End of VoIP as we know it

FCC finally came down on VSPs and made e911 mandatory, giving them 120 days. The decision, at least to me was expected. For a while I have been saying if you are going to be like PSTN, then you have to meet the PSTN standards. Consumers expect their “phone” to work like a “phone” whether the calls come over narrowband or broadband. FCC’s decision, however tells me the freewheeling days of VoIP, the game of price arbitrage and mom-and-pop operators are over.

You will see more subtle regulation of the space, and as Andy points out that the development/hardware costs are going to make it impossible for the little ones to get out of business. The evolution of VoIP will follow the time-tested pattern: free for all, rapid consolidation, leaving four odd players in control of the market. In case of VoIP it might be six – three phone operators and three cable operators. Rest of the market will be fighting over scraps.

In my opinion, this is the best thing that could have happened to VoIP. Why? Because, as a PSTN replacement, VSPs were truly limiting the potential of the technology. For last 12 months I have argued that VoIP has to become transparent, voice embedded in everything.

If you think about it, the first generation VSPs are caught in a demographic death trap.

You have a large portion of US population – baby boomers – who are aging, and will find it hard to change their usage patterns when it comes to phones. They will be happy to buy cheaper (VoIP) phone service that comes bundled with cable connections. At the other end of the spectrum you have the below-21 crowd, that is more presence inclined. Allan Tumolillo of Probe Research pointed out two years ago that changing demographic are wireline phone service’s worst nightmare. Jeff Pulver and I chatted last week about this, and came to conclusion that today’s generation growing up on IM will find a fixed line phone service that runs on broadband, a 20th century anarchism.

What are going to be some of the new applications of Internet Voice? I don’t have clear idea right now, but rest assured, for I am on the job, trying to find answers and sharing them with you. Meanwhile, if you have any thoughts, do let me know.

Here are select reactions to what others think about the e911 ruling:

Jeff Pulver: Maybe the FCC’s E911 ruling will prove to be the kick in the butt that the IP-based communications community needed to move towards the end-to-end IP future. I’ve always found it unfortunate that too many people associated VoIP with PSTN long distance arbitrage. Frankly, the economic advantage and ability to arbitrage has been like heroin to many in the VoIP community keeping us from realizing our true potential while we collect revenue by arbitraging against the PSTN pricing umbrella.

Jon Arnold: The FCC can’t be seen as idle when fatal events occur and are being blamed on 911 letdowns. I don’t know how many times 911 mishaps have resulted in fatalities with subscribers to incumbent carriers, but the nature of the FCC’s decision seems heavy handed in the context of its potential impact on the emerging VoIP sector. The implication here is that the Kevin Martin administration may end up being less friendly to VoIP, and more friendly to the RBOCs, who would not mind seeing a few roadblocks out there for VoIP.

Tom Evslin: Because the HELP! Packet will come to the responders as IP, applications like mapping and call transfer – even to a mobile unit on its way to respond – can more easily be implemented than with today’s phone call based system. Devices like heart monitors will more easily be able to make their own IP 911 requests for help.

Andy Abramson: Today’s ruling by the FCC about E-911 may spur consolidation within the growing next generation VoIP industry here in the USA for one big reason. Development cost.

Voxilla: The action is anti-competitive, will prove costly to consumers and actually stifles the type of innovation that could lead to more robust and efficient emergency calling services.

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