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.
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.
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