VoIP moves beyond hype
By Russ Arensman, Contributing Writer -- Electronic Business, 11/1/2006
Texas Instruments' Tom Flanagan has waited a decade for voice-over-IP (VoIP) technology to live up to its early hype.
“I can't tell you how many times I predicted 'this is the year,' ” says Flanagan, director of technical strategy for TI's VoIP group.
This, however, may finally be the year that the technology—which allows voice to be sent as data packets over the Internet or other IP-based networks—gains enough momentum to develop into a major market.
Ajit Pendse, CEO of VoIP software vendor Trinity Convergence, says VoIP is taking off because there is now a critical mass of broadband Internet subscribers. “The enabling technology is broadband,” he says.
U.K.-based research firm Point Topic estimates there were 246 million broadband subscribers worldwide by mid-2006, a total that's increasing by 15 million to 20 million per quarter.
Businesses have been adopting VoIP faster than consumers thus far. In-Stat analyst Norm Bogen says that 95 percent of the VoIP phones shipped during the first half of 2006 were to business users. (In-Stat is owned by Reed Elsevier, which also owns ELECTRONIC BUSINESS.) But that's starting to change. The company most responsible for popularizing VoIP with consumers is eBay's Skype subsidiary, which has attracted more than 113 million customers for its free PC-to-PC Internet calling service.
For less tech-savvy users, companies like Vonage, Verizon and NetZero offer paid services that allow ordinary phones to be plugged into users' Internet connections. Vonage added more than 1 million U.S. VoIP subscriber lines during the past year, ending the first half of 2006 with nearly 1.9 million lines. Point Topic estimates there were 18.7 million worldwide retail VoIP subscribers (not including free Internet callers) at the end of 2005, up 83 percent from the previous year, with the biggest concentrations of users in Japan, France and the United States.
U.S. cable companies are also rolling out VoIP, calling it part of their “triple-play” packages of cable, voice and Internet services. And in the Netherlands, telecom carrier KPN recently launched as part of its VoIP service a line of phones made by NXP (formerly known as Philips Semiconductor) that come with videoconferencing features.
All this activity presents opportunities for both equipment makers and service providers. On the component side, In-Stat forecasts that worldwide VoIP chip sales will grow more than sixfold from $209 million in 2004 to $2.4 billion by 2009. In-Stat also estimates that more than 100 million VoIP-enabled phones will be shipped annually by 2010, compared with about 600,000 this year (see chart).
Trinity provides software for a variety of VoIP phones. Yet Pendse has especially high hopes for a new category of consumer-oriented VoIP devices. The best example thus far, he says, is Sony's new “mylo” communicator, which combines an MP3 music player with Skype calling, Wi-Fi connectivity and instant messaging. “There's never been a product like that before,” he says, adding that “this whole market is becoming a consumer electronics market.”
In-Stat's Bogen doesn't rule out success for such innovative new products. “There's going to be a lot of VoIP-enabled devices,” he says. Yet he expects far more sales to come from more conventional mobile phones that offer VoIP service via Wi-Fi networks at users' homes or offices, where poor reception can be a problem, and cellular service elsewhere. “We think the vast majority of the future IP phones will be these combo cellular/Wi-Fi phones,” he says.
Combo phone makers still need to improve battery life and call handoffs between Wi-Fi and cellular networks, he says. But those shortcomings should be improved enough for sales to begin accelerating by about 2008.
Says Bogen, “We think it solves some fundamental problems and gives you one device that you can carry anywhere.”
