More service providers -- such as iiNet, Telstra and TPG -- are expected to launch consumer VoIP by mid year, IDC says. They will lob in the residential VoIP space already inhabited by the likes of engin and Freshtel.
“It’s certainly shaping up to be a big year,” says Ilkka Tales, CEO of Mobile Innovations, which owns the company engin.
“There’s a lot of smaller players coming into the market and a few international VoIP providers.” There may be dozen players with their eyes on the consumer VoIP market, he says.
In December 2004, Unwired cooled off a proposed trial of its VoIP offering to Sydney residents. Some of the reasons behind the re-think included the rise of free VoIP products and the heavy discounting going on in mobile phone offerings, which was tempting consumers to do away with fixed landlines in their homes.
IDC’s Landry Fevre says Unwired may have been a little ahead of itself when it announced its residential VoIP plans.
“It’s tricky, especially with spectrum usage. Voice is very demanding in terms of spectrum and also in terms of quality of network. Unwired has a little ironing out of its network and tweaking of the base station before they go into this space,” says Fevre.
From a start-up point of view, it is not as easy as people think, says Tales. "You need funding, you need distribution channels to take the product to market, you need a product that’s reliable and scalable, you need a billing system and staff that can manage that effectively, and you also need to be able to comply with the regulatory environment.”
“At this point in time, Australia’s regulators say, 'If it looks like a duck, quacks like a duck, it must be a duck’, so we’re operating in that sort of framework,” he says.
Some of the things that concern regulators about VoIP are issues over quality of service, vulnerability to software viruses, consumer education and managing expectations, access to emergency services, lawful intercepts and power supply.
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| engin's Tales: Shaping up to be a big year |
The Department of Communications, Information Technology and the Arts (DCITA) also highlights concerns about VoIP services being compatible with other types of equipment the consumer has, such as older ADSL modems and special communications needs of people with speech and hearing impairments.
To get residential VoIP to capture the attention of consumers on a grand scale, it has to be truly plug-n-play -- straightforward and foolproof enough for the average person to cope with installation.
“If the consumer doesn’t like it, then the product won’t survive,” says Freshtel’s CEO Michael Carew.
Then it is a matter of getting the message out to consumers, and making sure VoIP products and services mimic the standard telephone so closely it is barely noticed, he says.
Freshtel will launch a product in March that it claims is the first Australian-built ATA (analogue telephone adaptor). “It’s a plug-and-play device for a normal telephone,” Carew says. “We’re also working with PDA devices -- building interfaces with wireless PDAs so you can use your VoIP to anywhere else in the world.” Carew says the company is also making a centralised PBX and handset for the commercial market as well as the domestic market -- all built using Australian technology.
One of the issues being grappled with is being able to offer technical support to such a mass market as consumer VoIP and to be able to do that in a way that is satisfactory to the user and makes money for the service provider.
Nortel’s chief convergence architect, Mick Regan, says the consumer market has challenges because there is no control beyond the end point. “If the end user decides to tinker around with the home network, then the quality is going to go right down.” That is when you will get support issues and the consumer will point the finger at the product or the provider -- potentially badmouthing both.
Mainstream-managed VoIP services are still to hit the residential VoIP market. Express Data’s Ross Cochrane says in time the telcos will offer a managed IP service. “There’s no telco today that doesn’t have a plan to move all of their infrastructure into an IP environment,” he says.
Carew says about 60 percent of Australia’s ISPs -- through a group called Wholesale Communications Group -- will offer VoIP services to the consumer.
“It’s a lot easier for 100 ISPs to sell to a million people than it is for one large company to handle customer care for those million customers,” Carew says.
“With the Wholesale Communications Group, there are three levels of support. The simple questions will be taken up by the ISP, the more technical questions will be taken up by the Wholesale Communications Group, and the extremely technical questions will be taken up by the developer themselves, in this case, Freshtel,” Carew says.
It is important to have a very consumer-friendly VoIP system in order to keep prices down. “With VoIP, the more costs required for customer care, the more prices of the product are driven up,” he says.
The next six months will make a vast difference in terms of product simplicity. Engin is going after the consumer and cost-conscious small business. Despite sales of engin through retailers like Dick Smith, Tales says there are still opportunities for the channel.
“We’re actively building up a small to medium enterprise channel and a consumer channel. The channel’s very important to us to help acquire customers and we’re always looking for potential partners,” Carew says.
While broadband uptake is helping residential VoIP adoption, it is going to take a lot of evangelising to get the VoIP message out to the public.
Tales uses the US example where about 21 percent of the population have broadband -- about 30 million households. Australia has about 9 percent broadband penetration -- just over a million households, he says.
“In the US, companies like Vonage have been actively marketing for over two years now and they have about 400,000 customers out of a potential 30 million,” he says. “That gives you some idea of the amount of consumer education that’s still needed locally, but also the potential growth still left in the home VoIP market.”
Carew says the consumer market will yield good revenues. “The margins available to ISPs in relation to VoIP services are far greater than the ADSL and the dial-up connection, so it’s a very lucrative business for that partner market.”
It is not just a one-off product sale -- they stand to get a share of the revenue from the calls people make.
“The good thing for the channel with VoIP is that you can be an integrator but you can also virtually become a mini-telco in that you can receive call revenue from doing VoIP, depending on whose service you supply,” Carew says.
Engin’s VoIP product -- Voice Box -- has been available for some time, but earlier this month the company launched a new product called engin OneWay, which is an outgoing service only, Tales says.
To overcome some of the thorny issues with numbering, engin has another product called engin Switchboard, which offers a hosted service.
“Say a customer lives in Sydney but their family and friends live in Melbourne. They can buy the Switchboard service from us...and the cost is the cost of a local call. You can buy six or seven numbers around Australia, and we deliver calls to you via the internet into your voice box,” Tales says.
He says the company has done a lot of legal legwork and consultation with the Australian Communications Authority to ensure services they deliver are within the guidelines of the regulatory system in Australia.
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| Express Data's Cochrane: The telcos will offer a managed IP service |
How those regulations around VoIP pan out will not be known for about six months. “The regulatory bodies should have some recommendations from the discussion paper through to the government by March...We’re certainly pushing for light-touch regulation [similar] to the approach they’ve taken so far,” Tales says.
As for some of the future challenges to providers of residential VoIP, globally VoIP is heading towards voice calls carried for free over the internet. “So from a pricing mechanism perspective, anyone’s pricing model that’s based on a ‘per minute’ basis is slightly flawed,” says Tales.
It is very much a volume game, not just locally but being able to build sustainable volume globally, because it is such a borderless world when it comes to VoIP.
“When choosing a partner for VoIP, you need to have someone who has some credibility, who can stay the distance from a financial perspective, who can scale up, and who you can trust,” he says.
“You need to make sure you have a reliable business partner, one that’s sorted out all the regulatory issues and complies, that’s well-funded for growth and who is taking VoIP seriously, not opportunistically.”
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