Hey, we all knew it was coming -- VoIP’s explosive growth, that is. Considering that the major telecommunications carriers in the U.S. have been using VoIP on their long haul networks for nearly two decades now, it only makes sense that eventually it would find its application on the last mile networks of today’s fixed line and mobile broadband service providers. It’s all part of the ongoing evolutionary process in communications technology: Find a better way to do something and eventually everyone will want to use that method. Consumer awareness of VoIP is growing rapidly, as people come to discover the many advantages it holds over traditional phone service (not the least of which is its super low cost – typically either free for local calls or pennies per minute for long distance). When you come right down to it, it is a pretty simple concept: the Internet is becoming the new telephone network. Or perhaps it’s even more simplistic to say that the traditional telephone network is being absorbed by the Internet?
This evolution and subsequent rapid growth is clearly evident in today’s announcement from VoIP service provider VoIP Inc. The company, a leading provider of turnkey VoIP communications solutions for service providers, resellers and consumers, today announced the largest increase in network traffic since its inception in 2004. As a result of network expansion, new customers signing on, and higher network usage, VoIP Inc. has reported a 40 percent increase in overall minutes per day being carried over its global network during the period from September 15, 2007 to October 15, 2007. Not only does this break all previous records for the company, it also equates to a significant increase in its October revenue compared to September. And the company anticipates gross margins on the minutes carried over its network will only continue to improve.
In terms of network expansion, VoIP Inc., which also serves as a certified Competitive Local Exchange Carrier (CLEC) and Inter Exchange Carrier (IXC), has established direct facilities for the origination and termination of minutes/calls on its own network instead of utilizing third party carriers to handle those minutes. It claims that 44 percent of all minutes that it bills for are carried over its network today, compared to just 17 percent just 30 days ago. Through interconnection, the company charges other providers for use of the network and passes the cost savings onto its customers. These types of network sharing arrangements are generally referred to as “peering.” Basically it means that any network capacity that isn’t being used on a participating partners’ network can be utilized by any other partner. VoIP Inc. claims that its network has now expanded to the point where it can be compared to the massive networks being operated by VoIP peering leaders XO Communications and Level 3 Communications. (In terms of network coverage, that’s whole lot of real estate!)
“The investments we made in expanding our network have made us a more important partner with our customers,” said Shawn Lewis, chief operating officer of VoIP, Inc., in the press release. "The increased traffic and improved margins, resulting from a more favorable mix of customers, positions the Company for strong growth during the fourth quarter. We believe the progress we have made in attracting new customers and in developing our network will be reflected in our fourth quarter results."
As VoIP Inc. continues to target IXCs, CLECs, ISPs, ITSPs, cable operators and other VoIP service providers around the world, one can be certain that VoIP’s continuing growth is all but guaranteed.
VoIP, Inc, last made news on TMCnet in August, when it reported a 58.7 percent increase in un-audited revenues for the month ended July 31, 2007. This represented an increase of about $852,000 in revenue. The company said the boost was mostly due to 47 percent increase in termination minutes by users of its network.
For more information, visit www.voipincorporated.com.
October 2007 Archives
In case you haven’t heard the news, Vonage has settled its patent suit with Sprint, and will pay the telco about $80 million in a cash settlement. As per the agreement, Vonage will pay $35 million for past use, $40 million for a license going forward, and $5 million in prepayment "for services." In addition the two companies announced that they are about to enter into an unspecified business relationship.
A federal jury ruled last month that Vonage had infringed patents belonging to Sprint and ordered the company to pay $69.5 million in damages, plus future royalties. Vonage said it would appeal, but instead ended up settling.
Meanwhile, Vonage is still hoping for a favorable verdict in the patent infringement case brought against it by Verizon last year. Last month a U.S. appeals court upheld a verdict that Vonage had infringed on patents held by Verizon. Vonage has been ordered to pay more than $58 million in damages plus a 5.5% royalty on future revenue.
But Vonage has reportedly developed a workaround that does not violate the Verizon patents, which cover the way VoIP calls are routed over the PSTN. Although there is speculation that the court might overturn (i.e. reduce) the ruling for $58 million in damages, plus royalty fees, there remains the matter of a third patent which still needs to be re-reviewed. It remains to be seen whether the damages will be reduced.
If Vonage is forced to pay Verizon the full $58 million, plus royalties, it will, in conjunction with the other settlement, no doubt have a major impact on the company’s financial health. Some have even speculated that it might put the company out of business, or at least lead to it being auctioned off.
My take is that Vonage and the other "pure play" VoIP providers were doomed from the start – and I think it’s entirely possible that they won’t be around much longer. That’s because the real attraction to VoIP and other IP services for consumers is the bundling: More consumers get their VoIP service through their cable provider than any other method, and that’s because of the convenience of bundling your phone service with your Internet service and television service. It’s hard to imagine, at this point, that many consumers are going to buck the trend and go the other way and start buying stand-alone VoIP. It’s simply not convenient and not the way of the future. Perhaps Vonage and Skype will continue to subsist as stand alone providers, (or maybe they'll team up with other companies and start offering other services such as IPTV?) but my prediction is that their subscriber bases will start shrinking sometime over the next few years unless they start getting super innovative. And it's tough to find money for innovation when you're getting sued all the time.
Once we reach the point where all phone service is IP-based, you can be sure the dominant telcos will do all they can to stomp out the "little guys" … and my bet is that they’re going to win.
A federal jury ruled last month that Vonage had infringed patents belonging to Sprint and ordered the company to pay $69.5 million in damages, plus future royalties. Vonage said it would appeal, but instead ended up settling.
Meanwhile, Vonage is still hoping for a favorable verdict in the patent infringement case brought against it by Verizon last year. Last month a U.S. appeals court upheld a verdict that Vonage had infringed on patents held by Verizon. Vonage has been ordered to pay more than $58 million in damages plus a 5.5% royalty on future revenue.
But Vonage has reportedly developed a workaround that does not violate the Verizon patents, which cover the way VoIP calls are routed over the PSTN. Although there is speculation that the court might overturn (i.e. reduce) the ruling for $58 million in damages, plus royalty fees, there remains the matter of a third patent which still needs to be re-reviewed. It remains to be seen whether the damages will be reduced.
If Vonage is forced to pay Verizon the full $58 million, plus royalties, it will, in conjunction with the other settlement, no doubt have a major impact on the company’s financial health. Some have even speculated that it might put the company out of business, or at least lead to it being auctioned off.
My take is that Vonage and the other "pure play" VoIP providers were doomed from the start – and I think it’s entirely possible that they won’t be around much longer. That’s because the real attraction to VoIP and other IP services for consumers is the bundling: More consumers get their VoIP service through their cable provider than any other method, and that’s because of the convenience of bundling your phone service with your Internet service and television service. It’s hard to imagine, at this point, that many consumers are going to buck the trend and go the other way and start buying stand-alone VoIP. It’s simply not convenient and not the way of the future. Perhaps Vonage and Skype will continue to subsist as stand alone providers, (or maybe they'll team up with other companies and start offering other services such as IPTV?) but my prediction is that their subscriber bases will start shrinking sometime over the next few years unless they start getting super innovative. And it's tough to find money for innovation when you're getting sued all the time.
Once we reach the point where all phone service is IP-based, you can be sure the dominant telcos will do all they can to stomp out the "little guys" … and my bet is that they’re going to win.
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