Give us your DSL, your cable modems, and SOHOs that yearn to be free…

Last column, we asked readers for ideas about how to approach VoIP for a distributed global company highly reliant on DSL and cable modems. The response has been overwhelming and quite interesting, so we’d like to update the progress, correct some misconceptions, and ponder the impact for carriers – all in 750 words or less. Seems like some sort of SAT Advanced Placement test.

Last column, we asked readers for ideas about how to approach VoIP for a distributed global company highly reliant on DSL and cable modems.  The response has been overwhelming and quite interesting, so we’d like to update the progress, correct some misconceptions, and ponder the impact for carriers – all in 750 words or less.  Seems like some sort of SAT Advanced Placement test.

First and foremost, let us clarify some information related in our last column regarding ICG – initially provided to us by ICG, but which appears to be not quite as first represented.  So yes, on June 12th (the day we were placing our order), ICG decided to suspend orders in several new markets that they launched in January 2004 including the cities of Boston, Chicago, New York, Seattle and Washington D.C. Ultimately, ICG will close these markets because they do not foresee profitability in these cities for some time. The few existing customers in these cities are being transitioned to other providers. But ICG is not withdrawing VoicePipe nationally – it continues to serve 26 markets across the U.S. and in these core cities. “It is business as usual as we continue to serve these customers and take new orders,” says Susan Koehler, Director Communications for ICG.

Susan was kind enough to forward their marketing positioning for the product, which is focused on small and midsized businesses, SMB. ICG targets the market segment of 10-500 seats because a key component of VoicePipe is the quality of service associated with an ICG-provided T-1 for bandwidth dedicated to both voice and data.  Most SOHO businesses – ours included – do not want to spend the money associated with a dedicated T-1, because they usually have, or can get, a less-expensive DSL or cable modem broadband connection.  Bingo, right on, noticed that.

We think ICG is right, but also wrong, at the same time. Or put another way, given the monopoly being granted to the Telcos by their branch office in Washington (read: FCC), how do companies like ICG differentiate themselves? Based on the positioning above, it’s through superior quality and customer service. And the only way to get that quality assurance is by ‘owning’ the customer through the direct T-1 connections.

ICG does not feel it can compete with the customers without that chokehold over quality, and it doesn’t feel it can provide that quality using DSL or cable modem service. They’re probably right since they can’t get access to the links directly.

Since DSL and cable modems represent the lion’s share of growth in the U.S. for broadband, ICG is left to serve a shrinking segment of the market – those who will shift to a T-1 for all their locations – and a large number of users won’t have ICG as an option because of their reliance on DSL and cable modems. I know our firm, for one, is relying on the DSL and cable modem access links for, as ICG implies, cheap and easy access to bandwidth and it’s worked superbly thus far.

And therein lies the rub over the current Washington environment that is pro-Bell.  Competitors have no choice but to withdraw from the market (This is why Dan Moffat at DSL-reliant New Edge Networks has spent so much time in D.C. lobbying for his firm’s cause, as surely have executives from Covad, ICG and other impacted service providers.) Within the Bell regions, their resale prices for DSL are so high as to discourage competitors who want to build a national net reselling local loops. But the Bell companies still are largely regional entities, with Qwest the only thing close to a national offering.

So it’s we the customers who are getting screwed in the end, being left with fewer nationwide alternatives and having to kludge together premises-based gear using regional solutions, to try to replicate what should be a service provider driven capability.

I feel for the competitors. It’s got to be hard to abandon a base so large as the SOHO marketplace, particularly when more SMBs are becoming SMB/SOHO composites, like our firm.

So enough pessimism.  The optimistic side says that there hopefully are alternatives yet to be had.  Thanks to so many people like Biagio LaRosa, Brian Fischer, Dick Trivane, Brian Dall, Dale Booth, Andrew Burgert, Pavel Radda, Mark Sher, and others, we’re looking at some new options – some of the ideas we had previously looked at and rejected, but others we did not know about. Among the companies we hope to tell you more about in the near future are: network-based options such as TalkISP.com, Covad, VirtualPBX.com, Addavoice.com, Red Gap, MeritCall, and AccessLine, as well as hardware plays including Cisco, NetSapiens, and 3COM/NBX.  We like the idea that a lot of stuff is done in the network, because it offloads the SOHO links and dumbs down the requirements on prem. However, some of the products such as NetSapiens look fairly compelling. Stay tuned.