Some Phone Makers Step Back From VoIP

By Greg Scoblete On Jan 7 2008 - 8:00am

While VoIP services continue to widen the ranks of users and subscribers, some phone manufacturers are stepping back from the technology to focus instead on core PSTN-based offerings.

"The marketplace is still deciding how it will use and interact with VoIP," said Noah Hershman, audio and video director, Amazon.com.

"VoIP for consumers at retail has not performed well," said Brendan Morris, president, Uniden. The firm is discontinuing its Windows Live Messenger model due to "disappointing" sales, he added. "The phone market is constricting, and retailers don't have as much shelf space to experiment with new technology that won't deliver big returns."

VTech, which launched phones for use with MSN and Yahoo! messenger in 2007, will likewise discontinue those product lines, said senior product management VP, Matt Ramage. "These were tests, and the market did not embrace them." The problem, Ramage said, was a disconnect between advertising a "free" telephony experience on a retail product which consumers would have to pay for. "Every retailer we've spoken to hasn't been happy with those types of products," Ramage added.

Several companies that introduced VoIP handsets at International CES last year, such as Netgear and Linksys, will not do so this year. Thomson, which launched a GE-branded Skype phone in 2006, is pleased with how it has sold but will not refresh the product line at CES, according to Tom Bratton, sales and marketing VP, Thomson. Instead, the company will do several "soft updates" to the product's firmware in 2008.

Panasonic will continue to support Skype, though "it's a pretty narrow niche," said Bill Taylor, communications group VP, Panasonic. The company has pursued its own VoIP solution, GlobaRange, in partnership with VoIP provider deltathree.

"The challenge with Skype is that they're fairly standardized — they're looking for lower cost options. With deltathree we can develop unique services for the phone." The GlobaRange product line "is the beginning of a series of application-enabled devices for consumers" from Panasonic, Taylor said.

"It's a challenge to sell [VoIP] phones at retail," said Dan Smires, digital voice services product manager, Vonage. "Is it a phone or a networking product? One of the benefits of having a large network of retailers is that we can work with them and help guide customer decisions."

Not everyone is backing away. Skype certified as many devices in 2007 as it did in 2006 and has not seen a let up of products into its testing labs, said Manrique Brenes, hardware business development director, Skype. Many of the new products are focusing on video and business-oriented solutions, he said.

Skype has moved to strengthen its certification process with a new, more rigorous audio testing laboratory, Brenes added. The end result would be to push "a higher quality audio experience into entry level handsets."

Philips will broaden its Skype phone portfolio at CES with a total of six new models. "We're thrilled with how the Skype phone has performed for us," said Chris Price, Philips director of telephony marketing. According to Price, a third of all consumers who purchased the Skype phone were new to the VoIP service.

Wal-Mart, which expanded the number of stores carrying Skype-certified hardware, believes the low-cost message resonates, especially with college students and military families, a spokesperson said.

"The technology aligns with our cost-savings message" and is part of the company's overall push to over-haul its CE offerings to appeal to early adopters, she added.

Skype worked very closely with Wal-Mart to craft a retailing experience that would unify a number of different hardware components — Web cams, phones, headsets, calling cards — that would traditionally be merchandized separately, said Don Albert, North America General Manager, Skype. "We're optimistic that there will be similar retail relationships for us in the future," Albert added.

An appeal to the mass audience is going to be a crucial hurdle for VoIP marketers. To spur adoption, VoIP must shed its high tech image, said Sally Cohen, technology analyst, Forrester Research. "Consumers don't want VoIP — they want voice." Right now, early adopters and consumers looking for a low cost second phone line in the home have jumped on board, but the mass market consumer has been wary, she said.

"Extending the customer base will be an important step," Hershman seconded. "Currently, it's early adopters who are mainly taking advantage of the technology. Deeper extension into the consumer base will be key to the VoIP's growth."