PC to PC vs. TelSet based solutions - Which is better?

A leading VoIP authority in the UK stated today that he did not feel the PC-based VoIP solutions were going to be the products to "win over the masses". I have to say that we are of a similar mind.

The PC-based solutions like Skype are growing very fast in penetration and capability, but for the average home or even small business user, these may not be the best answer. For the really, really budget minded or for the "Road Warrior", yes. These solutions work well in those cases and are by far the least expensive. But if you want to make daily phone calls from your home or office, are you really going to drag out your laptop and boot it up? We think this is too obtrusive for the everyday application, and the user would be better served by a server solution that integrates easily into the existing inside telephone structure.

We also predict that Skype and the others will move this way over time in an attempt to gain further market penetration. And, with their pricing structure, this should continue to pressure the major VoIP providers.

The effect of VoIP on the enterprise

Systimax, a global IT infrastrcture provider, recently put out a very good article on the impact of VoIP on the corporate enterprise, including some good information on the basics. We think it's worth a read.

Too much hype over Skype?

Too much hype over Skype? by ZDNet's David Berlind -- CNET Labs has a review of the latest version for Windows of Skype's namesake voice over IP product. It scored an 8 out of 10. The review cites the addition of two features -- SkypeIn and Skype VoiceMail -- as being the significant changes to the "dot-level" release. Of the two, SkypeIn, which is in [...]

Check out Skype now...

Vonage raises $200M, sees VoIP growth continuing

Vonage said today that they see their growth rate continuing as more homes add broadband. They stated that as new competitors enter the marketplace their opportunities seem to actually increase, an enviable position for anyone in business but particularly positive for a market leader. They are generally acknowledged as the premier IP phone company in the business, and the financing they announced last week should help solidify this position.

More forward thinking in the UK

Just after writing about our experiences with BT and their plans for an all-IP network earlier today, two more stories caught our eye that add emphasis to the increasing focus on new technology in the country. (Yes, we like this!)

The Islington Council financed a recently completed a Council-financed WiFi network providing mobile users in that part of London with free access using technology from CitySpace and BelAir Networks. Dubbed the "Technology Mile", a Council spokesman said that each of eight nodes in the network would allow the simultaneous access of up to 50 users connecting over the 11Mbps 802.11b version of WiFi via a 54mbps 802.11g backbone. In an almost unprecedented move, the council even donated an unspecified number of PCs to local businesses in an effort to increase broadband usage.

The second story involves WiMax, the high speed wide area technology which has become somewhat controversial lately amid stories that it will be "one-upped" by newer better solutions. Unruffeled by these reports and on the heels of Intel's release of the Rosedale chip, built around the new 802.16 standard for providing WiMax capabilities, BT has announced that they see DIY WiMax self-installation kits on the horizon within the next 18 months. This will be facilitated by the expansion of WiMax and IP services throughout the BT network and the continued drop in WiMax modem prices over time. Indeed, Scott Richardson, General manager of Intel's Broadband Wireless Group, sees the price coming down from the current level of around $500 to below $200 over the next few years.

So, why is this important to VoIP? VoIP represents the real killer application for WiMax, or in fact whatever technology dominates this marketplace in the long haul. The technical problems are being solved, and WiMax tests are beginning to appear in diverse places which we believe will be good news for voice as well as data users in the near future.

One may think that the technology battle between WiMax and competing technologies really does not matter so long as the winner is capable of providing the services, however it is our view that, with the head start of WiMax, any major deviation from that path could prove a delay for the service offerings and advances we all need. Hopefully this will not become a BetaMax/VHS kind of battle!

Making money in the process

Information Week and EE Times have reported that "Consumer broadband service providers more than doubled their revenue during last year, from an annual rate of about $3.3 billion worldwide in early 2004 to $6.9 billion by the end of December 2004."

This is indeed good news, and it points to a strong uptake in the IP-based service area. What in fact is happening is that prices for the services are coming down, but this has caused consumers and small businesses to take more of the services. While the prices have come down somewhat, the number of lines being sold has increased dramatically, and the net result is a very healthy growth level overall in the industry.

There is no real surprise here. We have felt for a long time that the IP based services would continue to outstrip growth in most other telecoms services. The reasons are vaired, but the growth is certainly spurred by the increasing reliablility of these services, plus increasing richness of features provided. From the customer's point of view, especially that of a small business, a cost-benefit comparison shows the VoIP choice almost a "no-brainer". You can start with an average of $40 per telephone line every month even before making your first call. Compare this with from less than $20 to a maximum of just under $30 for VoIP, where even the most basic services provide all the goodies you have to spend extra for from your local Telco.

So, a final question: How do you share in these profits? Or, stated a different way, what does this mean to a potential investor? We like some of the plays out there today, especially Packet8 (aka: 8X8, Symbol: EGHT), who we haven't covered too much in this forum, but their foray into video may yet just pay off. Their stock is at an almost all-time low, but it appears that things are beginning to turn their way. They still have some problems - mostly, in our view, a need to re-do their website to give users much better access to more features - but, the basics are certainly there, their voice service quality is good, and the video play could be their ace in the hole. It will be fun to watch!

Notes: In the interest of full disclosure, we do hold some 8X8 stock in our portfolio.

Meanwhile, other countries are moving forward!

Computer Weekly reports that BT has chosen the eight preferred suppliers for it's ambitious 21st Century Network project. In case you missed it, BT's aim is to take the entire telephone plant throughout the UK and convert it from analog to IP-based service. This would dramatically increase efficiency, not to mention opening the door for great new innovative services.

As an aside, when we first moved to the UK in 1995, we were struck with the advanced state of telecommunications in the country and indeed throughout Europe. This was partly because of the early adoption of GSM, which allowed the mobile phone to become ubiquitious and partly due to the innovative approaches used by BT and SkyTV, the major satellite provider in the UK. Perhaps it is just the closeness to Europe and more of a focus on international markets, but we found it interesting that when we went travelling we could transfer our home or office phone to ring directly on almost any telephone in the world! As they say on TV, don't try this at home...in the US our service providers don't really seem to even want us to forward our calls from one state to another. We have no provision at all in the US to forward calls internationally without going through some sort of external service based in the US.

So it comes as no surprise that BT is pushing such an initiative. We all like to carp about our local Telcos, and BT get's it's share of bad press due to stupid ommissions and policies like the rest, but the bottom line is they are an innovative company. Couple this with Tony Blair's "BroadBand Britain" initiative, and you have created a real climate of innovation.

Certainly in the US we are lucky to have the emphasis on technology and the innovative spirit to move forward in impressive leaps. We hope to see these initiatives in the UK, our adopted second home, continue and expand to other countries throughout the world. Who knows? Maybe even Mexico will come around!

The power of the state...

We are fortunate to live in a world where most countries have realized that telecommunications services need not be provided solely by government-controlled monopolies. Indeed, this is how VoIP has come to be, along with a lot of other innovative technologies we now take for granted. But take the case of Mexico, where the national monopoly, Telmex, appears to be fiddling with the behind the scene settings of VoIP users. From the Miami Herald, in cooperation with El Universal Online.

VoIP Adapter deals abound!

It has never been easier to add VoIP service to your network...and never less expensive! More and more deals are now becoming available on adapters for use with the various services. The prices range from about $60 down to...well, free!

Check out these deals:

8X8 - Packet8 Broadband Phone Adapter VoIP

LINKSYS Vonage 2-Port VoIP Adapter