While many technology decisions are made based upon what analysts or the media think, these sources can be flawed as they involve relationships – sometimes financial which could potentially skew how a specific company may be rated by the media or analyst firm. Even if everything is 100% objective, there is a certain amount of guesswork related to determining share of market in any industry as much of the data is not available and has to be surmised from multiple sources which could include interviews. Typically though, there aren’t other places to go when trying to ascertain which companies are leading in a particular market.
But in the VoIP space, there is a relatively new source of information worth noting. The FCC in fact has become a leading provider of market research by disseminating the results of its form filings. In particular, Form 477 which carriers have to file or risk enforcement action under sections 502 and 503 of the Communications Act as well as other laws. Failing to comply with filing or inaccurately filling the form out could mean fines of $100,000 per day or action with a maximal fine of $1,000,000.
In short we have a new and presumably very accurate way to rate VoIP players in the market as the FCC has released a few recent reports… One titled Local Telephone Competition: Status as of December 31, 2009 and another Local Telephone Competition: Status as of June 30, 2010. The six month separation between the two reports gives us some powerful insight into the VoIP market in the US.
The report doesn’t highlight Skype or similar services – instead it focuses on traditional service providers such as ILECs, CLECs and interconnected VoIP players like Vonage. Here is a glossary of terms if you are interested.
Click any graphic to see a larger version.
The first bit of information which jumps out at you is in the six months between the reports, interconnected VoIP provider lines for business grew from 3,574,000 to 3,665,000 or an increase of 91,000 lines.
In a recent conversation with Bryan Martin, Chairman, CEO and President of 8×8, he explained to me that during the six months when the industry grew by 91 thousand subscribers, 8×8 added 18,544 new users (PDF) and grew at a rate of 13% as opposed to the rest of the market which grew at around 2.5%. Keep in mind these numbers are for a two quarter period and you would want to consider potentially doubling them both to come up with an annualized figure.
The backup data above can be found in more detail here. A bit esoteric, you have to take the number of subscribers 8×8 had at the beginning of the report period FQ310 and multiply it by the number of services each subscriber pays for or 19,407 * 7.3 = 141,671. Then you take FQ111 and do the same exercise or 21,362*7.5 = 160,215. The growth number is the difference between the resulting numbers or 18,544 as mentioned above.
Another fascinating point in this report is in the first six months of last year the number of POTS residential lines decreased by over four million from 68,646,000 to 64,523,000 while consumer VoIP grew by almost 3 million lines from 22,407,000 to 25,231,000 or 12% growth – 24% if you look at it on an annualized basis.
The point of course is the business VoIP market is absolutely full of potential and we can expect the number of business VoIP lines to increase at an accelerated rate going forward. What is surprising to me is the amount of time it has taken for companies to switch to IP. As Martin explains, “We haven’t scratched the surface as an industry.” Of course there is a lag here in terms of data freshness but at least this information helps us spot trends in the market. Thank you FCC for helping to provide data accuracy in a market which can clearly benefit from transparency.