VoIP: The Real Deal

(Ping! Zine Issue 19) – These days it’s hard to talk about communication without VoIP coming up.  As with anything in the technology sector, one key question comes to mind when reality sets in.  Is all the excitement surrounding VoIP based on hope or hype?  The bottom line is that VoIP is growing at an absolutely exploding pace.  In fact, analysts predict that VoIP will be a multi-billion dollar industry by 2009.  If you’re in the hosting industry, you probably already know the basics…that VoIP stands for Voice Over Internet Protocol and that it is a means for delivering voice traffic over an IP network.  Even so, you may be asking yourself what the big deal is and wondering exactly what makes VoIP one of the hottest new technologies.

VoIP related software development is a huge market.  Open source software such as Asterisk paved the way for incredible amounts of development in a thriving community of developers dedicated to producing and improving software to support VoIP technology.  The massive success here has lead to a development stampede with software companies releasing commercial VoIP applications in record-breaking numbers.  Look around and you’ll notice that the hardware market is also being inundated with a slew of devices of all varieties that have VoIP technology integrated.  Traditional phone manufacturers such as Uniden are scrambling to release new models of popular phones which combine a phone and a VoIP adapter into one device.  T-Mobile recently made headlines with the launch of a BETA for its new Wifi-cellular converged phone service over UMA which allows you to essentially add a “VoIP feature” to your T-Mobile calling plan to have your calls routed through VoIP at a significant savings when Wifi internet access is available.  Manufacturers of traditional business phone systems are rapidly dropping PSTN (Plain Old Telephone Service) components and making them optional.  There’s even rumor of an Apple iPod on the horizon that would double as a converged VoIP device.

Earlier this year, Vonage went public with one of the year’s most anticipated IPOs only to have it be deemed the “worst performing IPO in history”.  It was obviously overvalued.  Even with that being said, investors are practically begging VoIP startups of all kinds to take money.  Virginia based SunRocket has managed to effortlessly raise more than $80 million in venture capital funding while being in the industry for only two years.  Why are investors so eager to fund VoIP ventures?  It’s simple….the market has huge potential.  The bottom line is that the industry is in its infant stages, and everyone is interested in cashing in on a piece of the VoIP pie.
Even with exploding growth and all the positives surrounding the technology and industry, the VoIP sector is not without challenges.  First and foremost, unprecedented amounts of government regulation are being imposed upon VoIP providers of all sizes.  Earlier in the year, the FCC released ground-breaking E911 regulation which required even the smallest VoIP providers to invest hundreds of thousands of dollars in order to be meet new nomadic E911 requirements.  In my opinion it was essential, but possibly a little too drastic.  Later in the year, VoIP providers were reclassified and are now required to contribute to the Universal Service Fund.  More recently, the FCC and other agencies paved the way the make it easier for for local and state governments to impose their own taxes on VoIP service.  While this primarily impacts service providers, the additional costs trickle down through the chain and everyone, including hardware vendors and customers, feels them.  While the governmental interest is already there, traditional carriers such as SBC, Bellsouth, and Verizo, also referred to collectively as a ma’bell, are drastically increasing their lobbying budgets to lobby for more VoIP regulation.  Frankly, I don’t blame them and I too would feel threatened by VoIP if I were in their shoes.  Regulation is tough.  Unlike the web hosting industry which seems to have avoided much of it, VoIP is attracting massive attention from the government in all regulatory areas and that trend will only continue. 

The second major challenge is adoption in general.  Let’s face it…the technology is still relatively new.  Many people and businesses are hesitant to adopt VoIP because they’re concerned about its stability.  If someone have a flaky internet connection, this could in fact be a problem.  Your VoIP service would not work if your internet connection was down.  However, stop and ask yourself when your internet service provider last had a complete outage.  The reality is that as broadband deployment continues and the demand for bandwidth increases, stability has drastically improved over the years especially with cable and DSL connections.  Today, nearly all mainstream broadband providers have excellent trackrecords for near perfect uptime and reliability.  Complete outages are indeed incredibly rare.  The reliability concerns are based more on the fear of adopting this new technology rather than true stability concerns.

In fact, the flexibility and nature of VoIP makes it more reliable than POTS in some situations.  As an example, if a business had a solid VoIP solution in place with a reputable VoIP provider, it could potentially recover from a disaster faster than a company using traditional service.  In the event of something like a fire, calls could almost instantaneously be routed to another location, another phone system, or even a virtual hosted phone system which could be deployed in minutes.  With VoIP, providers can direct numbers virtually anywhere and to any device with very few limitations because the service is routed over IP networks and not the traditional phone network.  On the other hand, with traditional phone service, that same business my be limited to call forwarding.  In the event of a major natural disaster such as a hurricane, VoIP could truly save a business by directing the traffic completely away from the local phone infrastructure which may have to be rebuilt.  So is VoIP really less reliable?  Don’t buy into that myth.  It’s all perspective.

These are all issues that I feel can be easily overcome.  Anyone who looks at the pros and cons can plainly see the benefits of using VoIP significantly outweigh any downfalls.  Similarly, with proper planning, those in the industry can easily overcome obstacles that come up when deploying VoIP solutions out into the market.

The question remains…is all the excitement surrounding VoIP based on hope or hype?  You decide.

Bio:  Timothy Dick is the President and Founder of VOIPo.com, a provider of VoIP services funded by HostGator.com which primarily caters to VoIP resellers by providing carrier and wholesale services.  VOIPo.com is also scheduled to launch US residential service nationwide in the first quarter with a full private-label reseller software platform in the second quarter.  Dick is the former Vice President of Operations for HostRocket.com and its VoIP subsidiary.