VoIP: The state of play

Everywhere you turn these days a new VoIP player enters the market or an old company sprouts a VoIP arm.  The buzz that steadily built around VoIP over the past six to 12 months is now approaching a crescendo.

With rumours the successful US VoIP trailblazer Vonage is about to enter the Australian market, everyone is keen to shore up their own VoIP patch.

Companies offering anything faintly resembling VoIP-related products are talking up their prospects for 2005 and beyond. “We’re going to triple our revenue due to VoIP" or “We predict 100 percent growth this financial year” are common catchcries.

However, almost to the letter, when pressed for actual figures -- excusing listed companies -- the standard response for these companies is to slam shut tighter than a clam’s sphincter.

In the rush to hitch to the VoIP bandwagon, there will be some casualties, especially when regulatory requirements become clearer later this year.

“You’ll find in Australia there will be regulatory issues that will make it harder for some VoIP companies,” says Freshtel’s CEO Michael Carew.

“To a certain extent it will clean out the would-be startups who really don’t have any structure behind them.”

After a period of consolidation and turmoil, some will spectacularly bust or quietly disappear, while others will maintain some foothold by forming partnerships. Carew believes it will come down to half a dozen major players in the Australian marketplace.

Cisco’s general manager for convergence, Peter Hughes, admits VoIP has been through a typical technology hype-cycle. “The peak of inflated expectations and the trough of disillusionment followed by a plateau of productivity...No two ways about it, there were issues the [VoIP] industry had to overcome, but we’re well past that trough of disillusionment...I call it the erogenous zone at the end that we’re just about to move into,” he says.

And it is not just this year. IDC predicts a compound annual growth rate of 50 percent to 2008 for the local VoIP equipment market.

IDC has already signalled it is upgrading local forecasts on the back of bigger and bigger VoIP rollouts, some in the tens of thousands of seats. “Today, for one IP phone sold, there’s about four traditional phones sold,” says IDC’s telecommunications research director Landry Fevre. “In 2006 that will change to where there will be more IP phones sold than traditional phones. That’s a way to measure market maturity.”

Cisco is still VoIP’s kingpin with 50 percent of the local market, ahead of Avaya, Nortel and Alcatel, he says.

Cisco's Hughes: Past that rough of disillusionment

It is becoming less clear who “owns” the VoIP customer Fevre says, as telcos -- like Telstra, Optus and AAPT -- compete with system integrators like IBM/Logicalis, Dimension Data, Alphawest and CSC.

“Even though the telcos don’t have a strong install base now in IP telephony, they have a strong mindshare,” he says. “System integrators have a much stronger hold on the install base today; [however] the telcos started to get their act together last year and are now frantically working to put offerings together to get customer references,” he says.

Now when a company looks to upgrade or replace their systems, you can expect them to consider IP telephony. “And if they don’t, then their management should be asking them ‘Why not?’,” Fevre says.

That goes for all industry verticals, he says. “This year the [VoIP] market will go mainstream...The most advanced to date are professional services, but the biggest opportunities for the next 12 to 24 months will be government, healthcare and education.” Next in line are telecommunications and media, and finance -- the big banks, he says. 

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