VoIP, Broadband Growth is Slowing

One of the tentative conclusions we might reach from Comcast's fourth-quarter results is that the broadband access market is approaching a saturation point, with slowing net additions. Comcast added about 331,000 broadband subscribers in the three months ending Dec. 31, 2007, down 26 percent from the 450,000 subscribers it added in the third quarter. That's congruent with net adds from telcos as well, and has perhaps a little to do with the economy and slower housing starts. But mostly it is simply that we are approaching the point where nearly every potential customer for broadband already has become one.

VoIP net adds are slowing as well, again confirming a broader trend seen in the consuemr segment of the VoIP business overall. Basically, significant numbers of people who are persuaded VoIP makes sense for them right now have become customers.

After adding 662,000 new subscribers in the third quarter, Comcast’s total net new voice additions dropped to 604,000 in the fourth quarter. None of this is unexpected.

More Competition in Small Business VoIP Market

Small business VoIP providers face a challenging year where competition in the small business space is heating up. Speakeasy, for example, has introduced a voice trunk replacement service called Integrated Voice, using a per-person pricing plan, available nationally and seemingly pitched to the sort of business that otherwise might buy a Cbeyond service.

Cable operators also are aggressively pitching their own small business VoIP services. Oddly enough, it is Comcast and Time Warner that arguably can claim better national name recognition that any of the other business VoIP specialists. And name recognition has been a problem up to this point, in the small business VoIP market.

The Best Buy-owned company is targeting smaller businesses with two to 12 phone lines that also want to keep their existing on-premises handsets and phone switch, and which also have a need for broadband Internet access.

Pricing begins at just $19.95 per line or user, with long distance charges of 2.9 cents a minute.

The phone line trunk replacement service combines voice and data services over a T-1 or high-speed DSL Internet connection, where bandwidth is dynamically allocated between voice and data. Speakeasy says the service will run over any existing broadband connection, but also sells the Speakeasy T1 and 15 Mbps Digital Subscriber Line service as well, the advantage being that Speakeasy can provide quality of service mechanisms if its own access is used.

Is Voice the Killer App for IMS?

You have seen this story before: a new service rolls out and providers look for the "killer app." Then it turns out the killer app is something people already do, but the innovation allows them to do it in a new way, or maybe a better way.

To some extent, voice is a bit of that sort of thing for broadband Internet access, as email was something approaching a killer app for dial-up Internet access. Though the initial "killer app" for broadband was fast Internet access, voice becomes a very important incremental value.

"We are seeing a pattern in Europe of VoIP being delivered by companies that control the broadband infrastructure," notes Stephan Beckert, TeleGeography analyst. "It's an add-on feature to broadband."

So what is the killer app for fixed-mobile services? It's voice again, allowing legacy providers to hang on to more of their fixed-line business than otherwise; allowing mobile providers to displace landline traffic with mobile; or new providers to displace business phone systems.

So what is the killer app for IP Multimedia Subsystems? Wouldn't it be surprising if it turned out to be voice?

So what's the logic? Assume wireline carriers might lose as much as $13 billion in annual revenues by 2011, in part because 34 percent of U.S. households might elect to go "mobile only." So enter IMS, allowing mobile users to take advantage of cheaper Wi-Fi-based calling over their broadband lines.

Assume the landline carriers then lose just $8 billion in revenue to cord cutters. That's a $5 billion annual revenue stream. So put that in perspective. All U.S. multichannel video providers put together earn about $4 billion a year from pay-per-view and video-on-demand services.

So if wireline carriers just prevent landline erosion, they make more money than the whole U.s. VOD and PPV providers put together.

Vonage Work-Arounds in Place

Vonage has "substantially completed" the deployment of work-arounds for two of three VOIP (voice over Internet Protocol) patents claimed by Verizon Communications. Though some litigation remains, the theory that patent infringement would kill Vonage does not presently look like it will match the facts.

Vonage began deploying the two work-arounds about July 1, the company says. The two work-arounds target most of Vonage's customers, with the third work-around covering wireless voice, Citron said.

Vonage also has completed development on the third work-around, Citron notes. The company consulted outside experts to ensure that the work-arounds do not violate Verizon's patents, he adds.

The patent hiccup will be just that: a hiccup. The strategic problem remains Vonage's positioning in a world where cable triple play offers have serious traction, more call volume is migrating to wireless or text modes, and communications are becoming part of enterprise, portal, entertainment and instant messaging experiences.