Report: VoIP market is set to thrive

The prospects for Australian VoIP operators appear good and they should continue to thrive, according to results from a survey of 500 customers of broadband telephony company Engin and Australian Telecommunications User Group (ATUG) members.

The study, which surveyed home and business VoIP users, as well as non users, found that 85 percent of VoIP subscribers would recommend the service.

Rosemary Sinclair, ATUG managing director, said there is the potential for service providers to educate consumers and tap into a growing market.

"There is space in the market for VoIP service providers as most users think line rental and call prices are too high and don't give the flexibility that VoIP provides," she said.

"Even if the price difference diminishes, the service feature differences and benefits are enormous."

Both Sinclair and Engin spokesperson Kelvin Kirk say that saving money is still the main driver for VoIP, with the survey finding that on average VoIP users are saving $44.20 a month.

The cost savings Australian VoIP subscribers can make are still less than in many other countries, according to Sinclair.

"DSL broadband customers [here] are still forced to pay line rental per month on top of a broadband package; pricing for broadband in Australia has discouraged take-up until recently," she said.

"Now that we [have] more 'all you can eat', flat-rate packages with much higher download limits, broadband is taking off so VoIP becomes attractive, but the rental means the savings are not so great."

Kirk said there are many other benefits that VoIP has to offer such as increased ability to support teleworkers, enabling low-cost expansion of business into other states, and increased productivity.

"Voice as a data application is a very new concept and it will take education for consumer and small business users to get the flexibility benefits beyond the cost savings," Sinclair said.

The survey found the main inhibitors for consumers were a lack of convenience, lack of information and an expectation of poor voice quality.

"They are perceived problems that are based on old thinking and experience," Kirk said.

"VoIP was the domain of the techos, but it is starting to move into the mainstream as the technology has matured and improved significantly."

Sinclair said the quality of VoIP is improving all the time, adding however, "The issue of quality of the underlying copper network for copper-based broadband solutions may emerge as a problem over the next few years," she said.

"Industry has to design, configure and deploy IP networks so that quality is not a problem. It then has to work to educate end users on what VoIP services are, what voice as data can mean in terms of new services, and how to manage quality of service for different applications such as voice Internet browsing access."

Shara Evans, managing director of Telsyte Research, is not as confident about the potential for VoIP providers.

"If Skype's description of itself as the world's largest VoIP carrier is to be believed, then we know that the Number 1 player generated only $US60 million in revenues in 2004-2005," she said.

"Telecommunications reform is a knife which could cut both ways for VoIP. Recent reforms (for example, the lower cost of carrier licensing, and relaxation of emergency services obligations) have made the market more attractive for VoIP players. Other regulatory reforms might make life more difficult for the VoIP sector."

Device locking is an example of a regulation that Evans believes VoIP providers will want to pay close attention to following the Australian Competition and Consumer Commission's investigation over whether it is legal to lock a broadband modem.

The most serious threat VoIP providers face in the long term is from traditional carriers and their ability to reshape themselves, according to Evans.

"Many carriers are already in the process of transitioning their core infrastructure to IP-based systems. They can and will turn themselves into IP carriers, able to offer converged services that may not be as cheap as today's consumer VoIP, but may be richer and more functional," she said.

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