. Qwest, meanwhile, also sells VoIP, yet not enough to compete with Vonage et al. In fact, Qwest is in the process of merging with the smaller CenturyLink because it has been unable to craft a solid business model in response to the move away from traditional phone access to IP communications.
The inability of providers such as Qwest to effectively compete for VoIP customers provides a boost to companies like Vonage. The over-the-top VoIP provider, which for years has fought to justify its one-trick-pony business model, has worked to capitalize on the weak economy by convincing consumers to switch to cheaper VoIP service to cut household expenses. And the company at last is benefiting from the strategy. In the most recent quarter, the company boosted sales by $5 million, to $225 million, as more users signed up for Internet phone service.
Comcast and other cable operators have done much the same as Vonage, luring subscribers from their traditional home-phone providers with the promise of less-expensive, higher-quality digital voice service.
Residential users, however, aren’t the only ones turning to VoIP. Business VoIP access took off in the first half of 2009, according to the FCC – and more recent quarterly data back up the finding. 8x8, for example, has turned its attention almost exclusively to business customers and, in the quarter ended June 30, 2010, signed 32,896 new business lines and services, compared to 27,937 in the same period in 2009.
By far, non-ILEC providers such as Vonage and 8x8 are claiming the majority of VoIP subscriptions in the United States. In the residential market, non-ILEC interconnected VoIP subscriptions totaled 20.7 percent of all wireline residential connections in June 2009; ILECs claimed just 0.6 percent of interconnected VoIP subscriptions. Among businesses, non-ILEC interconnected VoIP subscriptions amounted to 5.1 percent and ILEC interconnected VoIP subscriptions again totaled 0.6 percent.
And the VoIP trend in the United States only promises to continue.
“Beyond 2010, we forecast the market to grow in the low single-digits through 2014," Greg Collins, vice president at research firm Dell’Oro Group, said in February. “Future growth in broadband subscribers will likely be boosted over the next five years by government initiatives, such as the National Broadband Plan … which will target greater availability and adoption of broadband services to hard-to-service customers and customers who otherwise are unable to afford it."
