Despite almost a decade of exposure to the VoIP industry, this Musing is mainly about my experience as a consumer.  I have used Skype for well over a year and joined Vonage about nine months ago.  I am not going to comment on Vonage as a business nor analyze the market implications of the hefty war chest they had to raise (over $400M) and the widely reported customer acquisition costs ($453) to find early adopters like me.  Hey! TV jingles are expensive! Meg Whitman claims voice will be free, and I can only conjecture that Ebay’s $2.6B acquisition of Skype is to make sure that those 50 million Skype users have a place to hold virtual garage sales.

My Skype experience was somewhat limited because when I joined the service you could not “Skype-out” and call PSTN phones (which you can do now). Basically, you could only call other Skype users who were on your Skype buddies list who had successfully downloaded the Skype software AND who were on line when you wanted to call them….in my opinion pretty lame.   For me, that universe was exactly two people who were both Acuitive employees.  Frankly, picking up my cell phone and calling them was a lot easier than waiting for them to be present on line and willing to chat. To me, Skype was analogous to AT&T’s ill fated 1960’s video phone that could only make calls to recipients who had the same CPE device on the other end.

·         Installation, Set Up

One of the areas that really impressed me about Vonage was the initial ease of installation. After ordering on the web, Vonage handled all of the administrative issues of transferring over my home office number from my local and long distance carriers.  A Linksys router showed up within days that replaced my existing router, and I literally plugged it in and picked up the phone and presto…dial tone!  Very impressive.

Admittedly, I am not the average Vonage customer.  Since I deployed a wireless network in my home five years ago, I was concerned that swapping routers was going to impact my wireless configuration, but it worked perfectly.

I was so impressed with Vonage that within a month I convinced my skeptical wife that she just didn’t get it and that VoIP was going to change our lives. I convinced her we just had to switch our PSTN personal phone line and fax line to VoIP.  This was a little more tricky.   Adding an additional fax and voice line required daisy chaining an additional Linksys router because all of the Ethernet ports and voice ports were consumed.  Nonetheless, it worked, and I felt that same tingling feeling as the first VC on Sand Hill Road to read his email on his new Blackberry (probably during an entrepreneur’s pitch).

The few times that I had to call Vonage tech support I found them very knowledgeable, sincere, and their follow up was far better than any other technology vendor including HP, Dell, and Linksys/Cisco.

You have probably heard all of the ruckus about E911.  What is it? E911 is the internet equivalent of regular 911 which is to allow the first responder network (police, fire, ambulance etc..) to quickly locate a caller in trouble who dialed 9-1-1.  E911 is controversial because with the added benefit of VoIP phone number portability, it creates a problem that first responders may think you are at home when in reality you may actually be at the local pub and have suffered a coronary watching our 2-9 San Francisco 49ers.  Whoops! The media has made such a big deal about E911, but frankly it is a non-event for most people right now.  Sure… once in a blue moon I may take my CPE device some place else, but since Vonage does a required E911 registration locality check, I know if the Saratoga police need to find me I am comfortable that Vonage can point them to our house.  Too bad they couldn’t do that with the pizza delivery guy. However, E911 will be a bigger issue when WiMAX and mesh networks will allow mobile users to take their Vonage number on their SJ Labs soft phone residing on their Windows CE or Blackberry devices when WiFi VoIP becomes a cellular avoidance strategy.

Features

At first, dial tone is the killer feature.  The latency, jitter, voice clipping and low bandwidth co-decs of early VoIP calls made cellular phones in the subway sound like the MCI pin drop commercials. I was very impressed at the Vonage voice quality and took pride telling my fellow Silicon Valley digerati…"you know this is a Voice over IP phone call” -- almost like I was the first one to try the Salk Vaccine.

Vonage and other ITSPs do a good job of bundling value added services into the base product offering. You will no longer feel “nickled and dimed” by the phone company who programmed us to get used to paying $4.99 for every single additional feature like voice mail, call waiting, caller ID etc…  Who cares that AT&T is now at 4 cents a minute when your fixed monthly incremental feature charges are $25!

·         Pricing

·          Network Availability

I should note that as I am writing this Musing, I am without email, internet access, and worst of all, without phone service as I am waiting for the Comcast Cable Guy to tell me why my home network is down.  He/she is rumored to be here sometime between 9 a.m. and midnight on Tuesday orThursday.  Ahh….the misery!

There is no doubt that I have added complexity to my home network by going to VoIP.   Before Vonage, my cable modem was connected to a single router/wireless access point for my 4 computers on our home network.  The network never seemed to go down, and if it did go down, I did not notice.

Since Vonage, my network has been down a lot and that is a huge problem.  Coincidental? Maybe… or maybe not. 

I sympathize with many of the enterprise network administrators I talk to on a regular basis. I have become the Garland family network admin, and I am also responsible for adding complexity to the network. There are a number of network elements that need to fit together and actually work. What is indescribably frustrating is when the Comcast cable guy comes in and sees multiple downstream Vonage routers and a Linksys wireless access point connected to the cable modem. He slyly grins for a second because he knows this will be a short call. Without hesitation, he shows me that he has Vonage and Linksys’s tech support phone numbers tattooed to his forehead.  Conversely, the minor IP address change that the Linksys tech support engineer in India had me modify caused smoke to come out of the back of the Comcast cable modem, and no surprise, everyone points their finger at each other!

Now these antics have been happening for 10 years in the enterprise VoIP market as the Cisco networking field engineer sheepishly points his finger at the Avaya IP-PBX as the culprit that brought the data network down.  These vendors may have conditioned corporate IT to expect the finger pointing, but this can’t happen in the consumer market!!  There is no way that consumer VoIP market will cross the chasm to the 100 million households in the US if this continues to happen!!  I am a technology guy, so I consume this for a living, but the other 98% of the market living outside the Silicon Valley and Banglore, India won’t tolerate it.

Today’s reality is that the consequences of my network going down are a hundred times worse than ever before. Not only am I cut off from email and the internet, I no longer have voice access except for cellular. To add insult to injury, Verizon’s cell coverage in Saratoga is not too great.  I admit it.  I was too enamored with features and cost savings and may have jumped the gun converting over 100% to VoIP in our home and office, leaving us without alternatives during a service outage.

Network availability is one issue, but contention is another.  Comcast’s cable internet service promises to give 4 Mbps up and 768 kbps down.  A few years ago, I was the only one in the house using the pipe mainly for email and the world wide web.  Now as my three kids get older and enter their teen years, I am actually having conversations about why Daddy’s Board presentation needs to get priority over my son’s “All you can eat Yahoo MP3” subscription service, or contending with my wife’s uploading 400 pictures of the scarf she just knitted to Kodak’s Photo Gallery while I am on a conference call and getting every third word. 

Will I some day need to set TOS bits on my Linksys router to prioritize my voice traffic over my daughter’s IM and son’s Runescape gaming packets?  I sure hope not.  Growing pains that I accept but will everyone?

·         Come a long way baby…..

In ten years, the telecom industry has undergone unprecedented change and created some new players while bringing down some old established players.  VoIP will likely catch on much faster in the enterprise market which is projected to be at parity with TDM penetration this year. Despite the early hype, consumer VoIP penetration did not happen overnight, but I think it will happen if the service providers don’t forget the lowest common denominator capabilities of the customer.  Consumer VoIP economics and bundled features are just too compelling to leave on the shelf. You can’t ignore Skype’s viral growth. Analysts are projecting near vertical growth for the consumer VoIP market with as many as 20 million subscribers in the US and five billion dollars a year in subscription revenue within the next three years. 

For this growth to be realized, technologists need to remember that when dealing with the consumer market, ease of use, installation and support are more important than some new wiz bang features.  Successful companies will have an eco-system or architectural approach to delivering end-to-end supported solutions to the consumer.  Companies that fail will have myopic product centric world views and frustrating support experiences.  Although the industry has come a long way, there still is more work to do.  Wake up Comcast!

All in all … my consumer VoIP experience has met and exceeded my expectations in terms of features and price. When the support and integration of disparate devices becomes more seamless, the market will be poised for explosive growth.  Stay tuned.

Maybe VON 2006’s tag-line might be, “Consumer VoIP 2006…the pieces really work all together!”

__________________________________

*Also the theme for VON in 1998, 1999, 2000, 2001, 2002, 2003, 2004.

___________________________________________________________________________

Tom Garland joined Acuitive in January 2001. His market, customer and channel validation practice has helped match dozens of Acuitive companies to his contacts with Fortune 1000 IT professionals in search of the elusive customer.  To learn more about Acuitive’s validation Practice email validation@acuitive or check out http://acuitive.com/Market%20Validation%20Practice.html