The Fool on Google VoIP

There is nothing really new in this article but it is a good overview of some of the reasons why Google may enter the VoIP space. Here is an excerpt:

The big G may be planning more than just providing email and Web searches. At first glance, it may seem odd that Google would venture into this type of business, but a closer look reveals that there is a huge market to exploit. Services based on VoIP have seen rapid growth in the past year, thanks in part to rates that are typically below what traditional phone services charge.

Of the 113 million or so traditional landlines that still use the old circuit-switched technology, about 115,000 U.S. homes are switching to VoIP every month. Fast-forward three years, and close to 16 million households will have VoIP service. That carries the assumption that current growth rates are sustainable, which they may be, as many nascent technologies experience an initial surge in growth and level off until technology becomes well-established.

What’s in it for Google? Look at it this way.

VoIP services require little infrastructure to build and maintain, since the services run over the Internet. Low-cost, flat-rate plans are ideal revenue streams for providers minus the regulations and taxes currently charged with traditional phone service. Features such as voice mail sent as email attachments would give Google another option when promoting its Gmail service. Plus the Web-based accounts where users can track calls, change service options, or add calling features would be another advertising billboard.

Even though Google won’t be the first to join the talk-over-the-Internet club, it has the muscle to compete. As with many services, price sells the service. If the big G can combine the right ingredients with a price structure below the competition, Googlians will have yet another reason to smile. That said, this might well be a reason for the company to consider its entry carefully, since vast productive capacity and low barriers to entry will invariably lead to some degree of price competition.

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