VoIP is now much more mature than previous days when Internet telephony meant a scratchy voice conversation over two computers. VOIP Services has been used by Telcos to carry voice traffic over long portions of their networks. It has now become the standard technology used to carry voice traffic over the world from every consumer’s home.
The Cable TV companies have a strong position in the telephony market. They already have a large embedded base of customers. They also have a local presence, with field installers regularly moving around neighbors and customers every where. It is their major advantage that with their field installers they can install VoIP service and also hook up inside wiring. Therefore a person doesn’t have to be the least bit technically inclined to adopt the service, thereby opening the market to the masses. The small consumer Mobile Virtual Network Operator just cannot reach the mass market with their limited and least bit technically experienced manpower.
Cable companies also have huge product awareness in their markets. Since they are familiar in the market, people rely on them and feel comfort to use their service. Still then people dislike some of the cable company because they have lengthy time windows for showing up for an installation or show up late and may keep you on hold at call center, although they are very good at managing the complexities of their operations. However, if a company wants to be a successful VoIP provider, they will have to manage the complexities of billing, installing and satisfactory customer service. There is a biggest opportunity for Cable companies to be success full at VoIP and ruin the other small entrants because they provide broadband connection but new provider has the firs dibs on providing voice service. Since broadband connections have high margins and VoIP has low margins, broadband providers could treat voice service as a loss sector to keep customers on their high-speed connections. NetZero, for instance, is giving free telephone numbers and low priced VoIP service with the hope of signing on users for their ISP.
The Local Phone Company also has some advantages as Cable as they have strong brands, ability to bill effectively, established customer service, and field technicians. They also provide great comfort level to people for providing a phone service. However, the Phone Companies are in backward position compared to the Cable companies who have the greatest number of VoIP subscribers. The reason of this dismal result of the Phone companies is Internet confliction between POTS and VoIP. They do not give importance on a low margin VoIP product in their core offer and have struggled to create an effective bundled; product strategy with advanced services. They are also expending more resources and internal focus on better broadband offerings than DSL and trying to break into video services. Still they hold a good position for share of pure-play VoIP subscribers and have deep pockets, which will allow them to more outspend a small VoIP provider to get mindshare.
Million pure-play major VoIP subscribers are spending a lot of money to get mindshare and customers. This is good in that it raises awareness of the product category, which helps a smaller pure-play.
Vonage is spending a ton of money to get mindshare and customers. They are aware of good product category which helps a smaller pure-play. However, it also presents a huge challenge for smaller providers to compete for customers when a single provider has such a dominant voice.
There are a number of challenges facing a smaller VoIP provider. Small providers have to compete for share of voice against companies that are spending a lot of money. As far as the business case goes, VoIP has relatively small margins and the ROI for marketing campaigns and generating brand awareness is a challenge. Yet without spending money on marketing, it is difficult to capture customers. Pure-play providers don’t have local installers and technicians, which obstruct to influence the market to those who have the technical manpower to set up the service. If they would have technical savvy to set up VoIP and then they could grow interest among the people, especially to the young people. Because this group is very much incline to mobile and has little use of land line phone. Day by day the use of mobile phone are increasing among the young people studying in college and people living in apartment where do not have land phone line. Thus the market for pure-play VoIP is growing fast.
ReVoS Internet phone service is an example of a small VoIP provider taking just this strategy. They are focusing on a niche segment of people who make a lot of international calls. ReVoS offers VoIP service, which includes unlimited international calling to over 40 countries including the standard VoIP product offering for $24.95 per month. They have also developed a VoIP product that works over a mobile phone that doesn’t require a broadband connection. This is very attractive for the people to use cell phones of any demographic. This niche makes sense since carrying long distance call traffic is an inherent strength of the VoIP among the people other countries. This is favoring the position of VoIP saving people money on high cost international calls. This is an example of how a small VoIP provider can successfully compete against much more formidable competitors such as the Cable Companies and Vonage.
Fixed Mobile Convergence (FMC) is another technology wildcard that could change the shape of the competitive landscape. The overwhelming penetration of mobile phone service and mobile carriers’ ability to steal the show with a FMC offer is very real. This may be the competing technology that upsets the MSOs stronghold on VoIP. The question then becomes which bundled product offer is greater 1) Broadband and VoIP or 2) Mobile phone and VoIP. Another thing to consider is how Wireless VoIP (wVoIP) could change the competitive landscape and underlying telephony ecosystem if municipal hotspots and/or WiMax take off.
People want simplicity in their lives and the winners will be those who provide the most seamless solutions to people’s basic communications needs. For smaller VoIP providers to survive and make profit, they will need to meet strong niche needs that get overlooked by the mass adoption strategy, have a well defined and differentiated value proposition (Recall ESPN Mobile’s problem), efficient operations to control cost and low margins, low churn in order to compensate for limited total average revenue per subscriber (ARPU) absent a larger bundled product strategy, and the ability to benefit from viral marketing within the target markets. With all of this in place, there is a chance of survival for small VoIP providers.