VoIP: Dead or Alive?

62 Comments

wantedposterFor the past few days, the VoIP community has been indulging in a bit of soul-searching. The debate: Is VoIP dead? To pragmatists such as Alec Saunders, the answer is yes. In his well-reasoned polemic, “2008: The Year VoIP Died,” he succinctly writes, “Voice over IP is just a transport and signaling technology. It’s plumbing.” Harsh, but true!

Of course, on the other side of the debate are folks such as Jeff Pulver and Jon Arnold, both with deep interests in the success of VoIP, who seem to think that VoIP is in for a renaissance. Pulver argues that we are going through Internet Communications Continuum, or “the continued evolution of the IP Communications Industry. In my case, this continuum represents all forms of IP Communications, including: VoIP, Instant Messaging, Presence, IP Signaling, Internet TV, Unified Communications, Social Media and more.”

They continue to think of VoIP as a revolution. The reality, however, is more mundane and as Alec said, boring. Where do we come out on this debate? On the side of realism. About two months ago, Ian Bell on our behalf analyzed the state of VoIP and why it was “dead.” We were egged on by some comments made by Skype’s general manager of voice and video, Jonathan Christensen, at an industry conference a few weeks ago.

Towards the end of that post, Ian pointed out that the current spate of problems facing the VoIP sector was lack of imagination on the part of the industry because its players went “after low-hanging fruit and forcing their innovations to be defined within the walls of the PSTN.” It is not just the failed voice service providers who took the easy way out, but also the so-called social voice innovators.

My friend Daemon sees a lot of hope in the new services that are emerging, but I remain skeptical. Not because I am a hater. Far from it. It is just that the VoIP landscape is littered with carcasses of companies that represented mediocrity and marginal ideas. There is some hope on the horizon, but we have been fooled before.

What side are you on?

[polldaddy poll=1239083]

62 Comments

AustinTX

VOIP is both a landline replacement and a potential monopoly buster at the same time. The monopolies have successfully stalled VOIP growth, due to their gateway fees and interference with VOIP transmissions across broadband, but have not yet successfully killed nor eaten VOIP.

VOIP seems to be heartilly accepted by businesses and others who are committed to using landlines, because these customers are financially and technically aware of how badly the telcos have been overcharging them.

Residential customers are still too attached to the novelty and freedom of their wireless cell phones to object to the Draconian terms of their service contracts. They either don’t understand or realize that cellular networks are an order of magnitude cheaper to operate than wired networks, due to the ease of deploying cell towers and the convienience of eliminating so much maintenance and service calls.

These wireless customers will likely still jump ship the second someone offers a truely cheaper alternative. VOIP could do this if they could only bridge the wireless gap. One solution might be generic residential cellular femtocells that transport wireless calls over the Internet via VOIP… so we can continue to use our beloved cell phones and PDAs. These cells would be low-powered, so they won’t need to be licensed. Folks would use them by configuring their handset menu to use them as their “preferred carrier”. This will probably happen long before cellcos permit toll-busting VOIP apps running on their branded and locked handsets.

Alternately, VOIP providers could flood the market with cheap-or-free wifi VOIP handsets, combined with a login helper that identifies participating hotspots, and establishes contact with the VOIP provider or directly with remote handsets. The login helper would display available credit, store usernames, passwords, and WPA keys so that virtually any wifi router would work. Anyone who operates a wifi hotspot could share the profit, by-the-minute, by opting into the program. This idea resembles what Fon.com was concieved to do (a PC app providing wifi hotspots in adhoc mode for VOIP handsets – they’ve long since abandoned this idea to sell proprietary wifi routers), combined with what Whisher.com’s wifi manager replacement does.

Disclosure: I blog about Fon and am friends with Mike Puchol of Whisher.

Dameon Welch-Abernathy

VoIP is dead like TCP/IP is dead. Still widely used and still pissing off the incumbent telcos :)

Normal people don’t care about VoIP. They just want it to work, whatever technology it is.

Mike Puchol

Statements like “At least I wouldn’t even consider PSTN for a new company’s phone system, voip is much cheaper and supports a lot more services.” are what I was referring to when I mentioned VoIP being stillborn – exactly how are you going to run VoIP without a broadband connection running over PSTN or cable? And, have you found a provider that will give you such line for free? Of course not. The telcos will still get their monthly minimum for whatever services you need to contract so you can run your packets back and forth. If their call minutes start getting seriously hit by VoIP services, they will raise the monthly minimum rate to cover the loss, or even end up earning more from users who fluctuate in their monthly usage and end up paying more on average.

Has anyone done an industry-wide study on telco revenues over the past 6-7 years? This would clearly show if VoIP is affecting their bottom line or not. If it does not, then they could care less what you use to call your mom on the other side of the planet, and VoIP will thrive.

Regarding mobile, most data plans that have large allowances are also very expensive, so it’s debatable that VoIP over mobile data is cheap.

Ari Rabban

From all the recent posts about “Is VoIP Dead” only Alec tried to define what this means. I don’t agree with the definition because it is not the academic or “official” meaning that we are looking at :-)

.. and when we do claim VoIP is dead what do we mean? Do we mean there will be no M&A worth over $X millions? No VCs poring money (once they put money anywhere again)? No IPOs for VoIP related companies? (if we ever have IPOs again)

Should we not ask about innovation in VoIP? Does anyone think it does not exist? As my partner Alon Cohen and also colleague Scott Petrack told me a couple of years ago, the industry solved most of the issues that have to do with the technology. It is about marketing and selling now. Look what we reached in less than 15 years.

Most of the discussion seems to me because some voip application start ups failed (especially this past year) and because some bigger (public) firms are not performing (but who is these days)? (and leave Vonage aside).

VoIP as a “stand alone” industry is gone for several years. We (who have been around voIP) all remember when VoIP companies were less than 5% of a Supercomm and now days it is pretty much parallel (OK – Supercomm is not what it used to be). Yes, it is harder to look at VoIP as a stand alone, niche segment of the telecom market where we all know each other (we all miss Jeff’s parties) but in the last two years I recognized less and less faces, isn’t that a good thing? And speaking of VoIP events, ITExpo is alive and kicking and adding a new mobile play with a new team that knows a thing or two about a voip event 

So to say VoIP is dead is to say Telecom is dead. Telecom is alive and innovation in telecom is alive (and frankly all of it includes “VoIP”). I think that is what Andy was trying to say. Lets not confuse “cool applications” with Communications and VoIP infrastructure and enterprise solutions and mobile solutions etc etc.

Stephen

How is VoIP dead when Comcast is now the 4th largest phone company in the US? When cable triple play is so popular that is has taken away millions of customers from telcos? When telcos themselves are looking at VoIP?

If you want to say Vonage type companies that do one thing are dead, I would agree! VoIP use has risen to be commonplace.

Subhankar Ray

“It is never too late, that’s why they invented death” – a wise man said. In that sense, VOIP is alive and kicking on my desktop through Skype.

Happy new year, and a good weekend for all!

Subhankar ray

Bukkiah Golden

The point is that landline is dead! Everyone is using their Cell. Rightly so, I should say. VOIP was tied to a large degree to landline because they could save the most because they were wasting the most, like the “most improved prize for the dumb kid”. So the VOIP as implemented Vonage, etc. are landline replacements, so they are catching the last peak of a falling wave.
An analog might be “The guy who invented the absolute best arrow, just before guns got more popular then bows.”
Cellular companies will eventually be the only direct to consumer phone company around. Landline companies will be relaguted to selling bandwidth and turn into ISPs.
BUT the arrow of VoIP also works in Guns. (i.e. VOIP can work over wireless too!)
The Google move with the WiMax radio space is the most exciting thing I’ve heard about in a while. This means that VoIP could catch the rising wave of wireless communications. Which at current could still be based around a WiMax (or any other high speed long range data protocol) provider (which might still be a big company) teaming up (or providing as a service, VOIP over WiMax (or other h.s.l.r.d.p.). Then you will see the revival of VoIP and WiMax capable 5G handsets.
You could even see an overturn of the voice market by way of individuals setting up WiMax stations that they would provide for free or peanuts, and everyone agrees to share/contribute to a giant database akin to DNS to sort out the numbers.
This would relagate the current phone companies (landline AND cellular) to only bridge to the genuine legacy. Still gotta call Grandma. But eventually no one will want to pay for it and the IPOD generation will leave all of the phone companies as glorified ISPs.

This is why the cells are fighting google so hard and using every ounce of influence with the FCC. This is the fight we should all fight, call your congressman and tell him to stop the FCC from “selling our radiowaves” and “deliver them back to US”!

Roger Toennis

The question is a red herring that misses the real problem. VoIP is a technology that is neither dead nor alive in any sense of those words.

The problem is that the primary market for VoIP-based solutions, medium to large 20th century style enterprise, are collapsing and will go through a 5 to 10 year restructuring in the basics of how they operate. This will drive VoIP players to rethink how they provide value.

During this restructuring period the fortune 500/global 2000 will shed their 20th century hierarchical , slow moving corporate structures. They will find new ways to operate more as conglomerations of small, fast moving companies loosely bound under an overall brand; or they will die. This will leave them with little time to aggressively adopt VoIP for VoIP’s sake if they are still on TDM. For those already on VoIP they will hunker down and limit their adoption of any advanced, add-on and premise-deployed VoIP applications. They will demand lower services support pricing from their vendors and demand higher reliability and easier in-house maintenance.

On the carrier front, for now, there really is no viable business model for VoIP. Carrier VoIP has no compelling story for customers beyond possible price reductions and customers are almost certain to see reductions in voice quality and continuity of service with carrier VoIP. Carriers meanwhile are killing their margins trying to roll out voIp with no clear vision as to why it is a good thing for them to do. It’s just technology for technologies sake in their core markets. If Small/medium businesses do move off carrier TDM they are, IMO, better off for now going pure cellular for business numbers versus adopting carrier VoIP. Frankly, carrier VoIP offers suck for SMB customers.

However, in the long run, packet based communications (VoIP) will certainly be ubiquitous 10 years from now. The real disruption will happen in how businesses consume VoIP. Today big businesses consume it and get value as a result of scale, depreciation of assets, advanced features and advanced app; mainly call center. In the future all sizes of business will move away from buying premise-based VoIP and will go to a next gen , hybrid model of leased premise equipment and sunscription-based payment for services.

But the current carriers will not be players by then in selling advanced realtime collaboration/communication services. They will have been subsumed as infrastructure “pipe” by Cable MSOs, “new media” companies like google, apple, salesforce.com, etc; and the ‘yet to emerge’ players.

So if you are a VoIP technology vendor; plan your strategy accordingly and you will succeed.

Roger

Marc Hershaft

I use Vonage for the home phone and Skype for my home-office phone. I see many of my clients use VOIP technology inside. I think VOIP is far from dead.

Jahangir Raina

i have been following VoIP for several years. And frankly speaking I don’t know what I have been following!!! The best times VoIP had was when softswitches were deployed left right and center. And softswitches were merely bridging PSTN. So even the most exciting times were rather boring.

voice as an application has created trillions of dollars of wealth over the last one century. I think we can give it a rest!

Jebb Dykstra

IP as a transport medium is alive and well for the internet, cable, IPTV and voice. Maybe it is just plumbing.If so and if VOIP is defined separately from IP, then OM and others can make any arguments and make them persuasive. But when all exchanges of packets can enable presence, IM, txt msg, voice, video con, video chat, and RMA app’s and/or meetings. But VOIP and its new progeny will continue to evolve into fantastic new applications.

Just as an example, the enterprise sw market is now adopting Skype-like applications with Unified Communications and Messaging solutions. AT&T and Verizon are migrating to an all IP infrastructure. Cable operators are heavily reliant on IP. IPTV is growing worldwide. Jeff Pulver is spot-on that advanced IP communications are already the source of the next generation of VOIP-like applications in a browser only environment. I guest the question is “how smart will the VOIP or IP plumbing get?” But VOIP is not dead, it is just gettting re-defined and evolving.

Ben Ortega

Such an interesting debate…is VoIP dead.

What is it that is presented as “dead”…the new way of transporting voice or is it the VoIP that was created to disrupt the PSTN and enter in a new way of communicating?

If you look at both of those, I think the “VoIP” we’ve come to know as being a new way of transporting voice is dead but “dead” but in a good way. Carriers fully understand the benefits and if they don’t by this point, they are way behind; WAY BEHIND. Back in 2000, it was all about cost savings and dealing with data traffic. That’s all change today as carriers are being ever more critical of their infrastructure investments. They want to know where and how to make the extra money but they still can only see, “infrastructure savings”. Dead view!

Now to the better part of the debate, is VoIP dead when thinking about what it was intended to do; break down the carrier monopoly and provide for new ways of communicating. In this sense, and I agree with Jeff P., we truly haven’t seen anything yet. I think the change in the way people are communicating is at its early stages of development. Maybe a 1-2 years in. Example: I was at a developer meetup in Cambridge and a 17 year old wanted to build an app so that when he’s walking down the street, he can find someone in his area that’s walking too and shares similar interests. Purpose? So he had someone to talk to while walking. An entirely new way of “communicating” There are other apps that can do that but the fact is, that’s what he (17 year old) wanted and ultimately, he may pay for (target demographic). None of this was of interest to carriers, since they just wanted to use VoIP to save money but now, they need to get apps like this into distribution because that is what the next generation wants. They don’t know how and this is where the opportunity still exists.

I think another reason we are even having this debate is because those who have been spearheading this over the years have gone stale. They don’t get it anymore and can no longer relate to what consumers want from their service. I wrote about something like this on my blog (http://phivetacos.blogspot.com/2008/06/decisions-made-by-non-users.html).

So after all that…I don’t think its dead by any means; just in a holding pattern while those controlling it, get a clue or make room for those that DO get it.

Long live VoIP…

Rob Adler

This discussion is like listening to optimists and and pessimists arguing over whether the VoIP glass is half full or half empty. Both sides are right, but the argument never ends.

The bottom line is that VoIP is a how, and not an end or a business model. It is one piece of IP commuications which includes data and video.

That said, IP Communications is now starting to deliver on its promise. It is being integrated into great applications and services like Unified Communications, and Voice to Text. Over time, Web 2.0 applications will incorporate voice, and voice will be an important interface for mobile applications. People should check out eComm Conference to see where VoIP or IP Communcations (your choice) is heading.

gheorghe

Well, I think voip running freely on the internet and everyone talking for free isn’t going to happen anytime soon. Obviously the carriers do not want this, but they can use it in their infrastructure to reduce costs. I read somewhere that 50% of the international calls handled by traditional pstn carriers are made through voip. While I don’t think it’s as big as 50%, voip is dirt cheap for international calls and it will probably grow in that sector.

Also, a lot of companies are replacing traditional PBXs with voip ones, or are adding voip to their traditional PBX to support new services, unified communications and all that stuff. At least I wouldn’t even consider PSTN for a new company’s phone system, voip is much cheaper and supports a lot more services.

So, while the revolution is not going to happen because of carrier’s interests and technological problems, cool web 2.0 like voip services won’t be making any money, voip will still grow replacing existing infrastructure.

Michael Jackson

Carrying voice over the internet has never been more alive. When I first started working with Voip in 1996, VoIP was used as a toll bypass service – cheap calling, and bypassing the very prevalent monopolies of the day. Some operators attempted to form businesses around this – Vonage, the best known in the US. They had the fantastic idea of replacing the phone on your wall with….. the phone on your wall, just a bit cheaper. The same idea as MCI in the mid 90s. A good arbitrage model, that lasts as long as price differentials continue. As these differentials erode, the value proposition erodes, and the companies die. Just as callback services and similar died, so will these.

But the internet has evolved in this time. In 1996, no end user connection was capable of supporting a voice call. When Skype started in 2003, broadband home connection were the exception rather than the norm. Today effectively all households in the world can access a broadband connection, capable of supporting voice and video connections, and every mobile phone is connected to a low bandwidth version capable of supporting messaging, presence and status updates.

This always-on network of devices is building the ubiquitous communications network of the future. Multi modal, feature rich, and customisable from the simplest to the most complex interface.

Skype is becoming an incredible network of connected video devices on the planet. High quality, presence rich communications is enabling more and more people , with less and less technical expertise to enjoy contact with each other.

The facts speak for themselves: open, high quality, feature rich communications is growing faster than ever.

Easy communications brings people together.

In fact, I would say that communications over the Internet represent the best chance we have of achieving the dream of world peace. Certainly better than most of the inane projects I read about on some of these tech blogs.

That’s a long way from dead.

(The author is no longer employed at Skype, although his computers remains firmly connected)

Om Malik

@All,

Lots of interesting comments. I am going to take sometime answering those. Meanwhile a friend of mine emailed me (he wants to remain anonymous) and had this to say:

“My $0.02 about VoIP; I think that over-the-top VoIp (Vonage, ….) is in a coma. But, VoIP by cable is doing quite well. Also, 3G/4G use one form or another of Voice over Packet. It is mainstream on one side, thus no attention and dead for others.”

I think that is the right state right now. I am struggling to find the next big VoIP idea. I think as @Michael Cerda sums it up, things are at best — listless for now. On the interesting end of things, the one experiment that is rather smart use of the plumbing is what @Pat is doing with his company, MAXroam.

Anyway @Jeff Pulver, I hope you are right and we are going to see some magic. Maybe ;-)

David Vaughan

I follow with many of the previous posters that VoIP is not dead, it just hit a huge roadblock. The revolution is still there, as was previously said many large companies use VoIP for intra/inter office communication and beyond more now than 3 years ago. The start-ups that died were mostly to VERY poor management and calculatin of money, but retail VoIP is nothing but growing, just look at all the companies trying to get a bigger market share such as comcast and Verizon FiOS.
The issues with VoIP are all the traditional bigboys are trying to figure out how to make the biggest profit while trying to strong arm the young innovators out of the way and infrastucture in this country needs a major overhaul in order to maintain and promote the growth for options as true e911, smart life(think smart home but bigger)

I could go on and on….but I think the topic of this article should be made a little more clear. What part of VoIP is dead?

Vipin

Certainly VOIP is not dead yet as you can see from several comments above. However the bigger question is are VOIP startups profitable? If not, could that lead to death of VOIP in near future?

Problem is that it is very good for users, but since everyone wants free/cheapest call, service providers are not making big money out of it and several still looking for a business model.

Libran Lover

I don’t know why you’d think that VoIP is dead. I keep seeing people switching to VoIP telephony on a regular basis. Do you know how many families in India are starting to get Vonage or Skype phones to call family and friends in the US? The way it works – their family or friends in the US sign up for Vonage or Skype service, and take the router/phone with them to India. You are a regular user of Truphone yourself. Together, we are all saving hundreds of thousands of dollars every year on international calls alone. I personally have an entire year’s worth of calling to all US and Canada numbers for just 65 bucks – repeat, for an ENTIRE year. So, how can you say VoIP is dead?

Let me word my question differently – what should be happening for you to say that VoIP is alive and kicking?

Pat Phelan

Om
I think its not that voip is dead, its that its plumbing, that’s all
The average man on the street doesn’t even know what voip is, the same as the average man on the street doesn’t know what a transmission bearing in his car does.
He just knows that his car doesn’t work without it.
We need to move away from this “vooip is dead discussion” its now mainstream, its just another transmission protocol.
We use voip at MAXroam, does the customer know, he doesn’t and he doesn’t care, he gets cheaper roaming and that’s all he is interested in.
Great post to begin the year with.

James Gardiner

VoIP is far from dead.
I and my company use it as our main calling technology with a few ISDN as backups. We have remote offices etc. bringing all the advantages. If anything, VoIP as a profitable business is a questional future as, like said, its plumming anyone can go and impement. So no money in it traditionally and as such, to the traditional voice business industry it is dead.

VoIP is so now, it is not funny. Its simply a part of the revolution that is the Internet. However, it is getting over shaddowed by all the hype and crud like Twitter, Facebook, and other non-profitable Web2.0 bubbles.

James

Mike Puchol

It’s not that consumer VoIP is dead – it was stillborn. There is simply -no- way to disrupt the services needed to run the new disrupting service. Confused? An example: many evangelists predicted VoIP would mean the end of traditional telcos as we knew them, by allowing people to freely call each other using their broadband connections. What they fail to mention is who exactly provides these broadband connections – in essence the very same people that give you a phone service. In very rare cases would someone have a voice services provider who is different from their broadband provider. Thus, if you put the telcos out of business, over which broadband is your VoIP going to travel now?

There is a niche for VoIP in corporate setups, to link remote offices who would otherwise be paying expensive long-distance or international charges, but for the average Joe, VoIP is confusing to setup and use, and while many people may use Skype or Gizmo, they still use their POTS phone to call for pizza.

Michael Cerda

It’s not dead, it’s just that nobody cares anymore. Skype aside, the industry as we’ve known it has been for sale for about two years now.

VoIP cost structures make it prohibitive to innovate as you would Internet companies, unless you’re not doing anything with the PSTN. And if you’re not doing anything with the PSTN, then you’re not functional in the most commonly used environment, which means you’re trying to change consumer behavior in ways that are expensive and/or take more time/money than anyone has to offer.

bunty

Your poll results suggest that most dont find your view convincing. Can you provide statistics that show failure rate of startups in this industry is higher than in others? In investigating failure rates, you may find the opposite. Very many voip businesses thrive because propensity to pay is higher for phone services than for other Internet services.

The examples of failure you cite only show that businesses that do not evolve are waylaid, true for any industry. VoIP has also been tethered to fixed internet connections at a time when residential users are asking for mobile services. Once better mobile tcp/ip and honest regulation come together, that too shall pass.

Sean P. Aune

VoIP is nowhere near dead. It may have fallen out of fashion with the higher ups in the tech elite, but I see more of my non-tech savvy friends gravitating to it all the time. One friend of mine who just moved for law school has passed on landlines all together and is using a combination of her cell phone and Skype for all of her phone needs. She got a Skype In number from her hometown so her friends and family could call her and they are none the wiser they are doing this all by computers.

I removed the second line in my home and in my office and replaced them with Skype Philps handsets and we are saving a tremendous amount of money.

Sure, it may be “old hat” to some of us, but it shouldn’t matter, it’s still growing in most sectors.

AustinTX

I sincerely think VOIP is revolutionary. It promises to undermine the corporate monopolies for voice communication, by routing realtime sound directly from person to person… practically for free.

However, with the grudging cooperation of the first VOIP providers, VOIP has simply become yet another transport mechanism for diverting large, arbitrary sums of money into the existing telco monopolies.

The fact that folks who use VOIP do need to occasionally talk to folks who use traditional phone networks, has chained VOIP providers to the VOIP/telco gateways. Telcos have mercilessly charged enough to make VOIP a losing proposition, and there does not seem to be any political leadership willing to correct this.

However, I do not think that VOIP is going away, and I plan to resist any future laws that try and force me to VOIP under the warm, guiding hand of Ma Bell. I have a pile of cracked VOIP boxes sitting behind me, and I can mail them to my friends and family, making endless, free calls directly between our IP addresses when that time comes.

Kiran

Landline is definitely getting less important for many of us. For me that does not mean I get rid of it completely. It means I dont want to signup for expensive monthly commitment to the phone providers, I am looking for cheaper solutions. Solutions that does not have huge monthly commitment. I was with Vonage, Sunrocket and after Sunrocket fiasco moved to Comcast and then AT&T. Currently I bought an OOMA equipment and looking to cut my monthly bill. I am looking to Vonage at my parents house in India and send an OOMA equipment and possibly use a MagicJack service.
When my colleagues at Oracle poll on the VOIP services used at home, I see tons of them using. I have hundred of friends who use different VOIP solutions. All major business use VOIP for their company phone lines. I keep hearing that VOIP is going to be dead, but I dont get why that would happen when there are millions of users of VOIP phones.
Marketsize of landlines as a whole might be coming down, but I can see a future when majority of landline users who have broadband access will switch to VOIP lines.

Jeff Pulver

I wonder how many of the people who actually believe VoIP is dead were involved in the VoIP industry at the time I introduced the concept of “Purple Minutes” back at Spring 2002 VON. I warned people as best as I could that we should use IP based communication platforms to do more than simply replace or substitute existing telecom infrastructure. To the extent that many of the people who were responsible for empowering the communication revolution eventually gave up on changing the world and ended up becoming part of the establishment rather than disrupting it, well maybe for them “VoIP is Dead” but then again, for these people VoIP died a long time ago.

When I look to the future, I believe we are just on the edge of the time when the true promise of VoIP will be realized. In order for these dreams to be realized, it will require a new group of people who believe in challenging the status quo, to stand up and be counted on.

While I am looking for others to join the NEW revolution, I am ready and prepared to do what it takes to continue to push for the promise of what IP Communications can offer.

So while some of my friends may declare that VoIP is Dead, I don’t.

“VoIP is Dead, Long Live VoIP.”

Happy New Year 2009!

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