LAS VEGAS — While Vonage clings to the top spot among VoIP providers pitching landline-replacement services, cable companies have rapidly eclipsed the smaller startups, wielding the competitive cudgel of the triple-play bundle to land voice subscribers by the thousands.
To endure against this onslaught, stand-alone VoIP companies like 8x8, SunRocket, deltathree and others will have to stress more advanced calling features in addition to cut-rate pricing, providers and analysts say.
"How does a pure voice company survive? It can't just be cheap voice," said Tom Flanagan, technical strategies director, Texas Instruments.
While many independent providers believe that low-cost, all-you-can-dial calling plans will continue to constitute the backbone of their value proposition, they acknowledge that the triple play has made value alone a harder sell.
Instead, packing on additional features, free of charge, will help smaller companies "survive in the niches," said Shimmy Zimels, CEO of deltathree, which sells a residential service under the iConnectHere brand in addition to providing private-label VoIP services for Verizon and ICQ, among others.
"2007 is the year we'll stress true enhanced communications that you can only do with VoIP," said a Vonage spokesperson. Dialing services that send local weather forecasts or traffic reports to a user are one example of where Vonage sees its VoIP offer developing in the coming year, the spokesperson added.
Presence — the ability to see if a caller is available — is a feature widely available from the PC-based services but could also be incorporated into landline replacement services, Flanagan said. Wideband audio, for a high-definition voice call, is another avenue open to VoIP providers.
The key to enabling many of these features is peering — the linking of disparate IP networks together to enable pure IP-to-IP calls. Services like Skype and Yahoo! can offer presence features because all of the users connect in the same network environment, but for landline replacement services, calls terminate to landline and mobile phones outside of a VoIP provider's network.
"We're very happy to do it, but the benefits of peering only appear once you have a substantial number of people making VoIP calls," said Huw Rees, sales and marketing VP, 8x8.
With peering agreements in place "the economics get a lot better for us," said Rob Chandock, chief product officer, SunRocket. The Vienna, Va.-based SunRocket recently completed one such agreement with Global Crossing.
The "nomadic" nature of independent services also works in their favor, providers say. A VoIP adapter can be taken around the world, while cable-delivered service is rooted (often professionally wired) to one spot.
Cable companies will not sit still however. There have already been major trials of TV caller ID and Comcast's voice portal gives its Digital Phone subscribers the ability to check voicemails online and forward calls selectively. "As consumers get more comfortable with the Internet, we will market more advanced features," said Tom White, VP, Comcast. White added that Comcast is not focused on competing against start-up VoIP providers but on taking business away from the telecos.
There may not be a "killer-app" available to stand-alone VoIP providers, but "we do feel our platform offers more flexibility," Zimels said. Smaller companies can easily add new features or innovations before their larger cable rivals, he added
While continuing to promote a residential service, 8x8 will put a greater emphasis and resources into its small business offering, Virtual Office, to differentiate itself going forward.