2006 VoIP Predictions

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Randy Savicky
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2006 VoIP Predictions


I promised predictions for 2006 and so here they are. Nothing like waiting till the last minute, eh? ;) Let me first start my analyzing my 2005 VoIP predictions. Some I have abbreviated for brevity sake, so if you wish to read my full thoughts on a particular 2005 prediction, go check out the original article. Within my analysis of my 2005 predictions I couldn't help myself but to intertwine some predictions for 2006 -- as opposed to just separating them all out. I do have a list of separated 2006 predictions at the end, but there are also thoughts & predictions within the analysis of my 2005 predictions.

So let's begin with the analysis of last year's predictions...

1) VoIP providers will continue to run to the FCC (a VoIP proponent) for protection from the big bad bully RBOCs, ILECs, CLECs, etc. as they try and lobby Congress to regulate VoIP.

Analysis: (wrong) If anything, the VoIP providers are running away from the FCC and complaining to Congress over several FCC rulings. The reason for the change? Well, Michael Powell, the former FCC chairman and a huge VoIP proponent stepped down in early 2005 after I had already made my 2005 predictions in late 2004. All bets were off once Michael Powell was replaced by Kevin J. Martin, where recent evidence shows he is much more in favor of incumbent carriers than in protecting VoIP startups, including the infamous FCC vs. Brand X Supreme Court decision.

2) VoIP providers will continue to harp that the government shouldn't impose any regulations on VoIP and that the industry should be open & free, while simultaneously VoIP providers will continue to alienate their customers by password-protecting and locking the customer's ATA (analog telephony adaptor), thus preventing customers from easily switching to another VoIP provider and using the same ATA. This is hypocrisy at its worst! Customers will continue to be left with useless ATA "bricks" which eventually will make it the local landfill when they switch to a better VoIP provider.

Analysis: (correct) Unfortunately, more VoIP service providers are still locking their ATAs even though they often charge you a $50 or more cancellation fee if you cancel within 1 year. Often their rational for the cancellation fee is that they give you the hardware for free and therefore since they have to "subsidize" the hardware costs they need to recoup the investment. I say if you are going to charge me $50 to recoup your losses, that's fine, but unlock the damn ATA!

3) With millions of customers using VoIP and with the ability to now easily switch to another voice provider and keep your existing phone number, more customers will switch to the best value, which means more ATAs will make it to the landfill drawing attention from the EPA. Rather than let the EPA regulate recycling of ATAs, in 2005 VoIP providers will offer a rebate or discount to "turn in" your old ATA so they can recycle it. It can even be a selling point to get you to switch from a competitor - "Be green! Send us your old VoIP ATA and we will give you the first month for free!"

Analysis: (neither) I wasn't entirely serious with this prediction. It was more of an idealistic, hopeful thought on my part. In the back of my mind I hoped this would happen to not only protect the
environment but also to stop the practice of locking ATAs causing consumers unnecessary cost expenditures.

4) 2005 - The Year Triple Play took off

Analysis: (partially true)
While it is true that more providers are offering Triple Play packages, especially the cable companies, I was actually hoping to see the Baby Bells and other carriers take off with their Triple Play offerings that included voice, video/TV, and data. And I don't mean fiber - sure the carriers have some Triple Play trial deployments in small communities, but nothing large scale. No I was hoping to see the carriers deploy Triple Play using the high-speed ADSL2+ standard that uses ubiquitous copper wiring. Unfortunately, we didn't see massive ADSL2+ deployments.

Relatedly, I read a NY Times article yesterday that said, "Verizon has also been hit harder than the other Bells by competition from cable companies, which are expanding rapidly into the phone business." as well as this quote, "In addition to the continuing loss of its landline customers, investors are worried about the company's decision to spend billions of dollars to build fiber optic lines to homes and expand into an already crowded cable television market."

Let me comment on these two quotes. While the investors are crying about Verizon's large investment in fiber which will affect the short-term stock price, I think Verizon is making the right decision to make the investment now while they still are profitable. Look at what happened to AT&T. AT&T waited way too long to diversify started losing customers and revenue and was finally gobbled up by SBC. While the AT&T brand remains, this is not the same "invincible" AT&T I grew up with. The last part of the 2nd NY Times quote which I bolded above ("and expand into an already crowded cable television market") really stuck in my craw. As radio personality Curtis Sliwa would say, "You couldn't be more hopelessly wrong! The cable space is not crowded. In all the towns I have ever lived in, I have had only one choice of cable provider. If you assume the journalist meant any TV programming provider, then you can also throw in satellite TV. That basically gives you only 2 choices - cable or satellite. It's once you hit three competitors in any industry that things get really price competitive for the consumer. There is plenty of room for Verizon to offer TV programming.

Let me point out that currently My cable bill is $130 with $39.95 for 3Mbps high-speed Internet. If Verizon or any other provider can offer me a monthly package that includes $25 unlimited VoIP, $30 broadband data, $50 TV programming, and $30 for wireless phone service for a grand total of $135/month I'd switch in a heartbeat. Verizon like several other carriers has a distinct advantage of the cable companies in that they can also bundle wireless cell phone service.

5) Return of the Jedi (Return of telemarketing calls to switch providers)

Analysis: (wrong)
This prediction was predicated on the notion that Triple Play offerings would take off in 2005, (as stated in the previous prediction it did not) which would allow the service providers to "telemarket" you since the DNC regulations allow telemarketers to contact you IF the company has done business with you in the last 6 months. So if for instance you signed up for Cablevision TV, Cablevision's telemarketers could call you to switch phone service. Surprisingly, even where Triple Play has taken foothold in the cable market I have not heard of the cable companies telemarketing to their customer base to switch phone service.

6) The Empire Strikes Back Phone companies (The Empire) will go after the cable companies' TV business just as the cable companies have successfully gone after the phone companies' voice and data business. This is related to my Triple Play prediction, but I just had to work Star Wars somewhere into these predictions.

Analysis (mostly wrong)
As previously stated, the carriers have only done limited trials of TV programming, but
the carriers are definitely eyeing the cable companies TV programming market. 2006 could be the year the carriers finally get it together.

7) Colleges ramp up on VoIP

Analysis: (true)
From the research I have done, analysts I've spoken to, and news releases I have received, college campuses are definitely deploying VoIP. Mostly Avaya and Cisco equipment from what I have heard. Even though many college campuses have invested millions in their legacy infrastructure, their are cost savings with IP-PBXs, such as ease of moves, adds, and deletions (administration costs) that have a quick ROI, especially due to the high turnover of incoming and graduating students.

8) Cities become their own phone companies
You will start to see more cities not only offering high-speed wireless broadband using WiMAX and other high-speed wireless technologies, but you will start to see cities offering their own phone services as well.

Analysis: (somewhat true)
It is true that several cities have deployed city-wide WiFi. Also, Google want to WiFi up the entire world according to the Google Blog. Some cities have even deployed VoIP and interconnected all of city's infrastructure buildings, including police headquarters, city hall, and fire department, all over a dedicated network with simple extension-to-extension dialing between city offices. However, having a private phone network isn't the same thing as the city reselling phone service to its city's citizens. I believe I came across some regulation that now prohibits cities from reselling phone service. Wish I could find it. Anyone?

9) VoIP Spam + 1st VoIP spam lawsuit

Analysis: (somewhat true)
There are cases of VoIP spam, including Skype spam, but nothing of an earth-shattering nature. And of course there are pranksters doing CallerID spoofing using VoIP, but again, nothing newsworthy. There hasn't been a VoIP spam lawsuit either.

10) Microsoft tries its hand again at VoIP
I foresee Microsoft taking another shot at the VoIP market. I predict Longhorn, which has had its deadline pushed back several times will have some nifty VoIP features. Longhorn was supposed to come out in early 2005, but word is it won't come out until 2006. I predict even if it does come out in 2006 that we will see betas in mid-to-late 2005 that demonstrate some cool VoIP capabilities.

Analysis: (true)
Microsoft has teamed up with MCI to offer PSTN termination using an "invite only" beta of the Windows Live Messenger client and Microsoft has recently partnered with Japan's Softbank to offer business VoIP.

That's a 6-3-1 record. 6 correct, 3 wrong, and 1 neither.

Ok, now for the 2006 VoIP Predictions

1) Pay as you go (pre-paid) VoIP takes off in 2006
Unlimited VoIP for a flat monthly rate is sooo 2003. With more competition in the VoIP space VoIP service providers will have to come up with more creative pricing schemes, including in my opinion, "pre-paid VoIP". Already, one provider Xpert VoIP lets you sign up and pay just $5/month and then a per-minute rate after that. While it's still a post-paid model, the flat monthly fee is getting very close to $0 which incurs more risk and liability to the VoIP service provider, especially for customers with poor credit. Thus, many VoIP service providers will start to offer and promote a "pre-paid VoIP" model.

Prepaid service is ideal for people who rarely use their phones or prefer to limit their usage. Since the service is prepaid, there's no monthly bill, and it doesn't require a credit check. Cellular companies already offer pay-as-you-go plans including AT&T Wireless, T-Mobile, TracFone, Verizon Wireless, and Virgin Mobile.

2) Universal Phone Minutes (UPM)
Take for example Verizon. Verizon offers DSL broadband, cellular phone, and broadband VoIP with their VoiceWing service. Today, I can get 1500 Verizon wireless minutes and 500 VoiceWing VoIP minutes. Why not just give me 1500+500 = 2000 Universal Phone Minutes (UPM) to be used on any of Verizon's phone services? With rollover of course... :)

Relatedly, and this isn't a prediction for 2006, but maybe in 2014... is my prediction that the concept of "phone minutes" will go away. Voice will just become another application riding on data networks. Instead the carriers will use the concept of monthly "credits". Each month you get a set of credits which can be used for phone minutes, downloading movies/TV programming, extra QoS for a videoconference, and perhaps even purchasing books, DVDs, or other items. The carriers will become like Amazon.com. :)

3) Skype becomes "bloatware" and possibly "adware"
We already know that eBay plans on integrating Skype buttons on their Web-based eBay auctions. It's too easy of a prediction to state that in 2006 eBay and Skype will go live with this feature. Nope, my prediction is that the Skype software will become much more bloated with functionality that has little to do with finding and communicating with people over the Internet. With 70 million Skype users, Skype has a large captive audience with which to offer advertising/adware. Skype CEO, Niklas Zennström, is the founder of the popular P2P application Kazaa, which probably caused the largest infestation of spyware & adware in the history of computing with Kazaa's inclusion of the notorious GAIN and Cydoor programs. One could argue that Niklas is more "customer" friendly nowadays and wouldn't sell out to advertisers for the sake of money, but on the other hand he sold Skype to eBay for $2.6 billion. Hmmm... One must also wonder how much power Niklas has in the direction of Skype now that eBay owns Skype. eBay is known for being customer friendly, so they may not approve any advertising/adware bundled into the Skype client.

Even if advertising isn't embedded into the Skype client, I think other non-critical features will be added to the Skype client. I think Skype may integrate a small browser into their client which will let you quickly search eBay auctions from within the Skype client along with a check box to only display auctions with sellers registered with Skype.

Initially, even with 70 million Skype users there still may not be many auctions with sellers registered with Skype. However, eBay could offer
incentives to the sellers such as reducing the auction fee if you list your auction with your Skype ID and presence listed with your auction.

4) The WiMAX hype will continue. WiMAX deployment unfortunately will be very slow in 2006

5) Ubiquitous WiFi in large cities - This is similar to my #8 prediction for 2005. As previously mentioned Google seems to deploy WiFi everywhere and they certainly have a lot of dark fiber capacity that they can light up. I just hope they don't focus just on the West Coast. Hey, don't forget about us East Coasters, Google!

6) Microsoft buys Level3 - Ok, you're probably thinking this prediction is from way out in Left field, but hear me out. Level3 has been burning cash for awhile, had to restructure debt, etc. While many won't touch Level3 with a 10-foot pole due to their outstanding debt, Microsoft has the deep pockets to be Level3's knight in shining armor. Level3 is one of the largest termination providers if not the largest in the world. Microsoft has been itching to break into the VoIP space for years. If Microsoft owns Level3 they can offer free worldwide long-distance (or heavily discounted) to anyone that uses their Windows Live Messenger client to entice people away from Skype or the impending Google Gtalk threat. Microsoft needs to do something drastic if they are going to get into the VoIP game. Remember General Norman Schwarzkopf's famous "left hook" into Iraq that took the Iraqi army completely by surprise and is widely credited with shortening the war by 4 days? Well, Microsoft could pull a similar "left hook" that would leave Google and Yahoo scratching their heads saying, "Where the hell did that come from?"

Further, Microsoft can leverage Windows Mobile 5.0 smart phones install a Windows Mobile 5.0 compatible Windows Live Messenger client and then leverage inexpensive Level3 termination to offer price-competitive VoIP calling from Windows smart phones.

7) IM & VoIP Interoperability finally happens. Ok, this one might be more wishful thinking. But with companies such as Festoon offering software that lets you talk to both Google Gtalk and Skype users, perhaps this will put pressure on Microsoft, Google, Skype, and the others to "get along". GAIM is another software that integrates multiple IM clients. There are a few others as well. When will the big boys get it?

8) Vonage goes IPO instead of attempting to be acquired. Russell Shaw also made this prediction, but I had the same thought before reading his predictions. No rules against two pundits predicting the same thing, right? ;)

9) Asterisk (Digium), the open-source IP-PBX gets deployed by a Fortune 500 company. I should point out that I don't mean a small Fortune 500 branch office that installs a single Asterisk server. I'm talking about a Fortune 500 company that installs Asterisk in at least 5 branch offices OR at their main corporate headquarters. This would be major news for Asterisk and another endorsement of the open source movement. Cisco is asked for comment on this young upstart and simply replies, "Cisco is a well established company with reliable, scalable, and affordable VoIP solutions that is committed to its customers and will be here for years to come."

Well, I had a few other predictions rolling around in my head, but they day is half over and I wanted to get these out before the New Year's holiday weekend. I guess this year will have to be 9 predictions instead of an even 10. Hope you enjoyed the predictions and feel free to comment.



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