ANALYSIS

Catching the Next VoIP Growth Wave

VoIP, or Voice over Internet Protocol, started out being a very low-quality and clunky way to make free calls using an Internet-connected computer. As it has evolved, most of its growth has been on the consumer side, but that is now slowing. Growth is starting to come from the business side. So, what will the VoIP industry look like going forward?

To predict the future of VoIP, look at the ISP business. In the 1990s, small companies started at kitchen tables grew in size and importance to become Internet service providers. In the early days, AOL, Prodigy, MindSpring and EarthLink led the way into this new industry.

They were the first companies in the ISP space and saw strong growth for a while. Then the telephone companies and cable television companies got into the same business and basically cut the legs out from under that new sector. The model changed. New leaders took over.

A Heaping Buffet of Choices

Today, both business customers and consumers enjoy a variety of provider choices. However with all the choice that’s out there, most get Internet service either from their local telephone company or their cable television company — companies like AT&T, Verizon, CenturyLink, Comcast, Time Warner Cable, Charter and Cox.

Wireless Internet also is becoming a growth engine in this sector with companies like AT&T Mobility, Verizon Wireless and Sprint.

Even though VoIP is changing, we will continue to see advertising and marketing from providers like Vonage and Magic Jack. However, their growth rates and paths are changing — and their focus should, as well.

Consumer growth rates for VoIP are lower than ever. At the same time, there are more choices than ever for making phone calls. Wireless is a huge transformational technology that is changing everyone’s way of keeping in touch. This is putting enormous pressure on the VoIP industry, especially as wireless phone call prices continue to drop.

Going forward, wireless will offer multiple ways to make a voice call including VoIP app services over WiFi connections. Some new wireless carriers, like Republic Wireless, focus on this new way to use the wireless network to offer a VoIP connection.

They start out trying to make a phone call over a WiFi connection. When there is no WiFi nearby, calls are routed over the Sprint network.

If successful, a variety of players may offer this type of combination service in the coming years.

This is the transition the VoIP industry is going through.

Keep Making Waves

We are increasingly using smartphones like Apple’s iPhone or Samsung’s Galaxy, which runs Google’s Android OS, to make phone calls, send text messages and email, use social sites, surf the Web and so on.

That’s one key reason the traditional VoIP sector is getting softer. Traditional telephone is shrinking as well. We can make calls in a wide variety of ways today — through wireless services, VoIP from cable television companies, and old-fashioned telephone company wire line services as well.

As the Internet expands, and as more services — both wireless and wire line — become available, VoIP may continue to nibble around the edges and grow. It is already much larger and more important than it was a decade ago. The question is, how important will this sector become?

Every industry rides a growth wave. Is VoIP on the growth side of the wave, the cresting side or the falling side?

Innovation changes everything, time after time. Will VoIP grow to become an important part of the change wave going forward, or will it remain a niche sector?

VoIP has been on the consumer side of the growth wave over the last decade or two. Now it is changing focus to the business side. Business is an entirely new and potentially huge opportunity for this segment in both the wire line and wireless space, but business won’t stay on the growth side forever. It’s important for every provider of VoIP services to create the next wave to continue the company’s growth.

My advice to VoIP executives is to keep your sales and marketing strong. However, you must also keep reinventing yourself. Create the next growth wave — and then the one after that. Then you will keep growing, while your competitors fall off the growth track.

E-Commerce Times columnist Jeff Kagan is a wireless analyst, telecom analyst, industry analyst, consultant and speaker who has been sharing his colorful perspectives on the changing industry for 25 years. Email him at [email protected].

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