VoIP - Not good enough... yet.

Summary

Today, VoIP may not be the appropriate choice for most mass-market situations, but that day is coming soon. As the technology hurdles are crossed, deployment to the mass-market comes closer and closer. Those businesses that prepare and test the waters early will be able to use what they have learnt when the market expands.

Actions

In VoIP's value network, what are the business opportunities for your business? Is it the hardware, internet/data access, VoIP connectivity, communications software or something else? Will you need to team with others? How will you collect and bill the information for those products? Will your solution require information and/or revenue sharing?
Examine whether your existing customer and/or product segmentation is still appropriate.
Will you require different marketing messages for VoIP? e.g. Vonage's marketing of local rather than interstate phone numbers to reduce the customer's calling costs
As a VoIP provider, examine how (and if) your VoIP systems will address interconnection with PSTN, mobile and data network providers. This includes the interconnect settlement requirement of other providers with your network.
Based on your answers to the above, can your existing systems capture and bill for VoIP?

Link: Jump to the Links section at the end of this column.

Innovations - not good enough yet...

The two books listed in this column's links ('The Innovator's Dilemma' and 'The Innovator's Solution') outline how new technologies and products, that eventually replace incumbents, are initially dismissed as inappropriate. The new products are seen as too slow, of poorer quality, inappropriate in the mainstream case, and not having all the features that 'customer's demand'.

For VoIP (and similar IP-based communications), these failings have included the sound quality and, when teamed with a video image, the incomplete and slow refresh rates of the pictures. Until relatively recently most VoIP had been performed over dial-up lines and this further hampered the quality of communication. Users also needed a computer with the appropriate hardware (soundcard, microphone), could only talk to other computers, and were geographically limited to the room in which the computer was located.

It is also worth remembering that mobile phones were once seen as an inappropriate technology for the mass-market - coverage was poor, handsets were too large, you couldn't use them when you traveled, and the call costs were excessive - only the few who found their specific benefits outweighed their failings used them...

Until...

However things are changing for VoIP. Data compression has improved to the point where conversations of suitable clarity can be performed internationally across dial-up lines. Broadband connections are becoming more common. By combining VoIP and WiFi, users are no longer tied to their computer's location.

Gradually what was 'not good enough' is becoming suitable for everyday use. For example, by linking the US and Australia with VoIP technologies and using a WiFi enabled laptop with a camera, grandparents can watch their grandson have breakfast whilst discussing the day's events with his parents. This scenario forms a compelling proposition to customers when, based on 'all you can eat' broadband, WiFi enabled infrastructure in the home and suitable price points for the hardware, there is no additional charge for untimed video/phone calls to anywhere in the world.

Supporting VoIP

The VoIP scenario outlined above is being nurtured by:

Decreasing costs for data connectivity: The customer's ability to access the internet on an 'all you can eat basis' allows them to connect without concern for how much it will cost (i.e. no 'download' metering).
Available hardware at consumer price points: The necessary hardware has dropped in cost encouraging customers' purchase of the hardware. This is further enhanced by the network effect if your friends and family can also afford the hardware. Widespread availability of compatible hardware means that internationally separated groups can obtain the necessary pieces locally to support their distributed communication needs.
Deployed with in-built capability: As hardware manufacturers include new product features to compete against one another, they are including the necessary VoIP infrastructure in customers' existing purchases. This avoids the need for additional VoIP-specific purchase decision. DSL and cable modems / routers are including WiFi connections, and computers (especially laptops) are coming WiFi-enabled. This allows people to connect via public WiFi 'hotspots' and home-based wireless networks.

Items to be addressed

Interconnection with the PSTN and mobile networks is often charged on a 'per minute' basis. Whilst this situation holds, the interconnection of VoIP and PSTN/mobile networks will require more complex customer billing and settlement processing by the VoIP provider. A similar billing and settlement requirement exists where network providers charge for data peering.

Retaining a 'lights out' communication method

PSTN retains an engineering benefit not available in other communication methods - when the lights go out the PSTN phone continues to deliver dial tone. This was demonstrated in the US in August 2003 when the electricity went out for a large geographical region from Canada down to New York City.

Computers and VoIP don't work very well (at the consumer's end) without power - even consumers' mobile phones were challenged as the mobile phone base station's batteries ran out. Only the PSTN network with its redundant power supplies continued to be available.

This may provide an opportunity to businesses that can provide the benefits of VoIP features and prices, with the 'lights out' capability of PSTN.

Links

Has VoIP reached a tipping point? (Graeme Lynch's weblog - bandwidthblog) - Includes a comment from Graeme Lynch that VoIP looks like an easy decision for connecting his reporting staff spread across the globe.
SingTel and SIPphone form strategic partnership to deliver SIP VoIP services worldwide (Singtel news release) - The planned offering will support SIP-to-SIP as well as SIP-to/from-PSTN calls.
Mobile phone towers lose electricity during the power outage in the US north-east in August 2003.(CNN)
Clay Shirky's writings on a possible VoIP future that involves VoIP installed and controlled at the customer's premises rather than controlled by the phone company.
Vonage whose tagline is 'The Broadband Phone Company'.
Book: The Innovator's Dilemma (Author: Clayton M. Christensen) (Amazon)
Book: The Innovator's Solution (Authors: Clayton M. Christensen and Michael E. Raynor) (Amazon)