| VoIP
Pioneers see their Market Share Erode Big brands begin to flex consumer marketing muscle BY AL SENIA the electronic edition of America's Network The VoIP industry pioneers such as Vonage, Packet8, Voice Pulse and others are seeing their market share hammered as top brand names such as AT&T, Cablevision and others move forcefully into the consumer telephone space, according to a new research report released by the Yankee Group. The report, prepared by Kate Griffin, Yankee Group senior analyst for consumer technologies and services, finds that the smaller "alternative voice" providers will see their residential VoIP market share plunge from 66% at the end of 2003 to just 19% by the end of next year. Traditional telcos, primarily RBOCs, ILECs and IXCs, will drop in market share from 34% in 2003 to 25% in 2005. A new breed of player - the cable MSOs - will grab a 56% markeshare next year from virtually nothing last year, the report says. "Alternative voice providers lose market share every day to the major players," Griffin concludes. "MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers." Griffin sees evidence that the smaller industry pioneers already are sniffing out new approaches, business models and features to stay competitive. Vonage, for example, added a lowertiered, lower priced VoIP offering. Nuvio launched its consumer VoIP service in January, but now focuses on developing private-label partnerships with telecom, wireless and cable companies. VoiceGlo, which launched broadband VoIP service in the third quarter of 2003, now focuses on a PC-based VoIP service that resembles that of Skype. More industry pioneers could head for the exits as they are forced to compete in a more demanding mass market that favors big brands offering services like 24/7 customer support, truck rollouts to simplify provisioning and new, more efficient billing systems.  MASS MARKET APPEAL The market share shift is occurring at a time when the VoIP industry is booming, and cable companies are moving much more aggressively into the phone market to compete more effectively with regional Bells. In many cases, the MSOs are turning to big names like AT&T to provide their VoIP services. Overall, VoIP subscribers will hit 1 million by the end of 2004, according to the Yankee Group, up from just 131,000 last year. However, the firm expects 17.5 million U.S. households to go with VoIP by 2008. That huge growth might allow many of the early industry pioneers to survive if they adopt realistic business plans, says Griffin. "The early adopters aren't going to singlehandedly overturn the RBOCs," she notes. "But if they set their targets on realistic growth, they can still be a profitable business." One factor helping is their broad national reach. The MSOs typically are limited to specific geographic areas where they have the cable franchise. Even so, the smaller pioneer providers face dangers from escalating price wars, limited resources and unknown brand names that limit their addressable market to niche segments, according to the report. With the window of opportunity in the VoIP provider field rapidly closing for new entrants, the focus needs to be on quality, customer service and differentiat-ed functionality to thrive. "Vonage's success has shown there is a market for a besteffort, lower priced telephone service," says Griffin. "However, in the next several months these early market entrants will face tough competition from battle-tested telephone and cable MSO ready to fight for local VoIP leadership." |
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