Based
on information contained in SEC filings, it’s obvious that Google is
about to jump into the already crowded consumer VoIP market. The
challenge for any company entering this space is to come up with a way
of combating what will surely be continued downward pressure on
pricing. True differentiation from your competitors is the only way.
But, that will prove to be very challenging. If I was launching a
consumer VoIP service and had Google’s resources, I’d be trying to sign
deals with broadband service providers that would enable me to
prioritize my voice traffic and give me the feet on the street required
to roll trucks when necessary.
Results tagged “consumer voip” from IP Communications and Technology
I read an interesting post by Ike Elliot on the subject of why consumer VoIP service providers struggle. Ike lists three main factors that challenge the industry:
- No barriers to entry for competition
- No sustainable competitive advantage (some would argue there is a competitive disadvantage)
- Not enough attention to details that matter to customers.
Ike does discuss the issue of QoS and bandwidth management. However, I believe that that Quality of Experience (QoE), is likely the most important criteria that limits the success of many consumer based VoIP service providers. In my view, the delivery side of the business is the most significant limiting factor to a satisfactory QoE.
I often make this analogy. Imagine your company makes some widget. You have deployed stringent quality control procedures to ensure consistent quality of your product. When it comes to the delivery of your widgets however, you just boot them out the door and hope that they arrive at your customer in good condition. You have no control of who delivers your widgets. In fact, your product may be delivered to your customers by your competitors who have absolutely no motivation to ensure that your product gets delivered in good condition and without delay.
For many VoIP service providers this analogy applies. Notice I didn't say all providers because cable companies, carriers and wireless providers can, if they chose to do so, control the quality of delivery within their own territories. For most others, the delivery analogy applies because of their inability to implement end-to-end QoS . In addition they have absolutely no control over the quality, reliability and availability of the physical infrastructure responsible for the delivery of the service to their clients.
The result is that network congestion and outages can occur at a multitude of points along the delivery path. Even if these occurrences are rare, when combined with quality issues that are bound to arise within the service providers' own infrastructure or the infrastructure of their suppliers, the result is an unsatisfactory customer QoE!
In my view, the delivery factor constitutes a fundamental flaw in most consumer VoIP business models and jeopardizes their long term viability.
So, is there a way to control the quality of delivery? Well, as previously mentioned cable companies, wireless service providers and telephone companies do have the ability to control many of the delivery challenges within their own territories.
For other VoIP providers (those who do not own their own infrastructure) their options are limited. One option is to lease infrastructure from a cable company, telephone company or wireless provider where regulatory and other policies allow. However, co-locating equipment adds a very significant initial capital investment for a new entrant. Additionally, leasing infrastructure adds a recurring cost that will likely destroy the economic viability of a VoIP-only service. A service that includes Internet access and a bundle of applications in addition to the voice service could potentially contribute to a viable business model based on leased infrastructure. The barrier to entry is however, significant.
Rick McCharles
Telecom Consultant, Toronto, Ontario, Canada
RIC Services
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