Networking

Will cable companies and telcos take over the VoIP market?


A recent comment on the blog of a fellow MVP struck a chord with me: "Hangin' with friends and they too have switched over their home phone from traditional phone to VoIP with their cable company."

My first thought was: The cable company? Why would anyone get their VoIP service from the cable company?

In my area, at least, the local cable company's VoIP service costs significantly more than that of independent VoIP providers such as Vonage, Lingo, and Packet8. Time Warner Cable charges $40 a month for unlimited calling in the United States and Canada -- but only if you also subscribe to its cable TV service.

My VoIP provider, Lingo, charges $21 a month for unlimited calling to the United States, Canada, most of Western Europe, New Zealand, Australia, Singapore, and South Korea. Other independent VoIP providers offer similar plans.

Yet many folks are indeed turning to their cable companies for alternative phone service. In fact, according to a study by the Yankee Group, cable VoIP grew by 167 percent in 2006, and by 2011, most residential VoIP customers will subscribe to bundles from cable companies.

Why are consumers choosing cable companies?

Indeed, the concept of bundling is probably a primary reason why consumers are choosing cable companies for their VoIP service. In today's busy world, the ability to pay one bill for cable TV, Internet, and telephone services is an attractive one, even if you could save a few bucks and get better coverage by going with separate companies. Convenience is something people are willing to pay for -- now more than ever before.

On the other hand, cable companies have reliability issues to contend with. Most don't have great reputations in terms of uptime; cable outages occur all too frequently. When it's just your TV programs that are unavailable, it's annoying, but you can live with it. When your phone service is unavailable, it can, in some circumstances, be life-threatening.

Another player enters the game

But it's not just cable companies that are bundling services and trying to drive the smaller independent VoIP providers out of business. The big telephone companies, including Verizon and AT&T, are also offering VoIP services now. And, at least in some areas, they're undercutting the prices of the cable companies and coming close to those of the independent VoIP providers.

For example, AT&T changes only $24.99 a month for unlimited calling in the United States, Canada, and Puerto Rico. Verizon's price for its VoiceWing service is virtually the same. It's still more money for less coverage than my Lingo plan, but the gap is narrowing.

For those who want the convenience of a single bill, the telcos can do that too. They offer broadband Internet services (e.g., AT&T DSL and Verizon DSL or super-high-speed FiOS) and now television (e.g., AT&T U-verse and Verizon FiOS TV). Since both are also cell phone providers, you can literally get all of your communications services from a single company.

And the telcos have an advantage over both cable companies and independent VoIP providers: A reputation for rock-solid reliability. They've been delivering a dial tone for decades, and people trust them to a greater extent than the cable companies they've had bad experiences with and the independent VoIP providers they've never heard of.

It's all about reliability

And reliability is on everyone's mind now when it comes to choosing a VoIP provider. With the demise of SunRocket that left so many customers without phone service and the uncertainty of Vonage's future in light of Verizon's and now Sprint's patent infringement lawsuits, the relative stability of the cable and telco companies looks more attractive than ever.

Then, just last week, Skype suffered a two-day outage that the company blamed on the download of a Windows security update. Whatever the cause, it reinforces the doubts of potential VoIP customers that the technology is really ready to replace their landlines.

On the other hand, consumers know that Verizon and AT&T are going to be around for a long time. And although they may not be completely happy with their cable companies, they feel fairly confident that Time Warner and Comcast aren't going to go bankrupt anytime soon.

These factors are driving users toward the perceived safety of the big utility companies for their VoIP service. That's especially true of those who aren't very tech-savvy and are already hesitant about trying something new.

The future of VoIP

What does this mean for the future of VoIP? Will the big guys eventually run all the independent companies out of business in much the same way the big oil companies destroyed so many of the small independents in that industry? Only time will tell.

The independents do have one advantage over the telcos and cable companies -- in addition to lower prices -- and that's flexibility. Internet-based technologies move fast, and it may be easier for a smaller company to keep up with the rapid changes, just as a small fighter jet can make quick turns much more easily than a 747.

There are many reasons to hope the independents survive. Perhaps the most important one is the realization of the full potential of Voice 2.0 -- the much-heralded coming integration of communications technologies.

The idea behind Voice 2.0 is to combine the advantages of landline, cellular, and VoIP services in one device. While that sounds like a natural for the big telcos, it makes more sense for them to drag their feet. The advantages to consumers of a phone that can automatically switch from using expensive cellular minutes to using VoIP whenever an 802.11 wireless network is in range are obvious. But it's just as obvious that such technology isn't in the best interest of cell phone providers.

There's room in the VoIP market for a lot of players right now. However, if the traditional telephone companies and cable companies corner the market on VoIP, we may find ourselves paying for it -- both literally, with higher prices, and figuratively, with less rapid innovation.

Deb Shinder is a technology consultant, trainer, and writer who has authored a number of books on computer operating systems, networking, and security. She currently specializes in security issues and Microsoft products, and she has received Microsoft's Most Valuable Professional (MVP) status in Windows Server Security.

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About

Debra Littlejohn Shinder, MCSE, MVP is a technology consultant, trainer, and writer who has authored a number of books on computer operating systems, networking, and security. Deb is a tech editor, developmental editor, and contributor to over 20 add...

6 comments
judy.shapiro
judy.shapiro

I really like the idea of VoIP becuase it offers real value. But all the recent uncertainty is scary. I want a VoIP provider that has been around and is solid. There don't seem to be many. I hear a telco - IDT owns voIP provider - Net2phone and they have been aorund a long time. Are they reliable or should I just give up on VoIP?

CharlieSpencer
CharlieSpencer

I'm not a VOIP user, but I can see at least one reason to use the cable company. It eliminates finger-pointing between your broadband provider and your VOIP provider. If they one and the same, neither can claim an outage is the other's fault.

venator
venator

We ultimately made our decision based on e911 capability so Time Warner won out...for now. With small children in the house I felt it was important. I was unable to find another provider at the time that offered it. Hopefully more providers will see the benefit in providing that service.

floridacoastman
floridacoastman

Very well articulated even if somewhat startling! It is my understanding that if my voip provider (vocalocity) goes under I can keep my phone number. In the case of my provider going out of biz; other than the inconvenience of setting up a new account is there some horrible consequence I should consider before investing in next year's yellow pages/display ads etc?

yobtaf
yobtaf

If the big telcos take over the VoiP market the prices will shoot through the ceiling. The problem is, most of the public have no idea of what VoIP is and how much money they can save with an independent service. Even worse, the courts seem to be buying into the phony patent cases from giants like Verizon. I, for one, will not not give in without a fight.

ckizziar
ckizziar

Well I'm already stuck with the big telco here, I can't get cable modem service in my area so I went with BellSouth DSL. In order for me to have DSL, I HAVE to have an analog phone line, so I cancelled my VoIP service...no need for two lines. It sucks being stuck paying $30 a month for a phone line that will cost me $.10/m long distance etc that I can't shake without shaking my high speed internet.....of course I could go dial up if I had a phone line from BellSouth ;)

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