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VON Event Showcases Service And Equipment Agreements

April 1, 2005

By Robert Poe

In light of the torrent of announcements about Voip services and equipment surrounding the recent VON conference in San Jose, the central question facing the nascent business resembles the one the kids in the back seat ask on long car trips: Is it here yet? Depending on how rambunctious the kids are, the best answer might be either "not yet" or "pretty soon."

The highest-profile announcements had to do with services. In particular, Vonage noted that it had reached more than 500,000 subscriber lines. That was up from 75,000 at the end of 2003 and 390,000 at the end of 2004. The rate of new subscriber take-up rose from 10,000 per week in the fourth quarter of 2004 to 15,000 a week in early March.

In addition, AOL confirmed previous reports that it would be getting into the IP telephony business soon, using Level 3's national infrastructure and Sonus softswitching equipment. And there were persistent reports that Google is seriously considering getting into the Voip market, as well as speculation that Yahoo and MSN would soon do the same. Voip calling is a natural evolution for providers like AOL, Yahoo and MSN that already offer voice-capability instant messaging or even PC-based Internet phone service.

SOFTSWITCH DEALS

Voip equipment announcements can be a less reliable indicator of growth prospects than in other markets, because gear such as softswitches can be used to deliver conventional as well as IP telephony services. In one such announcement, Veraz Networks and Sylantro Systems unveiled a tie-up that combined Veraz softswitches and media gateways with hosted communications services from Veraz to provide end-to-end packages for service providers. In another, low-end softswitch maker CopperCom said it had made a deal to incorporate Jasomi Networks session border controllers as part of a turnkey packet-based infrastructure product. And yet another softswitch vendor, Sentito, announced that it had landed an equipment deal with KBT Systems, a provider of wholesale managed services.

Still, softswitches at least represent the next-generation infrastructure that will make ubiquitous IP phone service possible in the future. And at least one announcement represented one of the classic coming-of-age milestones that indicate an industry at least thinks it's on the verge of the big time: the semiconductor announcement. That occurred when Texas Instruments said it had been named Vonage's preferred provider of Voip silicon and software.

Along with the various signs that the Voip market is moving along rapidly, there was also a bit of fighting in the back seat. In February, Vonage had complained that a broadband provider was blocking its calls.The FCC fined the provider, Madison River Communications of North Carolina, and it agreed to stop. But Vonage and Nuvio have also since complained that telco and cable broadband providers had been degrading their signals, a subtler form of blocking. Any business that is threatening enough to block is clearly getting big enough to take seriously.

RELUCTANT CONSUMER

However two surveys about consumer attitudes towards Voip services that surfaced before and during the VON conference gave the best indication of where the industry was headed. One by Forrester Research found that only 43% of its respondents had heard of Voip telephony and only 4% used it. The other, commissioned by Level 3, said essentially the same thing: that 60% of its respondents were unaware of the service, while 4% used it.

Two further questions, though, showed the real path to VoIP's future. Forrester found that only 13% of its respondents were interested in such services. The Level 3 survey, going a step further, found that after having the capabilities and benefits of Voip service explained to them, 71% said they would consider switching from conventional service.

And that, more than anything else, makes clear what it'll take to make the Voip telephony business a success: a lot of explaining.



 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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