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Summary:

Frost & Sullivan says that the North American VoIP residential revenues will hit $4.07 billion by 2010, up 1300% from 2004 sales of $295.1 million. Do some math here, you can very quickly find out that the numbers paint a pretty bleak picture for most VoIP […]

Frost & Sullivan says that the North American VoIP residential revenues will hit $4.07 billion by 2010, up 1300% from 2004 sales of $295.1 million. Do some math here, you can very quickly find out that the numbers paint a pretty bleak picture for most VoIP providers. They are forecasting VoIP lines to grow from 1.5 million in 2004 to 18 million. By all estimates, 2004 the total US VoIP lines were about a million. Given the late start of Canadian VoIP, I find the 1.5 million number hard to believe. But that’s me nitpicking.

$4.07 billion divided by 18 million lines works out to annual VoIP revenues of $226 per line. Or about, $18 a month. “Residential subscribers are likely to replace second lines with wireless or VoIP,” Frost & Sullivan Senior Analyst Lynda Starr said in a statement. What she did not say – if her forecast is true, then residential VoIP is nothing but a cheap tack-on service. Unless you are bundling VoIP service with cable or DSL service, or packaging it as a part of some triple-play offering, there is little chance of making money in this game. Research from In-Stat supports this. Nearly half of US telecom customers are buying some sort of a bundle from their service provider, up from just one-third in 2004. SBC softphone for $10 a month? I will take that!

And if you are a VC looking to cash-in on the VoIP madness, think again!

  1. VOIP’s Residential Growth in North America

    Om Malik offers up his usual keen insight into market statistics being offered by Frost & Sullivan about the North American VOIP market. Frost & Sullivan suggests residential revenue will hit $4.07-billion by 2010 from $295.1 million in 2004. Om does s…

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  2. Thomas Hirsch Thursday, July 21, 2005

    Om — How can anyone predict where VoIP (or anything else) will be 5 years from now? I would discount the Frosty report 100 percent. You say independent VoIP providers don’t have a chance. Wrong. Keep these factors in mind:

    1. The main cost for Vonage now is acquiring customers. Once you have them, the monthly fee is about 75 percent profit. So, big profits ahead.

    2. Now, as VoIP is trying to become mainstream, it offers all kinds of special features free. Expect that to change big time in the years ahead. My local provider, Sprint, charges $9 per month for CallerID. Expect VoIP providers to start charging for special features in a year or so.

    3. Deltathree right now is slightly profitable while receiving about $4 to $9 per month from the VoIP lines it runs for others. DDDC is profitable because it keeps customer acquisitions low by letting the front companies (such as Verizon) do the acquiring.

    4. Note that Verizon’s VoiceWing has increased charges significantly in the past few months. Non-VZ customers are charged 34.95 (plus tax) per month.

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  3. Thomas Hirsch Thursday, July 21, 2005

    Note that Verizon charges current customers $29.95 for VoiceWing — but that increases to 34.95 after 12 months.

    Note that VZ has in effect increased prices even more because Canada is no longer included in the unlimited plan.

    VZ recently dropped its mid-range ca 25.00 VoIP plan. It also offers a 19.95 plan but that only includes 500 minutes so very, very few people will consider that.

    The fact that Verizon can increase prices significantly must indicate very strong demand for VoIP.

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  4. Thomas Hirsch Thursday, July 21, 2005
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  5. Thomas good points, except Voicewing is not a business that is growing… it won’t grow because right nnow the price pressure is too much, and will continue that wy for some time. as i said, the standalone offerings will have a tough time in the market.

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  6. Thomas Hirsch Thursday, July 21, 2005

    Om — On what hard evidence do you say that VoiceWing is not growing????

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  7. Thomas Hirsch Thursday, July 21, 2005

    Om — VoiceWing is not standalone. It is offered by Verizon, and is prominently featured on Verizon’s main Web page.

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  8. thomas, i am a reporter, and i don’t reveal my sources. i have on good authority that they are not growing that much. by the way, voicewing is a standalone for those who don’t live in the verizon footprint. i think when they make it part of their triple play package, it could sizzle.

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  9. Thomas Hirsch Thursday, July 21, 2005

    Om – First you say that VoiceWing is “not growing.” Now you say VoiceWing is “not growing that much.”

    Why not reveal your source? Did the source commit a crime? Does the source work for a VoiceWing competitor? Does the source even exist?

    How often does a person signing up for VZ broadband also sign up for VoiceWing?
    Is VZ broadband growing much?

    Om — Either be exact or your blog loses almost all its value. We do not need more unsubstantiated opinions, of which there are far too many now.

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  10. here is the thing. if they add say 100 users to 200 users, its growing, but not that much in larger scheme of things. i think you are nit picking on the semantincs here. and why the hell should i reveal my source. you take this information for what it is. or not.

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