Making residential VoIP a viable proposition

According to Tales, the biggest differentiator for residential VoIP services is still savings. “Our customer survey revealed, on average, Engin residential customers saved up to 55 percent on their phone bill by using Engin.

“If you are on cable you can get rid of the landline, if you are on ADSL, you can get the benefit from the best of both worlds by keeping your number and by using a VoIP service for all your outbound calls,” he said.

iiNet’s Harley agreed that price was still paramount and that, whilst the overwhelming perception produced by the media was that VoIP was simply about low-cost calling, it was really about the ability to give the consumer far more choice for a service that they’d been paying a premium for far too long for.

“To this end, VoIP offers dramatically reduced rates as it jacks into the one constantly innovating and evolving technology source: the Internet.

Big companies, those that have been around for a long time, with established pricing policies and strategic plans that stretch out over years, often find it incredibly difficult to compete with the overwhelming pressure from the Internet to innovate and rethink the way we do things.

Pricing strategies that cover long and often manual connection procedures have no place in a virtual environment where the same service is replicated instantly – with minimal resourcing,” he said.

However, as Evans pointed out, it is important to remember that there are still great call plans available with traditional voice services too.

“If a customer expects to cut their phone bill, but most of their calls are to mobiles, they might be disappointed. If, on the other hand, they are looking for a second or third phone line for their kids to use, a VoIP service may present a low-cost way of providing for these extra services,” Evans said. Savvy customers may also have the option of using VoIP for cheap international calls and traditional telephony for other call types, she added.

As more and more residential customers subscriber to VoIP services there will be an increasing pool of people that can be reached at ‘no charge’. It is also likely that the emergence of VoIP services will lead to new types of call plans, perhaps completely funded by advertising, Evans said.

However, whilst price may still be a major driver at the lower end of the VoIP market, more and more features are being introduced into the market to make the proposition seem more compelling. Calling features that would normally each incur an additional cost like call waiting, voice mail, three way calling, caller line ID and call forwarding to e-mail are now standard features of many residential VoIP services.

“Call forwarding to e-mail is one of the simplest yet most useful services out at the moment. Instead of trawling through your voicemail when you get home from work everyday, you can simply have an audio message emailed to any email address you like so you can hear it all as it happened.

“You’ll never miss an important message again,” Harley said. “Just like e-mail has largely replaced the need for a dedicated fax line, the virtualness of a VoIP line will ultimately replace the need for a fixed residential line. The future is a household with a separate VoIP number for each family member, just like an e-mail address, but without the exorbitant cost of bringing multiple fixed lines into the house,” he added.

Evans added that presence-based services, such as the ability to see which of your friends are online at any given time as well as having the ability to simply click on an icon to initiate a voice or video call, send an instant message, or an email - all without having to look up a phone number – were other key features of the VoIP world.

“The protocols behind VoIP also allow for sophisticated functions such as call forking (allowing multiple phone numbers/devices to ring at the same time), unified messaging, and so on,” she added.

Other channel opportunities

So, given that sales margins are likely to continue to come under pressure, despite increased uptake numbers, what types of other opportunities exist in this market segment for channel companies?

Tales said he believed the current market state represented a fantastic opportunity for partners to offer a way to free customer budgets so they could direct their cash flow to network upgrades, new computers, new infrastructure or straight to the bottom line. “This is all about adding huge value to the end customer and offering our resellers the opportunity to help their customers save money while making money - a win, win proposition.”

Harley said he expected to see channel partner opportunities become more available through middle-ware applications that are sold in addition to bare VoIP services. “These applications can be used to route certain calls to other branches, connect callers to a Voice to email gateway and provide call statistics etc,” he said.

Other partnering opportunities ranged from the resale of VoIP services to other markets not mass targeted directly through some ISPs such as SME and Corporate bodies that have existing relationships with these channel partners, Harley said.

Resale of VoIP through the retail consumer market was also becoming more popular as the VoIP service is bundled with VoIP hardware as a trial try-before-buy service or sometimes including free calls, Harley added.

Stewart said that, given residential VoIP’s relative infancy, channel partners could benefit not only from increased volume of hardware sales but from programs such as trailing commissions from VoIP service providers delivering greater margin and residual income streams.

One flow-on effect we are already witnessing, he said, was its increased uptake from the SMB market, where cost-consciousness was also paramount. “Excellent opportunities will be generated for channel partners to be VoIP solution deliverers for this market,” Stewart said.

One thing Evans said was paramount for any channel company wanting to benefit from the growth in this market segment would be the ability to communicate with customers buying voice systems on their level.

“Remember that the customer buying the phone system is not going to be familiar with the ‘geek-speak’ of a VoIP specialist”, she said, adding that, whilst there may be a raft of features that can enhance the VoIP experience, often the end user just wants “a cheap phone that works,”.

Gazing at the future

A number of recent independent research papers and worldwide trend data indicate strongly that the Australian market is close to what Tales described as a “tipping point” for VoIP to take off in Australia.

However, issues such as education, understanding, dispelling the myths, true broadband speeds, providing true customer service and support - not just a Web site – still need to be properly addressed before anything like critical mass can be achieved, he said.

The increasingly rapid uptake of residential broadband services would continue to be a major catalyst for VoIP adoption, he added.

Stewart agreed that the major challenge for the residential VoIP space would continue to be educating the market to overcome some of the major misconceptions of the technology and overcome consumer apathy and fear.

“As an industry we are chipping away at it and increasing people’s awareness… but we’ve only touched the tip of the iceberg so the market potential over the coming years in Australia is huge!,” he said.

Another major driver will be the emergence of new products in this space which are completely portable and can be used anywhere there is an Internet connection, making it a virtual substitute for the mobile phone.

“You’ll also start to see an emergence of VoIP products for the home that are completely integrated with built-in features like wireless which simply look like a phone – it’s the form factor that consumers most associate with,” Stewart added.

Evans said Market Clarity expects increased wholesale competition in the VoIP market, adding that retail competition was so intense right now that revenue opportunities, already tight, may continue to shrink.

“Both in the ISP market, and in other spheres such as retailing, we already see a focus on retail residential VoIP being used to make customers more loyal, rather than as a profit centre in its own right. Indeed, we believe that it is only a matter of time before VoIP services are available from most ISPs,” she added.

Harley said that, in some foreign markets, where the product was far more mature, residential VoIP take-up was already growing at a faster pace than primary line traditional services, and revenue from such traditional primary line calls was already on the decrease as consumers moved to VoIP for all their call needs. For this to happen here, he said, VoIP needed to become far more widely accepted as a replacement to traditional line services, not complementary.

“As the service continues on its evolutionary path, more businesses, telcos, hardware vendors will develop more applications and services for use with VoIP. Gaining access to cheap calls, along with mobility and portability of one’s number anywhere, anytime is where VoIP is heading,” Harley said.