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Microsoft, Google, AOL and Yahoo as VoIP service providers?

Dec 14, 20052 mins

* Making voice calls via traditional PBXs is so yesterday

In our last newsletter, we reported that Cox Communications is now offering an unlimited voice-calling plan for a $2.50 promotional price when bundled with other services. Cable companies aren’t the only ones competing with phone companies by aggressively bundling voice calls into their core offering. Microsoft, Google, AOL and Yahoo are also nipping at the heels of the phone companies. 

Consider that in the past year:

* America Online updated Internet Services to include consumer VoIP and AOL’s TotalTalk brand.

* EBay spent $2.6 billion acquiring Skype, a “for-free” VoIP provider.

* Microsoft acquired Teleo to further advance MSN’s voice services, and integrated Microsoft Office Communicator with multiple IP-PBX suppliers to provide a unified messaging GUI.

* Google launched free instant messaging and computer-to-computer voice services.

* Yahoo acquired DialPad and integrated an upgraded voice service into its latest instant messaging package.

Our observations:

Eclipsing the earliest versions of PC-to-PC voice, today’s PC-to-PC offerings have solved many of the quality-of-service issues and are integrated with other information services.  

“On-net” voice calls are being offered “for free” in some cases, while “off-net” and calls from VoIP terminals to legacy phones have become very cheap. 

Voice calls are being re-purposed from being a core service that offers stand-alone revenue to becoming a differentiating feature on information portals and software applications. 

The million-dollar question: Will Microsoft, AOL, Google and Yahoo mean the end of phone companies? We think not – after all, the phone companies have other valued services of their own to add, such as field technicians and local loop.  Perhaps the question should be: How will the phone companies compete with value-added applications of their own when phone calls become free to anyone with a user terminal/computer and a broadband connection? Or maybe the best question is: Will advertising revenue for the likes of Google and Yahoo be enough for them to offer free phone service in the long term?