Thursday, May 19, 2005

Time To Sell VoIP Companies or How To Spell Consolidation

Andy Abramson - VoIP Watch

Today's ruling by the FCC about E-911 may spur consolidation within the growing next generation VoIP industry here in the USA for one big reason. Development cost.
Solving E-911's issues aren't cheap, which is why the cellular industry has danced around it for years. In a blog post, Russell Shaw quotes a former FCC Wireless Chief who points out that the road to implementation is not a 120 day ramp up period. If that's the case, by banding together and using the same technology the FCC's goal of safe phoning would be met more quickly.
While companies like Intrado and Level3 are selling services that are supposed to make the VoIP services E-911 compliant to their customers, the costs to the upstarts, who are also facing mounting marketing and competitive offering pressure from the cable MSO's, many of which already offer RBOC like E-911, will now have the added worry that the SBC-AT&T merger and Verizon-MCI deal will mean the big guns are weighing in with all kinds of marketing clout and can at the flip of a switch start offering CallVantage and VoiceWing like never before. That has to be on everyone's mind at places like Broadvoice, VoicePulse, Vonage and all the rest. If not their sun glasses better stop being rose colored.
Even with companies like Packet 8 (which had two more outages yesterday) and Sun Rocket, saying that they can and will comply, the expense to make sure every customer is not endangered may be too great a burden to go it alone. That's why through merger and rolling up, there may be the room for the upstarts to really compete in the next generation space against the well funded, entrenched and elephant like RBOCs and cable companies.
So while I love open competition, it also has to make sense. To fight the battle that's looming means strength in numbers, not a bunch of small companies firing harmless shots that land nowhere.
VONAGE, with a war chest of cash, big money and with some savvy leadership could leverage their marketing muscle, mind share and grab some of the smaller companies, many of whom have far better technical and possible stronger or smarter people in places that would bolster what they have to sell. For example, Vonage, VoicePulse and Broadvoice together would be a powerful combination. VoicePulse and Broadvoice have excellent technical leadership, and David Epstein of Broadvoice is one of the smarter and more pleasant CEO's to deal with. The same applies to AT&T which clearly has some of the best technology folks and smart marketers already in place.
The FCC's decision today may also have some impact on Skype and their efforts in the USA with Skype In as it possibly derails rapid acceptance of the service being a primary line replacement for now. But since I'm in the minority, and don't view Skype as a primary line replacement, I'm less worried about that than some may be about it. In a nicely worded statement Skype said:
Skype commends the FCC for moving quickly to ensure that users of VoIP who expect 911 service, will get 911 service. Skype also applauds the FCC's effort to make sure that 911 services will work by recognizing that many parties, not just VoIP providers, play a role in opening the existing 911 system to new technologies. Skype looks forward to working with the FCC to develop appropriate emergency response solutions for IP-based communications services.
As for newcomers in the field, even Earthlink has come out in favor of the FCC's decision, joining the rest of the crowd.
To me it seems the well backed, and the well thinking, realize to change things will require working with, not working against, the FCC's new group of leaders. Because unlike the song, the new one's not the same as the old boss.

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