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2008: The Year That VoIP Died

It seems highly likely to me that at some point in the future we’ll all look back and say that 2008 was the year that the VoIP industry finally died. With all due respect to my very good friends Jon Arnold, and Andy Abramson, it’s about time.

Voice over IP is just a transport and signalling technology. It’s plumbing. It may come as a surprise to some of you to know that in the late 1980’s and early 1990’s there was a TCP/IP industry as well. TCP/IP is inarguably plumbing. As the IP stack became common on all computing devices, TCP/IP went from being a differentiator to a commodity. The short lived TCP/IP industry was a footnote in the events that spawned the global web. The fact that a VoIP industry has existed is a similar historical footnote to the transformation of the communications industry as a whole. The VoIP industry was a necessary phase in that transformation; John in the wilderness announcing that the real action is still to come.

And what is the evidence that the VoIP industry is at that turning point?

Where have all the pure play VoIP companies gone? The last of any consequence still standing is Vonage. The S&P is down about 40% for the year, and Vonage a whopping 70% save for a miraculous gasp in November at the point of the announcement of their debt having been refinanced. The fact of the matter is that Vonage is in an impossible place. Phone calls are cheap enough, Vonage is undifferentiated from any other phone service, and ... the cable guys have television.

Will this be the Vonage’s last year for the zombie shuffle? Or can they pull it off again, and come back from the dead once more?

VoIP events are suffocating too. VON was a spectacular flameout, despite the best efforts of Jeff Pulver and his band of merry men to transform it from a voice only show into a voice, video and more show. At least the Pulverites understood where the future was, even if unable to craft a profitable event around those varied interests. There’ll be more of the same next year, I fear. Initial reports from this fall were that VoiceCon was an understated and quiet affair. Lawn bowling anyone?

Another sure sign of the ill health of the VoIP industry is that the feature companies are heading to the deadpool, as well. 2008 started as a year full of VoIP companies trying to make their mark with free “products” that were features in disguise. Needing to find a revenue model, many turned to advertising and cheap minutes and ran smack into the same wall that Vonage is heading toward at light speed. Bye bye TalkPlus, Jangl, and so many more. And suddenly, late in the year, Jaxtr lurched back from the dead with another free calling service…

The smart vendors have learned that consumers don’t want another telephone company built around a complicated piece of technology in their lives and those vendors have done one of three things—they have transformed themselves into a platform play (think Mobivox), into a wholesale player (think Jajah) or into a full-on competitor in the traditional telecom space (think TruPhone and the build-out of their global network). Taking their cue from BT’s $105 million buyout of Ribbit, these companies are positioning themselves as players that are part of the communications ecosystem, rather than apart from the ecosystem.

Why? Well, the big VoIP stories this year were that ecosystem of applications, and platforms.

  • Irv Shapiro’s IfByPhone ingeniously connected IVR and Google Analytics, allowing deep measurement and statistical analysis of call center traffic.
  • Mashup king Thomas Howe demonstrated over and over that with the right tools, building communications applications can be as simple as building web sites. Tom stood on stages in front of audiences, built applications and won contests and plaudits by concretely showing that voice is now just software. The subtext? The magic of software lets you embed voice into any application that you like.
  • Like Tom, we at iotum used modern platforms to release Calliflower in record time. We can turn around code on a two week cycle not because we’re smarter than everyone else, but because of the tools we use to do the job.

Building communications applications with today’s infrastructure compared to what was available even five years ago is comparable to digging a ditch with a backhoe instead of a pickaxe.

Most interesting, perhaps, is the fact that the service provider and the equipment manufacturer seem to be blurring at the moment. As the equipment industry has become mired in the complexities of defining and delivering a common application standard (think IMS), carriers are starting to go their own way—BT’s acquisition of Ribbit is an obvious case, but what of Orange’s developer camps (now in their third year) and the way in which the mobile industry has rushed to imitate Apple’s success with iPhone, both platform and store. These moves betray an understanding that the future is in software, in applications, and in building products that deliver end user value rather than shaving the corners off pennies.

And what of the companies that are failing to make that transformation? Pity the Nortel shareholder as Nortel has seen over $250 billion in market cap erased in the last five years.

Ding dong, VoIP is dead. Let’s dance on its grave and get on with the business of transforming communications in the twenty-first century.

By Alec Saunders, Vice President, Developer Relations, BlackBerry

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A bit of rebuttal with respect to Vonage... Dan Campbell  –  Dec 31, 2008 12:06 PM

As a customer of Vonage, I wouldn’t say that they are undifferentiated from other providers, especially legacy telcos.  That may be true or at least close with respect to pricing, but even at that I’m not sure because their pricing for local and long distance US (flat rate) and overseas (low per-minute charges) is quite good, and the bills are devoid of the multitude of nickel and dime fees and taxes that turn your $19.99/month phone line to like $46.73/month.  Vonage is $25 flat pretty much, plus some surcharges for features on top of the base package.

But as far as features, I use their service and get features not available from other legacy providers.  The most notable for me personally is that that although I’m in the US I can get a London / UK exchange for a mere $5/month flat rate, which comes in quite handy for my British wife whose family and friends can basically make what amounts to a local London call to reach her back in the States.  Convenient, and it saves them and me a bunch of money.  We can also take the Vonage router on the road and plug it in anywhere where we have broadband, like a hotel or a relative’s house (even overseas), and get (both of) our phone numbers (we have two, home and work) basically forwarded to wherever we are on the road.  They also have a PC-based client phone as well (although I don’t use that.)

Vonage’s web-based management center offers many features and account control that you typically don’t get with legacy telco providers.  You can do a lot with it, such as have your Vonage line ring while it also simultaneously rings your cell phone for the same call, so that whichever one you pick up first connects the call, which comes in handy if you are out and about and only have your cell phone.  (It’s different and better than pure call forwarding on the Xth ring, which Vonage also has of course.)  You can have voicemail forwarded as a .WAV file to an email address, which can be more convenient than dialing into your voicemail and going through the pushbutton menu options, like if you are at work and already on a computer you can just double click and listen. There are other features as well.

I am not aware of my other legacy telco options like Verizon having such features.  Maybe they’ve recently come up with some but I don’t know.

You can argue that Skype competes with these features but not really.  Skype is not really there yet.  The video and voice quality is good for novelty free-to-use quality but it’s not commercial grade quality that is as good as Vonage.  Maybe their paid services are better, I don’t know.

Overall, Vonage is definitely cheaper than my other non-VoIP traditional telco options.  And the features are much better for sure.  The call quality and call connect / noise / mid-call drop rate is very good, although still maybe a notch below legacy land lines because of its dependence on your broadband connection being up, uncongested and the Internet not providing too much jitter.  But it’s every bit as good as if not better than mobile phone call / connect / noise / drop quality in my opinion.

Agreed ... VoIP is plumbing ... look to Skype and Raketu Dave Johnston  –  Dec 31, 2008 2:47 PM

I agree. VoIP is just the plumbing to get voice (video) over the IP protocol. Skype and Raketu both look to bring many types of communications together, and add presence so you know if your friends are available. Raketu goes quite a few steps further by bringing in webtv and video on demand integrated with the communications features (think of discussing a sporting match being played in the US while you are in the UK and others are in Australia, all watching the same game). Raketu allows access to their services from your computer (with or without a download - actually from any web browser), from a mobile phone over IP, by sending an sms-text message to activate the service (for those without a smartphone), and even allows access from an IP-Phone (like Vonage) or even a regular phone connected to the service. Raketu has computer-to-computer calling, computer-to-phone, phone-to-phone, and videocalling all without a download. Add in instant messaging, offline messaging, file sharing, photo saving and sharing, both inside and outside of Raketu (the ecosystem) and you have a pretty complete ‘enhanced’ communications offering.

One of the nice things about Skype and Raketu is that even with all the features that are available, they have made it pretty simple to make a call - Raketu in particular, giving you so many ways to access the services. Raketu has delivered the ability to have a single provider for computer, mobile, and regular phone services.

I think there are some forward thinking companies with offerings available today, that not only differentiate themselves from others, but also offer everyday useful features free or at incredible savings - which is something we can all appreciate.

nowhere near dead John Peach  –  Jan 2, 2009 1:11 PM

I have Verizon FIOS at a giveaway all-bundled initial price. The phone line is not even hooked up to anything because of Verizon’s useage costs. I have a $9.99 monthly VOIP service from Viatalk with way more features than Verizon and 2c a minute calls to the UK. I am not interested in having to fire-up a computer to communicate with others…..

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