The year of Vintage VoIP

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Normally I don’t quote directly from research reports, but my friends at Current Analysis had a very interesting piece on Covad-GoBeam deal. Here is what they say:

bq. This year is shaping up to be a vintage year for VoIP services. SBC has already made its splash in the market, announcing in November 2003 that it built out its portfolio by adding a hosted VoIP service. SBC’s service is now in more than 18 metro markets for business customers and expected to reach 100 by the end of the year. Other carriers such as AT&T and MCI have their own flavors in place as well, making for an increasingly crowded market that requires players to be more aggressive in differentiating their services. For Covad, it’s the right move to make, and one that will help its strategic efforts to expand its business into a broader communications company. The challenge will be to get the right mix of sales and marketing efforts in place to capitalize on these new services.

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Jim Johnston

Facilities based carriers are going to have the advantage in the long run. Where Vonage may have first mover advantage, in the long run, their cost structure and scalability will hurt them. Their obvious strategy is to grow as fast as possible (eg, add subscribers) and sell to one of the CLEC’s. SBC’s hosted Avid VoIP service just moves equipment from customer prem to SBC’s. They can control quality of service but still more expensive to end-user then conventional telco rollout. Covad may be able to combine both of these strengths- facilities based/QoS with an attractive business price point The majority of business telco users are still in the 4-10 line space. Covad already plays very well in that area with their DSL data service. If Covad can execute (which may be doubtful), they may be a stretch run winner in the VoIP arena.

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