VoIP making slow entry onto Vermont’s telecom stage
Just when many Vermont businesses thought they were successfully navigating the turbulent telecom technology scene, here comes another new product threatening to upend the somewhat settled voice sector.
Voice over Internet Protocol (VoIP) a technology that can turn computers – wired or wireless – into low-cost telephones, poses challenges for both landline and cellular phone operators.
Start-ups specializing in VoIP, such as New Jersey-based Vonage, are attracting more and more commercial as well as residential customers With the promise of unlimited calling locally, nationally and internationally at rates the traditional telecom providers generally do not match. Vonage and other VoIP providers further fatten their pitch by offering features such as call forwarding and caller ID at no extra charge.
So far, however, only a few Vermont companies have adopted VoIP, partly because their telecom providers may not be making it available – or may be charging unattractive rates. In addition, VoIP could be the latest example of an exciting new telecom technology that’s slow in reaching the Green Mountain State due to its small market size.
But state officials and some telecom executives predict that VoIP will soon take off and keep soaring in Vermont.
“Businesses that are tech-savvy are looking at VoIP as potentially a great way to optimize their existing networks and to save a bundle of money,” says Tom Murray, deputy commissioner for economic development. He further notes that more and more Vermont businesses as well as residences have access to the high-speed Internet connections that VoIP requires.
As of September 2004, about 80 percent of Vermonters were able to subscribe to cable, DSL or wireless hookups that speed data far faster than do dial-up connections. The quickening spread of high-speed Internet capability during the past few years marks a significant advance in Vermont’s overall economic development strategy, Murray says.
Peter Stolley, marketing director for Sovernet, says, “VoIP is absolutely coming to Vermont in a big way, especially ,where cell phone coverage is spotty. For the future, I would bet more on VoIP than on cellular in Vermont.”
Sovernet, a Vermont-based telephone and Internet provider, offers VoIP for businesses via its own network. Having control over the medium presents major advantages, but, Stolley says, his company will probably have to move its VoIP product onto the public Internet as Sovernet seeks to grow this service.
“I would love to keep it exclusive to us, but using the Internet will give us access to market share we do not currently have,” Stolley explains.
CTC Communications, one of New England’s larger competitive local exchange carriers, also offers VoIP in Vermont through its own network. And CTC, headquartered in Waltham, MA, expects a big increase in its Vermont market share following its acquisition earlier this year of Lightship Telecom, a New Hampshire-based carrier that had been expanding its presence in Vermont.
Routing VoIP calls through its private network “allows us to control the quality of the service,” says CTC vice president for marketing Paul Weichselbaum. “There are no sound distortions or interference this way. People in the business world don’t tolerate bad connections,” he says.
Perhaps the surest sign of a bright future for VoIP can be seen in the actions of some leading Internet firms. eBay, the wildly successful online auctioneer, recently made a $2.6 billion offer for Skype, a Luxembourg-based Internet phone company. eBay made its bid amidst rumors in financial markets that Google and Yahoo were also interested in acquiring Skype.
But Google may not have needed Skype anyway, since the company, famous for its Internet search engine, apparently plans to become a telephone company as well. A recently launched instant-message program called GoogleTalk can carry voice transmissions as well. Subscribers to Gmail, the company’s e-mail option, can use Google Talk to make free phone calls anywhere in the world.
That feature may present special challenges to landline and cellular phone providers.
In Vermont, it is not only well-known telecom players who are getting involved with VoIP. Several small firms are offering the service as well.
Verizon, the leading telecom provider in Vermont, sells a VoIP product called VoiceWing. It offers an unlimited US calling plan for a monthly charge of $34.95 – not as low as some packages, but within the more attractive price range. Vonage offers a “premium unlimited” package covering calls anywhere in the United States and Canada for $24.99 a month. A similar Vonage plan for small businesses costs $49.99.
Some analysts argue that established telecom providers such as Verizon are reluctant to promote VaIP or to match the best deals available because Internet phone service might draw customers away from their core landline and wireless operations. Analysts also believe that landline and cell phone providers will not stand pat on their pricing as Internet phone service makes in-roads into their market share.
“The traditional phone companies are certainly going to respond to this trend,” says Deputy Commissioner Murray. “They will not stand by and let their business erode.”
Adelphia, another telecom company with a large presence in Vermont, does not currently offer VoIP in state, although it is scheduled to introduce Internet phone service next year in New Hampshire. Lisa Birmingham, Adelphia’s government affairs director for Vermont, does predict, however, that, “VoIP will definitely take off in Vermont. The state is more than ready for it.”
The telecom product line currently offered by Adelphia will change substantially, Birmingham adds, if Vermont regulators approve the company’s proposed takeover by Comcast, the nation’s largest cable operator. The pending acquisition is part of a $17.6 billion deal whereby Comcast and Time Warner would jointly buy the entire Adelphia network nationwide. VoIP is likely among the products Comcast would make available to Vermonters.
For all its attractions, VoIP does present some disadvantages in comparison with cell phones or landlines, notes Tom McLaughlin, vice president for sales at Unicel. Rural Cellular Co, Unicel’s Minnesota-based parent firm, does not currently offer VoIP in Vermont.
McLaughlin expects the pace of VoIP growth to be “extremely slow.” This technology will not soon threaten cell or landline providers, he contends, drawing an analogy with the incremental rate at which residential customers have abandoned landlines in favor of cell service.
“Look at the number of homes that have gone entirely wireless – it’s something like 9 percent, and that’s taken 20 years.”
Government regulators have yet to make definitive rulings on the extent to which VoIP is to be subject to state and federal rules and taxes, McLaughlin adds. He also notes that most businesses have invested heavily in landline networks that they are generally not ready to phase out. Companies have instead taken an interim step of “relying on the phone on the desk and the cell phone on the hip,” he says.
It will be at least a few years in most cases before businesses entirely replace landlines with wireless connections, he suggests. VoIP will also figure in companies’ telecom planning, but not to the point where cell service gets shoved aside, McLaughlin adds.
But VoIP may eventually allow its users as much mobility as is possible with a cell phone. The high-speed Internet link needed for VoIP is now generally established through a wire connection, but Wi-fi technology, allowing for. wireless highspeed Internet access, is spreading quickly.
With the right software, VoIP will work via a laptop linked to a Wi-fi hot spot, several of which have been established in Burlington and Montpelier. The limited geographic range of Wifi service will also become less of an issue with the advent of more far-reaching Wi-max technology. (See accompanying story.)
Other cautionary notes are also being sounded in regard to VoIP.
Because this type of telephone service depends heavily, for now, on computers plugged into sockets, a person using VoIP as his or her sole telephone may be left voiceless in the event of a blackout or a disruption of Internet service. Landline telephones operate on their own separate electrical systems, and cell phones would be similarly unaffected by a local power outage.
VoIP phones also do not automatically transmit their location to a 911 operator.
Comcast, however, is providing its VoIP customers with battery packs to keep their Internet phones working for several hours during a blackout. VoIP users are also able to register their phones with 911 responders.
As such obstacles are overcome, some telecom forecasters expect VoIP to make rapid gains nationally. In one recent survey, professionals at several large telecom providers around the country said they expect VoIP to account for 50 percent of their companies’ voice traffic by the end of 2007. That compares with less than 10 percent today.
Copyright Boutin-McQuiston, Inc. Oct 01, 2005
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