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VoIP Providers Doing Their Best To Get Your Money
by Rick Hendershot
We've seen this happen before. A new technology promises cheaper
and better service.
But when consumers try to take advantage of it, the new "cheaper",
"better" service ends up being a degraded level of the same
old thing, and usually for more money when all is said and done.
Think cell phones. Think internet connections.
The problem with cheap new technologies is that they don't provide
sufficient profit to be developed at a mass level. That's why
telcos and cable companies dragged their feet for years before
getting serious about broadband internet. Do you remember when
128k connections cost $300 a month? Why give people ten times
as much capacity for much less money?
Which brings us to VoIP. There appears to be no incentive at
all for the major telco and cable carriers to get into this
business yet. Until they find a way to leverage their infrastructures
for their own profit in the VoIP business, you can expect them
to throw up obstacles. Like tollgate fees. The idea of charging
companies like Vonage and Skype for use of the "free" IP network
has been floated, and is not likely to go away any time soon.
Fracturing of the VoIP market
That leaves companies like Vonage, Skype, and Microsoft to compete
at the consumer end of things. They are fighting over who will
get the most customers. Just like the cell phone companies,
they are using specialized hardware and added services to differentiate
themselves from the others.
You can expect they will all be taking a page from the cell
phone marketing book. Offer cut rate (or free) hardware to get
customers signed up to a long term contract. But the catch is,
the hardware will only work with one system. That way customers
will not jump ship without thinking twice about investing more
money in new hardware.
The strategy was apparent at this year's Consumer Electronics
Show in Las Vegas. Each of the major players unveiled new gadgets
that only work with their system: a special Wi-Fi phone for
Vonage, speakerphones and USB handsets for Skype, and handsets
from Uniden and Philips that only work with Windows Live Messenger.
The dilemma is that the major players in the VoIP business need
to generate cash. They hope to do that by tying up lots of customers
with exclusive hardware that is not compatible with their competitors.
But the risk is they will alienate a lot of the same consumers
they are trying to convert.
Will new handsets make Microsoft a VoIP player?
Bill Gates announced at CES in Las Vegas in January that Uniden
American and Royal Philips will have new VoIP phones available
for MSN Messenger users by the time the new VoIP-enabled version
of Messenger is available. According to Microsoft, there are
200 million MSN Messenger users worldwide. The new version of
MSN Messenger, called Windows Live Messenger will have advanced
VoIP capabilities, and an interface with the traditional phone
system through an agreement with MCI. The handsets available
from Uniden and Philips will be cordless dual landline-VoIP
phones making them a complete replacement for both traditional
phone service and PC to PC services like Skype. The companies
hope the three way combination of Microsoft and MCI along with
Uniden and Philips will make the MSN Messenger service a leader
in the VoIP battle for subscribers.
The new Uniden phone, due out in the spring will be a 5.8GHz
unit and will cost in the $ 100 range. The Philips phone will
have similar features and price, but will be targeted to non-North
American markets. The combination is aimed at putting the Microsoft/MCI
service on par with Skype and making it a serious alternative
to providers like Vonage.
As with Skype, PC to PC calls will be free using Windows Live
Messenger. Microsoft and MCI claim that PC to landline calls
will cost only a few cents a minute, and much less than some
other alternatives currently being developed.
Who is Microsoft targeting? Skype or Vonage?
According to Russel Shaw, writing in the ip telephony blog (http://blogs.zdnet.com/ip-telephony/?p=821),
the real target of the Microsoft/MCI project is not Skype, but
Vonage and other "pure play VoIPs" like Packet 8, as well as
the traditional telcos waiting in the wings to pounce once the
market gets going.
Services like Vonage are extremely vulnerable because they rely
on the infrastructure of the telcos without paying a surcharge
to use it. Those costs are off-loaded to their customers who
pay connection charges. But it is almost a certainty that the
telcos will not sit idly by while companies like Vonage use
the telcos' own capacity to take away their customers.
That means the "pure play VoIPs" are going to get squeezed between
Microsoft/MCI on one hand, and the telcos on the other.
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