Deloitte's Asmundson: Thoughts on VoIP, Michael Powell, and The Outlook for 2005

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Greg Galitzine

Deloitte's Asmundson: Thoughts on VoIP, Michael Powell, and The Outlook for 2005

I recently had the chance to chat with Philip Asmundson, who was recently promoted to national managing partner of Deloitte’s U.S. Technology, Media and Telecommunications (TMT) industry practice.

GG: Please describe the role of Deloitte’s Technology, Media & Telecommunications Group.
PA: The TMT Group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including cable, communications providers, computers and peripherals, entertainment, media and publishing, networking, semiconductors, software, wireless, and related industries. These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte is a leader in providing strategic, financial and operational assistance to its technology, media and telecommunications clients

GG: What areas in telecom should my readers keep an eye on in the coming year?
PA: In our predictions reports , we identify three key trends that your readers may want to watch for 2005:

1.) Two billion cellular users by EOY
By the end of 2005, there will be nearly 2 billion cellular mobile subscriptions worldwide and in excess of 100 percent market penetration in some markets. Subscriber growth will be strongest in developing countries (including Asia and Latin America). The most compelling and lucrative mobile content will continue to revolve around phone personalization, such as ring tones, real tones, wallpapers and basic games.

2.) Strength in PSTN, VoIP and Broadband
In 2005, the vast majority of voice calls will still originate and terminate on the PSTN (Public Switched Telephony Network) due to superior call quality and overall reliability. PSTN operators will reduce prices. Key convenience features, such as stored number dialing, text messaging and conference calling, will stimulate call volume over fixed lines. Meanwhile, VoIP call volume and the user base will increase significantly among consumers and businesses, but adoption and growth will be limited by shortfalls in VoIP’s quality, consistency and reliability and the resulting slightly negative image in the marketplace. Broadband penetration will continue to grow in 2005, with broadband connections finally outnumbering dial-up in many countries.

3.) RFID: Zero to 10 billion tags by EOY
In 2005, RFID will finally make it out of the lab and into the commercial world. The combined influence of major retail chains, defense contractors, automotive manufacturers and others – all of whom are requiring suppliers to use RFID — will prompt a massive increase in RFID adoption, starting from essentially zero. By the end of the year, billions of RFID tags will have been sold and used.

GG: VoIP is an industry on a tear. To what do you attribute the recent growth spurt of this technology?
PA: We believe VoIP’s call volume and growth has been fueled by the proliferation of broadband and growing public awareness. VoIP’s call volume and user base will increase significantly among consumers and businesses alike, but few enterprise customers will migrate completely. Although we believe that VoIP is inevitable, it will remain a niche product in 2005, but its importance to the global voice market will grow substantially.

GG: What are some of the hurdles facing the industry that would impede its success?
PA: Although VoIP quality will continue to improve, for many it will still fall short of expectations. New features will partially offset the quality issues, but those functionality advantages will often go unexploited as vendors and customers continue to focus on price. For enterprises, cost savings may well be less than anticipated, slowing wider adoption. Instead of taking a chance on VoIP, many enterprises will focus instead on getting more value from the PSTN, hiring a professional negotiator or enforcing governance to drive costs down. An even greater number of companies will opt for a hybrid approach, using VoIP for internal communications and the PSTN for external traffic. Another barrier to VoIP adoption will be the rise of VoIP spam, made possible by low-cost VoIP calls that are not subject to current telemarketing regulations. Although VoIP spam will be a limited trend in 2005, there will be a perception of this new threat to users. Finally, the regulatory framework has to date, taken a hands off approach to VoIP but as VoIP grows we expect regulatory scrutiny to focus on VoIP services.

GG: What are your thoughts on the news that FCC Chairman Michael Powell is stepping down from his post at the agency?
PA: Chairman Powell has led the FCC during a period of extreme turbulence for the industry. He has struggled to get his policies passed and has suffered from an inability to get a coalition among the 4 other commissioners. In addition, the FCC has been relegated to the backseat in some areas, as the courts have been drawn into not only interpreting policy but in some cases writing it. As a result, very little has been clarified during his administration and the new FCC chairman will face an increasing need to establish regulatory policy in an increasingly complicated environment. Look for the new chairman to come from outside the FCC and for further turnover at the commissioner level of the FCC.

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