VoIP for soccer moms

Gearhead this week discusses some "interesting" issues with using Vonage, one of which is random service outages. This intrigues me because I'm pretty technical, and if it is really hard for me to get the problem solved, what does the soccer mom do when things go wrong?

And that's just the tip of the iceberg for Vonage. I predict the company will find the going a lot tougher over the next few months for several reasons.

The first is that the competition is heating up. Skype, for example, might become very competitive now that it is owned by eBay, although much depends on whether eBay can truly absorb and integrate Skype (debatable given that VoIP is hardly among eBay's core competencies).

Even more challenging is all the other VoIP providers. I recently read that more than 1,500 companies in the U.S. offer some form of VoIP. The majority provide service based on Session Initiation Protocol as does Vonage, but unlike Vonage these systems are interoperable - anyone to anyone else.

This is hugely important to Vonage's future. It is much like the early days of the 'Net when AOL initially lacked and then later offered only limited TCP/IP connectivity. If AOL had remained isolated it would be non-existent today. Such could be the fate of Vonage if it doesn't play nicely.

The third reason is pricing. Vonage offers all-you-can-eat calling for the U.S., Canada and Puerto Rico for $24.99 per month, while Broadvoice, for example, offers the same service with 19 more countries for $19.95 per month. Admittedly when you add up the costs of activation and other charges over the course of a year the difference only amounts to about $33 in Broadvoice's favor, although if you talk to, say, the U.K. for a couple of hours each week the difference would be more like $95 per year.

The point is that pricing pressure can only increase and Vonage with its customer base of now more than 1 million users is locked in to a business model and might have problems re-scaling to lower per-user revenues.

The best hope for Vonage is to be acquired by one of the Internet big boys . . . such as Google. Google is definitely interested in VoIP, and it has been widely reported that it has been talking with many of the main players, including, rumor has it, Vonage. Might we see "Goonage"?

But what about the telcos? Where are they in this market? Why are they so slow to make a move?

Remember what I wrote about corporations and their psychopathic nature last week? Large corporations behave in ways that make no sense unless you recognize that if they were individuals (as opposed to the law just treating them as such), they would be seen as antisocial, amoral, self-absorbed, incapable of empathy and, to use a term favored by psychiatrists everywhere, whack jobs of the first order.

It is because of this orientation that the telcos (large corporations if ever there were ones) are finding it hard to get off the dime - they are convinced they are the masters of the universe.

We know this to be true from the way they treat us on the phone, from the way they respond to our problems and from the way they will carry on profitable business that is technologically out of date despite consumer sentiment. Just consider the struggle to get a decent level of broadband penetration in this country.

The trouble is the telcos already make a lot of money doing what they do and it is a lot easier to block new ways of doing business than adapt when there isn't an obvious and immediate profit potential.

But at the root of VoIP businesses is a big problem: All VoIP providers are reliant at some point on someone else's transport, which limits their reliability and availability.

I just spent 80 minutes on the phone with a Vonage tech trying to find out what was wrong with my service. We finally concluded that on the path back to me two SBC routers are having problems. Will SBC care when I call? Will I find anyone who can take a look at the problem? What will the soccer moms do?

Your guess to backspin@gibbs.com or on Gibbsblog, specifically, the Vonage forum.

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