Hosted VoIP

VoIP will generate £13.5 billion in global revenue in 2010, predicts financial adviser Grant Thornton. Sarika Patel, head of technology at Grant Thornton, cites the doubling of the VoIP customer subscriber base in 2006 and four fold in the last two years as just one reason to believe that the VoIP worldwide customer base with top 250 million in two years.

 

One potential result: a wave of acquisitions of independent VoIP software developers, at least in some markets, as incumbents move in a bigger way away from traditional voice.

 

"VoIP is no longer next generation telephony, it is here now, and 2008 should see strategic acquisitions of independent software developers and ISPs by large telcos looking to consolidate their VoIP offerings," says Patel.

 

Patel believes potential targets for acquisition in 2008 may include some of the many U.K. independent residential and enterprise ISPs and resellers such as Luminson and NDO, Prodigy Networks, Fast.co.uk, Firefly Internet and Breathe Networks.

 

Whether an acquisition wave makes sense in the U.S. market is open to question. Simple access accounts will add little value for telcos building fiber-based triple play networks or cable companies that compete with telcos.

 

Arguably more important are independent firms with skills in the commercial markets. Cable companies could use such acquisitions as a springboard into commercial markets.

 

But there seems little reason to believe that mass market VoIP is complicated or strategic enough to cause any major telco to "acquire" customer bases or "key" skills.

 

AT&T (News - Alert) and Verizon, for example, already have begun marketing VoIP as the "voice" component of their triple play strategies. But a disconnected "over the top" VoIP customer adds little long-term strategic or short-term revenue value.

 

We are drawing closer to a tipping point for VoIP services as a basic part of an incumbent offering, though. Up to this point, incumbents have refrained from launching mass VoIP marketing efforts to preserve the value of their legacy voice offerings. At some point, though, incumbent service providers will reach a point where they lose more money than they gain by refusing to embrace VoIP.

 

At that point we will see massive marketing by incumbent telcos and a major push to replace legacy voice services with VoIP. That's already happened in Western Europe.

But there are signs that U.S. service providers finally see fiber-based access networks as the logical place to begin introducing VoIP as a basic service.

 

AT&T U-verse customers now are offered voice services running over the fiber-to-neighborhood service, instead of running a separate circuit-switched voice network.

 

The move signals that AT&T is completely comfortable with the ruggedness and dependability of its VoIP offering, and is moving towards IP-based voice that can be interwoven with other services at&t plans to offer.

 

Verizon is using VoIP as the voice platform for its FiOS customers as well. Independent provider SureWest (News - Alert) Communications is doing so as well, a logical step since it provides a fiber-to-home service based on Ethernet.