Is VoIP ready for prime time?
Published: 15 Jul 2003 11:43 BST
While still just a trickle, early defectors to voice over IP (VoIP) represent the vanguard in a trend that some analysts believe could soon roil the communications industry.
Independent VoIP providers such as Vonage and 8x8 are beginning to steal consumers from tradition phone operators with flat-rate VoIP plans that cost between $20 and $40 a month for local and long distance calls.
Even as momentum for VoIP mounts, however, some of the biggest cable companies have begun to suggest that the technology isn't yet ready for the masses.
"The potential widespread commercial deployment of IP (Internet protocol) phone service has important implications on the future of the cable industry," Bank of America Securities analyst Matthew J. Bartlett said. But "cable's use of voice over IP technology is not quite yet ready for prime time."
After years of over-promising and under-delivering, VoIP providers are generating renewed interest among consumers thanks to sharp growth in broadband connections to the home, improvements in quality of service, and hook-ups that allow VoIP calls over ordinary telephone handsets rather than clunky PC microphone systems.
VoIP services for now typically promise a smaller phone bill, virtually wiping out charges for long distance and international calls. In addition, connecting phone calls over the Internet could eventually open the door to advanced communications services that tie voice together with email, instant messaging and video conferencing -- something that Microsoft and others are already working to achieve.
While cable companies are expected to be among the biggest winners as customers switch from traditional phone to VoIP service, recent cable industry studies suggest that the rewards may come only slowly, if at all.
According to white papers and a series of recent interviews, Cox and Comcast continue to have significant reservations about VoIP technology. A major setback is cost, they've found. Creating a service with all the trimmings American diallers are used to costs just 10 percent less than building a traditional phone line, not the 50 percent savings predicted in early projections.
In addition, cable companies are worried that current VoIP equipment has not been proven on the kind of large scale that would be typical in any nationwide service. Trials to date have tested only a relatively small number of users, averaging about 100 callers at any one time. Furthermore, network gear typically runs on proprietary software that has not been designed with interoperability in mind, according to a recent Cox white paper.
The cable industry's hesitancy over VoIP could be a major problem for the technology, which is just now seeing a spike in consumer interest.
Cable companies are considered key to VoIP's success, mainly because they are the dominant US providers of the high-speed connections that VoIP needs. But executives from Comcast and Cox now say they do not expect VoIP to pick up dramatically until 2004, if at all.
"While much of the VoIP equipment is available currently, the technology remains incomplete to support a wide residential deployment," a Cox spokeswoman said.
A Comcast representative added: "It will happen, but we're not going to roll out an incomplete service."
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