Tuesday, June 20, 2006

VoIP heats up while Net neutrality simmers

There have been some rumblings in the wobbly world of VoIP recently.

Voice over Internet Protocol, or VoIP for short, holds a lot of promise as both a viable technology and a sustainable business model but has yet to do much more than lurch forward. Leading VoIP company Vonage, which had its initial public offering in May, is in deep water now that its earnings picture has come under suspicion. Some stock analysts have gone cold on the stock amid concerns over subscriber numbers.

Those unfamiliar with VoIP need to know that it's a system for using the Internet for making voice phone calls at substantially lower cost than POTS, or plain old telephone service.

Even as its stock price has fallen nearly 54 percent off its IPO price, a few observers have risen to Vonage's defense. Cormac O'Reilly of the Britain-based TheRegister.co.uk points out that growing its subscriber base from 100,000 to 1.6 million in three years is nothing to sneeze at.

However, Vonage's willingness to lower its $24.99 monthly rate to $19.99 to keep its subscribers from bolting certainly reveals some market weakness.

Sadly, Vonage's main competitor, Skype, the brainchild of KaZaA founders Niklas Zennstrm and Janus Friis, has made things a bit difficult for Vonage with its own daring price point: free. Skype has millions worldwide using its free PC-to-PC calling software, but to capture market share, it has dropped its price on calling landline and mobile phones to free, as well.

Skype's fee structure will time-out at the end of the year, with its PC-to-PC remaining free "forever" as its Web site claims, while the calls from your PC to phones will again be charged. But you can bet Skype will manage to undercut Vonage.

Still, its niche is different from Vonage's -- as Vonage puts traditional handheld phone sets in users' hands -- but the difference may not be enough to mollify analysts' concerns. We should all hope Vonage makes it because the more competition the better, especially against the increasingly leviathan mainstream carriers such as AT&T and the various cellular providers. A string of telecomm mergers have bloated the Baby Bells, with SBC even resuscitating the AT&T brand.

VoIP has competitive advantages, but its main disadvantage is a dilly: It requires a technology comfort zone, if not downright know-how. I can figure out how to get Skype going on my home computer, and Vonage is certainly even easier, but most people may balk at the notion.

If you feel you're in that category, just head out to the Napa Valley PC Users Group monthly meeting tomorrow night, at 7 p.m. at the Napa Senior Activity Center, 1500 Jefferson St.

Susy Ball will host the main demonstration with an in-depth demonstration of VoIP and how to use it. Susy maintains most people who use VoIP are able to reduce their telephone costs and truly save money.

That sounds like something all of us can profit by.

Late update as my deadline nears: Vonage has been hit by a VoIP patent infringement suit by Verizon. When it rains it pours.

On the net neutrality front of which I spoke last week, things are also heating up, with a modest breakthrough in the ongoing fight in the U.S. Senate.

Net neutrality, or the notion that all players should be treated equally on the Internet with no sides playing favorites or charging higher fees for higher channel capacity, was dealt a severe blow a couple of weeks back with the House of Representatives passing a new communications bill with no promise to respect net neutrality.

Things were better but not good in the Senate until this past weekend when Senate Commerce Committee Chairman Ted Stevens (R-AK) expressed willingness to include language in the Senate's version that preserves a consumer's ability to travel anywhere on the Internet and use any Web-based application.

What's missing is any ban on multi-tiered pricing, as companies like Microsoft, Google and Yahoo! have demanded.

It's hardly a breakthrough when so little is offered, but it's a start. If nothing else Stevens has offered cover for middle-of-the-roaders to move a little closer to supporting net neutrality. With a little momentum and a couple more conservative defectors, there's hope yet.

It's ironic that net neutrality is considered a liberal cause, when in reality it should be the libertarians in the conservative ranks demanding a level playing field.

The stickler is that conservative ideologues favor a free market, which often favors capital over innovation. Business ends up regulating itself, not through regulation but market manipulation.

And that's something Internet enthusiasts -- and future Internet innovators -- can ill afford.


Anonymous Anonymous said...

I think its silly that the U.S. Senate can pass bills over the Internet which is clearly owned by no-one person or company and the whole world's surfing is at stake.

1:48 AM  

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