Study Says Big Players To Dominate VoIP

Mercer Management also finds that lower priced Internet calls still trump quality issues.


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Major ISPs are poised to dominate the market for Voice over IP services over the next three years and could grab up to 30 percent of the residential voice market, a new study says.

But VoIP offerings still suffer from inferior sound quality and reliability, according to a research report issued by Mercer Management Consulting.

Mercer surveyed 1,000 consumers in the U.S. and the U.K. in order to gauge their perceptions about VoIP. The consulting firm said it expects established ISPs to double their anticipated market share over what it called current low quality VoIP offerings over the next three years and grab up to 30 percent of the residential voice market.

But the full potential of the VoIP market won't fully be captured unless the services change the way the offering is currently marketed.

"Traditional phone companies need to develop offers that will maximize defensive value while at the same time avoiding rocking the boat for today's loyal and valuable customers," Martin Kon, a director in the Mercer's communications practice, said in a statement.

"And what about new VoIP providers? "The key for them will be structuring the right offer."

The study said consumers are less sensitive to call rates than they are to fixed charges. The importance of number portability was seen as more of an issue in the U.K. than in the U.S., although most respondents said they are interested in the "universal" and portable phone number concept that Internet-based phone calls enable.

Mercer recommended that providers focus more on quality and reliability, rather than offering lower prices as a defining feature of their offer. In addition, it said major telecommunications providers, as well as ISPs, are "seen as considerably more attractive to their customers as a provider of a VoIP service than new brands like Skype or Vonage" in maximizing the value of existing customer relationship.

But VoIP provider Vonage disputed Mercer's assessment. "Vonage offers a competitively priced full-featured broadband phone service, with premium sound quality," said Louis Holder, executive vice president of product development for Vonage. "Its customer base is inclusive of subscribers who are both tech and non-tech saavy. Vonage should not be classified as a service targeting technology geeks and cost sensitive consumers," as the study suggested.

The study comes as Vonage is experiencing growth in usage. The Edison, N.J.-based company recently announced that its VoIP network has just passed the billion minutes mark in calls provided.

"We're proving once again that not only is this technology scalable, but that people want it, and are using it in droves," said Jeffrey Citron, chairman and CEO of Vonage, in release. "With 170,000 customers actively using our network, one billion minutes is a lot of talking."

Vonage will have to face down incumbent phone providers, such as AT&T , that are increasingly vying for a piece of the VoIP market. AT&T and Vonage are also engaged in a legal dispute over whether AT&T's CallVantage service is confusing to Vonage customers.

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