Nothing But The V-Thang

[qi:86] James Seng, a fellow VoIP blogger from Singapore, was in town last week. We met up one afternoon for coffee, and my first question to him was: Why are you blogging less about VoIP these days? He expressed dismay at the lack of excitement in the sector right now; after all, how many times can one drum up enthusiasm for a USB phone or a soft phone? We agreed that VoIP is stuck in a “cheap calling” rut, and that it doesn’t appear to be going away anytime soon.

With the consumer market saturated, venture capitalists are funding companies that are trying to cater to small- and medium-sized businesses. Redwood City, CA-based RingCentral, a provider of web-based phone and fax services for professionals and small businesses, said today that it has raised $12 million from Khosla Ventures and Sequoia Capital. (I had erroneously said they were based in Denver.)

There is nothing about RingCentral that distinguishes it from countless other firms chasing the same opportunity and as such, nothing to convince me that they will not meet the fate of dozens of other small competitive service providers. In fact, the odds are stacked against a company like RingCentral. Not only do they have to compete with the phone companies, but they also have to contend with the cable operators, whose efforts to woo the small-and medium-sized business market are even more ambitious.

“Cheap calling” is a no-win business — the volumes need to be substantial in order to turn a profit. That is one of the reasons why I happen to be hesitant about Cubic Telecom, an Irish company looking to save you money on mobile phone roaming charges by offering a special SIM card that gives you up to 50 local numbers and turns every international call into a local one.

It’s a clever idea, and it’s addressing a pain point, but the founders have to execute flawlessly or they’ll see someone else do them one better. (Markus Goebel does a great job comparing Cubic to other offers on the market.)

The problem with competing on price is that the incumbents always have the scale advantage, which lets them play the game more effectively, especially given their bigger marketing reach. That’s one of the reasons why Vonage, despite its early start, is finding itself on the wrong side of the equation.

VoIP needs to break out of its rut and do something more interesting. The recent Facebook experiments by guys like Free World Dialup and iotum give us hope, but a lot has to happen there. Surj Patel recently threw up some ideas, but there has to be more. Care to contribute?

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