My take on AOL’s decision to eliminate its TotalTalk VoIP service is that Vonage and the cable companies have raised the bar very high and it is very tough to compete in the consumer VoIP telephone replacement market unless you are looking o spend a fortune on marketing.

This article surmises that the VoIP market is too immature to support multiple players but doesn’t take into account how fast Vonage, Packet8 and the cable companies are adding VoIP customers. If you have a big enough wallet you can add customers briskly in my opinion. The question is does it make sense to do this at a loss like Vonage is doing? You are likely aware that I think Vonage still has lots of potential and they shouldn’t be discounted. AOL’s recent decision shows you why I feel the way I do.

It is important to note that AOL is going to stay in the VoIP business and will continue to support AIM Phoneline as part of AOL’s Instant Messenger product. AOL is very committed to VoIP and some of the company’s recent announcements are worth ingesting at this point if you want more information on what AOL is up to. In short they will be a lot more like Skype and a lot less like Vonage.

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