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Friday, January 14, 2005

VoIP & Traditional Telecom Players

Om Malik brilliantly wrote in his book Broadbandits about Jack Grubman, telecom analyst at Solomon Smith Barney,who pocketed $100 million touting overpriced broadband stocks. I read in my saturday morning flight to Singapore this piece in Newsweek - excerpts from Charles Gasparino latest book - "Blood on the Street" revealing just how rigged the game was centered around Jack Grubman. Jack Grubman consistenly took a position that AT&T may not be able to withstand competition from the then emerging enterprise like Global Crossing and Worldcom in the lat 90's.The allegation is Jack helped companies like Global Crossing to raise billions of dollars by consistently maintaining a bearish stance on AT&T, citing inability of the giants to compete in the emerging areas.

I was wondering what would be the impact for the biggies as seen by the analysts in the emerging VoIP market with daily announcements by various players and so much attention in the media for the likes of Vonage. I came across this piece by Wolfgang Gruener of Toms Hardware saying Traditional phone companies to dominate VoIP. Excerpts:

Broadband phone companies such as Vonage grow fast and point out a new direction how phones will work in the future. IDC analyst William Stofega however believes that the incumbents are on their way to grab the lion's share of the Voice-over-IP (VoIP) market. VoIP is sending shockwaves through the telephone market offering companies and private households to slash their phone expenses. Vonage, one of the pioneers in this field, already claims more than 400,000 customers, with almost 30,000 new users joining the service every month. However, some analysts believe that relatively new VoIP firms may have just leveled the ground and the traditional phone companies will launch a major effort to fetch market share this year. 2005 is likely to become the year of the private consumer, with pricing to continue to lure new customers. Incumbents will be able to offer higher quality VoIP calls by controlling the infrastructure data packets are routed and will leverage their existing customer base to gain VoIP market share. "Traditional phone companies usually offer already broadband and phone services and own an enormous installed base of customers. This clearly provides them with an advantage to bring services together with the goal to convert all customers at some point", he said. The challenge for the incumbents however remains to find the price point for their IP offering and not jeopardize current revenue streams at the same time.

I can't agree more. Traditional telecom companies, so long as they are able to come with new service offerings would gain substantial marketshare.
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