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Will A Price War Run VoIP Out of Business?
ElCheapo writes "News.com looks at the recent price war that has erupted amongst VoIP providers. How much lower can costs for unlimited long distance go before next-generation phone services run themselves out of business? How does this compare with free services that don't offer connectivity to the PSTN?
Packet8 offers service for $19.99/month, a level analysts say is unsustainable. Vonage recently dropped their rates to $35/month to match VoicePulse.
VoicePulse is known to use a softswitch based on the Asterisk open source PBX. Will open source allow startups to compete with the traditional LECs?"
An article like this betrays a fundamental lack of understanding of capitalism. They wont run out of business.
Prices will drop until companies start failing. (If in fact the low prices are unsustainable) So long as there are customers willing to pay for VoIP, there will always be business.
If the price is too high, then they'll be out of business. If the prices are low, they can make it up on volume.
ntil they make something that pay's me to use it they will never EVER hurt my VOIP system.
Mine is 100% free, I have at least 6 nodes throughout the united states that all I do is pick up line 2 in my house and dial to connect ot the other nodes for free.
and yes it's as good or better than the telephone service using really low cost Creative VoiP blasters and fobbit.
voip will be around as long as there are people willing to use it and have access to the hardware. and no I dont care to dial out to a landline.
Since when does competitive price slashing drive whole sectors out of business? The ones that have a better business model and do things more efficiently will survive, others won't.
Mind you, however, this is true where these businesses aren't competing against a monopoly which can undercut prices at their loss. In either way though, there is at least one company left providing the service of the sector.
-bm
The problem with VOIP service providers is that from a technical point of view they are redundant. Skype is currently demonstrating this point in a very convincing way (good quality connection, convenient lookup service, 0$). So anyone depending on charging their customers for this is going to have some revenue problems in the near future.
The only reason you would need an actual service provider is to connect to 'legacy' telephone networks or to offer services like voicemail. Once the traditional telecom providers figure out that there is a market for this kind of thing, they'll be in an excellent position to offer that kind of services.
Jilles
I always imagined that at some point someone would come up with a standard cheap widget that everyone could plug into their POTS jack which would enable a distributed P2P style of VoIP system - Sure, sometimes you might have to wait a few minutes to dial out on your voice line while its in use by the commons, but its a small price to pay if you get to dial anywhere in VoIP or POTS land. These centralized services remind me of Napster - centralized services, legislatable out of existence.
It won't be competition that drives a market away, it is excessive regulation, government mandated monopolies, or a lack of desire for that service or product by the purchasing public.
I doubt that people will lose the desire to use VoIP, so that third occurence is unlikely. But government overregulating, or enforcing a company's "right" to be the sole provider of the service, both could happen (and probably will). I see ads on TV all the time for "$40 a month unlimited phone service!" but I know the last time I had such a deal, I paid $50 for the service, and $35 or more for all the government taxes and fees on top of it.
It is ridiculous.
I dumped my wired phone service because of these fees, and I am about to dump my cell phone service for the same reason. I have enough IP connectivity wherever I am that that I will happily switch to a VoIP company that allows me to transport my Wi-Fi based phone to any network and immediately get connectivity. But when they start getting taxed heavily, I'll move on to the next format.
Honestly, 80% of my communications have moved to instant messaging of some kind. Its loggable, it takes thought to write messages, and I can communicate with 5 seperate conversations at once. I used to use almost 3000 minutes a month on my cell phone, now I am down to 1000 minutes, but I send probably 10,000 text messages to various people.
I'm betting many of you will eventually drop the over-taxed, over-regulated services for ones that get the work done faster, cheaper, and with fewer government intrusions.
2.9 cents per minute? Feh! I can call any regular phone number in the US for 1 cent per minute..
The kicker? That's one EUROcent.. And I'm calling from The Netherlands. Using our equivalent of a 1010 LD operator (a 4.5ct fee per call put through, no monthly fees except what I already pay my ILEC).
Yes, prices can go down. If international calls can be terminated for less than 0.01 USD per minute, so can domestic ones.
SCO employee? Check out the bounty
is the emergence of high-speed internet providers jumping into the ring. My cable network recently got upgraded to a pretty decent speed and while chatting with a technician I found out that the company will soon be offering VOIP package that will be less than our current Phone company. Hmmmm.
Ten times as many features, less price, all in one package. Good bye Verizon! Your lack of DSL in my area, disturbs me.
Sig it.
I'm the president of an business only ISP and we've been looking at adding voice services for 4 1/2 years. We sell select office buildings where each tenant gets separately firewalled service. I was offered wholesale long distance last year by Worldcom for an insanely low rate of about 1/10th of a US cent per minute. Yes this was to be tied to a voice circuit terminated in a colo we were already it. So for about US$250 per month and US$0.00014 per minute in excess of 500,000 minutes, it's easy to be able to afford long distance bunding even without VOIP for long distance. Even if that's about 1/5 the number of minutes in a 30 day month, it's kind of like bandwidth; a T-1 goes a long long way for a lot of people especially if you minimize bandwidth usage.
Couple that with a soft phone switch like Asterisk with it's pseudo-TDM devices and you've got an incredibly inexpensive solution. Your real costs are advertising and support, not long distance.
The moment end-to-end encryption and authentication is enabled, either via tunnels or by just encrypting the IP payload, no authority trying to assert control over VoIP will be able to identify one application verses another e.g., VoIP verses HTTP verses SMTP.
They will have to either ban encryption, or ban all applications, which is the equivalent of banning the Internet.
Deploying encryption in this manner will actually restore the Internet to its original design - an application agnostic network, whose sole job is to just make a best effort to deliver bits between the hosts at the edges. Only the hosts should know and will know what applications the Internet is being used for.
The technology already exists, albeit in early forms :
This will also obselete firewalls, proxy servers, NAT, and any other devices that perform applications processing within the Internet. The only applications processing devices left will be those at the edges. Security, aka firewalling for example, will be deployed on each edge device.
Steve Bellovin (one of the Wily Hacker authors) wrote about distributed firewalls in 1999, here : Distributed Firewalls
The Internet's nature is peer to peer - 20050301_cs_profs.pdf
Hear hear.
I had a fairly serious problem with this a week or so ago (rowdy teens fighting and throwing each other on my car, no damage, but I didn't want to get in a brawl in my bathrobe...), the 911 person was confused, even though I had registered my # with Vonage's 911 system.
In the meantime, I may just plug my spare phone into my landline and use it for 911 only.
(OH, and for NYC vonage folks, you can contact the city via 212-NEW-YORK, since 311 doesn't work.)