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2008: The Year that VoIP died

It seems highly likely to me that at some point in the future we’ll all look back and say that 2008 was the year that the VoIP industry finally died.  With all due respect to my very good friends Jon Arnold, and Andy Abramson, it’s about time.

Voice over IP is just a transport and signalling technology. It’s plumbing.  It may come as a surprise to some of you to know that in the late 1980’s and early 1990’s there was a TCP/IP industry as well. TCP/IP is inarguably plumbing.  As the IP stack became common on all computing devices, TCP/IP went from being a differentiator to a commodity.  The short lived TCP/IP industry was a footnote in the events that spawned the global web. The fact that a VoIP industry has existed is a similar historical footnote to the transformation of the communications industry as a whole.  The VoIP industry was a necessary phase in that transformation; John in the wilderness announcing that the real action is still to come.

And what is the evidence that the VoIP industry is at that turning point?

Where have all the pure play VoIP companies gone?  The last of any consequence still standing is Vonage.  The S&P is down about 40% for the year, and Vonage a whopping 70% save for a miraculous gasp in November at the point of the announcement of their debt having been refinanced.  The fact of the matter is that Vonage is in an impossible place.  Phone calls are cheap enough, Vonage is undifferentiated from any other phone service, and … the cable guys have television.

Will this be the Vonage’s last year for the zombie shuffle?  Or can they pull it off again, and come back from the dead once more?

VoIP events are suffocating too.  VON was a spectacular flameout, despite the best efforts of Jeff Pulver and his band of merry men to transform it from a voice only show into a voice, video and more show.  At least the Pulverites understood where the future was, even if unable to craft a profitable event around those varied interests.  There’ll be more of the same next year, I fear.  Initial reports from this fall were that VoiceCon was an understated and quiet affair.  Lawn bowling anyone?

Another sure sign of the ill health of the VoIP industry is that the feature companies are heading to the deadpool, as well.  2008 started as a year full of VoIP companies trying to make their mark with free “products” that were features in disguise.  Needing to find a revenue model, many turned to advertising and cheap minutes and ran smack into the same wall that Vonage is heading toward at light speed.  Bye bye TalkPlus, Jangl, and so many more.  And suddenly, late in the year, Jaxtr lurched back from the dead with another free calling service…

The smart vendors have learned that consumers don’t want another telephone company built around a complicated piece of technology in their lives and those vendors have done one of three things – they have transformed themselves into a platform play (think Mobivox), into a wholesale player (think Jajah) or into a full-on competitor in the traditional telecom space (think TruPhone and the build-out of their global network).  Taking their cue from BT’s $105 million buyout of Ribbit, these companies are positioning themselves as players that are part of the communications ecosystem, rather than apart from the ecosystem

Why?  Well, the big VoIP stories this year were that ecosystem of applications, and platforms. 

  • Irv Shapiro’s IfByPhone ingeniously connected IVR and Google Analytics, allowing deep measurement and statistical analysis of call center traffic. 
  • Mashup king Thomas Howe demonstrated over and over that with the right tools, building communications applications can be as simple as building web sites. Tom stood on stages in front of audiences, built applications and won contests and plaudits by concretely showing that voice is now just software.  The subtext?  The magic of software lets you embed voice into any application that you like.
  • Like Tom, we at iotum used modern platforms to release Calliflower in record time. We can turn around code on a two week cycle not because we’re smarter than everyone else, but because of the tools we use to do the job. 

Building communications applications with today’s infrastructure compared to what was available even five years ago is comparable to digging a ditch with a backhoe instead of a pickaxe. 

Most interesting, perhaps, is the fact that the service provider and the equipment manufacturer seem to be blurring at the moment.  As the equipment industry has become mired in the complexities of defining and delivering a common application standard (think IMS), carriers are starting to go their own way – BT’s acquisition of Ribbit is an obvious case, but what of Orange’s developer camps (now in their third year) and the way in which the mobile industry has rushed to imitate Apple’s success with iPhone, both platform and store.  These moves betray an understanding that the future is in software, in applications, and in building products that deliver end user value rather than shaving the corners off pennies.

And what of the companies that are failing to make that transformation?  Pity the Nortel shareholder as Nortel has seen over $250 billion in market cap erased in the last five years. 

Ding dong, VoIP is dead.  Let’s dance on its grave and get on with the business of transforming communications in the twenty-first century.

{ 10 comments… add one }

  • Ed Prentice December 30, 2008, 4:46 pm

    Great that magicJack has an ad on this blog. I love it that they have their "own network." I doubt that they own a cable more than 20 feet long. That is the whole point. This is all commodity infrastructure. Stick a fork in all these imagined claims of invention. And the real point, as you observe, who wants another phone company. We barely need what we have. Just do the plumbing and connect us to the cloud.

  • Alec December 30, 2008, 4:50 pm

    There's a certain amount of irony in it :) I don't control where majicJack puts their ads… I just get paid when people click 'em!

  • Andy Abramson December 30, 2008, 7:36 pm

    The real point is VoIP is not part of Telecom, and it is mainstream…

  • Andy Abramson December 30, 2008, 7:37 pm

    oops..fired too fast

    The real point is VOIP is NOW part of Telecom and it is now Mainstream

  • Alec December 30, 2008, 8:28 pm

    yes, Andy, and so are web services, cloud computing and… but that's a topic for tomorrow's post.

  • Yusuf Motiwala December 31, 2008, 7:59 am

    Not really Alec, we are almost set for next announcement – very interesting, I promise :)

  • Alok January 3, 2009, 12:21 pm

    I appreciate your perspective, but am not sure whether that is correct. VoIP is far from dead, it is a platform waiting to be exploited. Read more on http://truvoip.blogspot.com/2009/01/voip-20-voip-

  • Bill Tech January 4, 2009, 9:04 pm

    And it couldn't die fast enough. I know I'm a dinosaur, providing copper dial tone for over 30 years, and my company is now urging customers to bundle their television services with VOIP, but the inherent fact is….. the quality sucks! Believe me, I've monitored many thousands of circuits, and the fact that consumers are settling for this crap blows me away.

    Of course much of this is due to the backlash against Ma Bell, and probably some of this is warranted. However, they are like teenagers rebelling against their parents, cutting off their noses to spite their faces. Constantly changing providers, hoping for better service, when in reality they, like some other obnoxious ISP advertises; are all connecting to the same Internet.

    I must be getting older, because I'm coming to realize that just because something is technologically feasible, doesn't mean that is better, or even a good thing.

    I feel better, now.

  • Beau Bennett January 8, 2009, 7:09 pm

    We tried them all Vonage, Skype, etc., the quality sucked and faxing became a nightmare. Our company switched to http://www.compoint.com for direct dial long distance at very low rates, with true one second billing, which surprisingly saves another 10%. There is no connect fee or monthly fee. We’re done with VOIP until someone offers a truly integrated universal solution that’s affordable.

  • Imran Malik April 6, 2010, 1:53 am

    Impressive piece of information, let me elaborate more on VoIP. Voice over Internet Protocol has been around since many years. But due to lack of sufficient and affordable bandwidth it was not possible to carry carrier grade voice over Internet Protocol. But since the arrival of low cost internet bandwidth and new speech codecs such as G.729, G.723 which utilizes very low payload to carry carrier class voice it has recently been possible to leverage the true benefits of VoIP. G.723 codec utilizes only 6 Kbps (Kilo Bytes/sec) which is capable of maintaining a constant stream of data between peers and deliver carrier grade voice quality. Lets put this way if you have 8 Mbps internet connection, by using G.723 codec you can run upto 100 telephone lines with crystal clear and carrier grade voice quality. I am also a user of VoIP and have setup a small PBX at home. Since I have discovered VoIP I have never used traditional PSTN service.

    Dear readers, if you have not yet tried VoIP I suggest that you try VoIP technology and I bet you will never want to use the traditional PSTN phone service ever again. VoIP has far more superior features to offer which traditional PSTN sadly cannot offer.

    Also It has recently been possile to carry Video alongwith VoIP by using low payload video codecs. I cannot resist to tell you that by using T.38 passthrough and disabling VAD VoIP can carry FAX transmission, but beaware FAX T.38 passthrough will only work when using wide band protocols such as G.711, a-Law and u-Law.

    By using ATA (Analog Telephone Adapter) which converts VoIP signals into traditional PSTN you can also using Dial-up modems to connect to various dialup services. I wont go in to the details what VoIP can offer, to cut my story short VoIP is a must to have product for every business and individual.

    How VoIP Works

    When we make a VoIP call, a communication channel is established between caller and called party over IP (Internet Protocol) which runs on top of computer data networks. A telephony conversation that takes place over VoIP are converted into binary data packets streams in real time and transmitted over data network, when these data packets arrive at the destination these are again converted into standard telephony conversation. This whole process of voice conversion into data, transmission and data conversion into back voice conversation takes place within less than few milliseconds. That is how a VoIP is call is transmitted over data networks. I hope that now you understand basics of how a VoIP call takes place.

    What are speech codec's and what role codec plays in VoIP?

    Speech codec play a vital role in VoIP and codec determines the quality and cost of the call. Let me explain you what exactly VoIP codec’s are and how they work. You may have heard about data compression, or probably you have heard about air compressor which compresses a volume of air in enclosed container, VoIP codec’s are no different than a air compressor. Speech codec’s compresses voice into data packets and decompresses it upon arrival at destination. Some VoIP codec’s can compress huge amount of voice while maintaining QoS which means use this type of codec will cost less because it will consume just a fraction of data network. Some codec’s are just not capable of encoding huge amount of voice they simply consume huge amount of data networks bandwidth hence the cost goes up.

    Following is a list of VoIP codec’s along with how much data network bandwidth they consume.

    * AMR Codec
    * BroadVoice Codec 16Kbps narrowband, and 32Kbps wideband
    * GIPS Family – 13.3 Kbps and up
    * GSM – 13 Kbps (full rate), 20ms frame size
    * iLBC – 15Kbps,20ms frame size: 13.3 Kbps, 30ms frame size
    * ITU G.711 – 64 Kbps, sample-based Also known as alaw/ulaw
    * ITU G.722 – 48/56/64 Kbps ADPCM 7Khz audio bandwidth
    * ITU G.722.1 – 24/32 Kbps 7Khz audio bandwidth (based on Polycom's SIREN codec)
    * ITU G.722.1C – 32 Kbps, a Polycom extension, 14Khz audio bandwidth
    * ITU G.722.2 – 6.6Kbps to 23.85Kbps. Also known as AMR-WB. CELP 7Khz audio bandwidth
    * ITU G.723.1 – 5.3/6.3 Kbps, 30ms frame size
    * ITU G.726 – 16/24/32/40 Kbps
    * ITU G.728 – 16 Kbps
    * ITU G.729 – 8 Kbps, 10ms frame size
    * Speex – 2.15 to 44.2 Kbps
    * LPC10 – 2.5 Kbps
    * DoD CELP – 4.8 Kbps

    Switch to VoIP Today and you will never want to use traditional PSTN ever again.

    Thanks

    -Imran

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