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Publisher's Outlook
January 2005

Rich Tehrani

VoIP Predictions Revisited


About two years ago at Internet Telephony Conference & Expo in Miami, February 2003, I made some predictions about where the industry was going. I finally got to writing them in the May, 2003 issue of this magazine ( At the time the market was still slow and in fact, by today's standards it was downright depressing. It wasn't until the last quarter of 2003 that things started to slowly heat up. Lots of people are making predictions about the future these days, so I decided to go back see how my predictions fared.

tel(x) Atlanta Opens at 56 Marietta Street

December 3, 2004 was a momentous occasion for me as it was the first ribbon cutting ceremony I have ever attended. tel(x) opened their new facility, tel(x) Atlanta, at 56 Marietta St. in Atlanta, GA, an address that was formerly the site of a carrier hotel. Atlanta is a major interconnection point from Florida to NY to South America and 56 Marietta sits on top of most of this fiber. This facility nicely complements tel(x) New York. The company's CEO Rory Cutaia cut the ribbon with the assistance of his team. This took place just after his charismatic speech, which was followed by speakers from the local area.

After the ribbon cutting ceremony, the crowd went to the Omni hotel where we had a day of networking and educational sessions. Many universities and some corporate delegates were in the audience.

I learned that this Atlanta property is important as it relates to educational networks, Internet 2 and much more. VoIP is an important part of the company's future. In fact, Hunter Newby, the Chief Strategy Officer of tel(x), mentioned as part of his presentation that a new voice Internet is being built. As with other technologies such as Internet adoption, we are seeing this trend starting in universities and subsequently growing outward to enterprises. This voice Internet is in fact a private Layer 2 VoIP interconnection network. VoIP interconnection networks are being connected much the same way the Internet came into being.

People at the conference asked me what tel(x) will do for their local market and I explained that peering has the potential to fundamentally change the way VoIP works. Peering of networks coupled with free ENUM services from companies like Stealth Communications allow tremendous savings on calls from parties that are peered.

Universities, enterprises, and small and eventually larger service providers will all need to peer to save money and increase call quality. Ironically, today a Vonage to CallVantage call still travels over the PSTN. If these carriers peered, there would be no PSTN connection, resulting in fewer delays, better quality, lower cost, and an escape from myriad government regulations, taxes and fees (at least for now).

The momentum is building in the peering space and I get frequent calls from all types of service providers asking me about the world's first VoIP Peering Summit taking place in Miami, Florida at TMC's Internet Telephony Conference & EXPO, February 22-25, 2005. Peering will dramatically affect service providers, large enterprises, call centers, the government and universities. If you fit in any of these categories you need to be at this event.

One sure sign of success of this summit is the strong sponsorship support we have received from three of the leaders in the peering space, tel(x), Terremark, and Sansay. The latter, Sansay is a relatively new session border controller company founded by the highly successful management team from Nuera, one of the original VoIP gateway providers going back to the late 1990s.

10) Hosted Communications
I was right on as far as I can tell. The market is doing great. Lots of companies like M5 Networks and others are doing well, in fact they are thriving in this space. This trend will continue.

9) IP Centrex
Why I decided this was its own number I am not sure except for the fact that I lumped the conferencing vendors such as WebEx above. Really these two categories are here for the long haul and will continue to grow. The fact that AT&T CallVantage now charges for the conferencing features that were once free tells me there is lots of demand for conferencing services.

8) Linux Telephony
This is still hot. Asterisk and Pingtel are among the leaders and they will continue to gain traction and new customers. I probably should have used open-source telephony as the heading here.

7) Video Conferencing
This one is on hold. What I said last time is still true:

Let's face it, video conferencing has been "right around the corner" for 15 years. But we may finally really be there. IP telephony reduces the cost of video conferencing and better yet, cameras are being embedded in tablets and PDAs. Finally, most of what we want to show others isn't at our desks anyway so it makes sense that mobile computing will be the driver for video conferencing. I firmly believe that we will see a merging of consumer electronic video equipment with WiFi networks resulting in video conferences on-the-fly from theme parks and other WiFi-enabled locations.

6) Telecommuting
This is happening in a big way. Companies like West Corporation - one of the world's largest call center outsourcers - are using home agents to compete with the offshoring threat from India. Many think this is the way to battle low cost offshoring as once you factor in the risk of moving overseas as well as the other problems, you may as well try something like this. There is no reason that this concept can't be applied globally. The only requirement is to make sure your employees have broadband.

5) Cable/DSL telephony
Bang. Nail hit on the head. We had a keynote speaker from Vonage at this same event and as I recall they were a sponsor. This is back when no one had ever heard of them.

4) Enhanced IM
What I said still rings true today. IM clients are morphing into personal communications managers. First they began to link you to e-mail accounts and then telephony. Expect this trend to continue and we may see these clients becoming our primary communications portal.

3) SIP
SIP gets hotter every day. It is an essential component of VoIP 2.0 (

2) WiFi Telephony
Still hot, still happening. In fact, recently we ran news regarding WiFi telephony on commercial flights via an announcement between Cirilium Holdings and Honeywell ( Wireless VoIP will be pervasive soon.

I said that 2003 was the year of the IP PBX and I think in hindsight was right.

Rather than make any new predictions or update the list I thought it worthwhile to comment on Tom Keating's Blog (Tom is TMC's CTO and executive technology editor). If you search VoIP blog on any search engine (I tried the top three) Tom ranks number one on all of them and has been at the top consistently for months. He seems to have the best-read blog out there as far as I can tell, so I decided to use his predictions and comment on them. (My comments appear in blue.)

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. It will be a fun battle to watch.

Agreed but I am not so sure that the FCC is a proponent of VoIP. Although the FCC says it is pro VoIP, the regulatory environment is in flux and makes for a turbulent time if you are looking to fund a business in this space. We need more clarity from the government on VoIP. We need to put this issue to bed.

2) VoIP providers will continue to harp that the government shouldn't impose any regulations on VoIP and that the industry should be open and 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.

This isn't unlike what we see in the cell phone world. If a provider subsidizes equipment they expect to make sure you use that equipment for their service only.

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!"

TMCnet: A VoIP Community Expands

Thanks to all of you that have been going to our Web site, Our traffic has swelled and we now receive more Web traffic on average than any other VoIP or communications site. I recently found an independent Web site called that tracks this sort of thing. (Alexa is a division of According to Alexa, is in the top 12,500 sites in the world. Yahoo! is #1. Avaya is just under 16,000. Skype is around 1,000, catapulting from nothing to 6,000 in about a week according to their graph. Vonage is around 1,400, Sonus is around 200,000 and Polycom is around 47,000. actually allows you to compare sites, such as, to any other site you choose. Have fun. If you find a competitor that has a better ranking than we do, I'll be very interested to know about them so please drop me line.

Recently we decided to survey some of our Web visitors, including the Internet Telephony magazine online readers, and it is amazing to see how much purchasing is going on among this community. Here are the stats.

87% of the visitors are personally involved in the purchase of VoIP products.

83% plan on purchasing products and services in the next 12 months.

These are the actual products and services that will be purchased:

I didn't expect the WiFi telephony or video numbers to be quite so high but this is definitely great news for the industry. This survey should definitely foreshadow another year of rapid growth and excitement in VoIP

Agreed. This is the same reason I have two old cell phones on my desk that one day will find themselves listed on eBay.

4) 2005 - The Year Triple Play takes off.
Other than WiMAX, the Triple Play has got to be one of the most hyped technologies of 2004. Well, watch out in 2005. The Triple Play will take off in 2005, you can bank on it. I examined one Triple Play technology provider (Pannaway) in the labs recently and the technology is ready. The technology used by them is ADSL2+, targeting the DSL providers (typically phone companies). This company already has some actual deployments - not trials - across the country.

Pannaway has really incredible technology. I think it may take one more year to get the marketing right and for the general media to understand what is happening. This doesn't take into account the fact that lots of fiber is being laid down and that takes time. This prediction will take place in mid 2006-2007.

5) Return of the Jedi (Return of telemarketing calls to switch providers).
Remember the days when MCI, AT&T, etc. would call you at home and ask you to switch phone carriers and they'd often bribe you with $50 or even $100? Have you noticed that the volume of these calls has dramatically gone down? Want to know why? It just costs too much money for the carriers to pay a call center agent to call you and get you to switch. The conversion rate isn't that great to begin with and with the ROI going way down with the price of voice minutes tanking, it just doesn't make sense. Of course the Federal Do Not Call list could have something to do with the call volume drop as well. But does this mean the end of telemarketers trying to get you to switch?

Unfortunately, I don't think so. There is a loophole in the DNC that lets companies call you if they have done business with you in the past six months, which surely will be exploited. As I mentioned in my prediction #4, the phone companies will soon offer Triple Play voice/video/data. If the phone companies don't already have you as a DSL customer, they could in the near future have you as an ADSL2+ TV customer. If they have you as a customer in ANY of the Triple Play offerings, they can call you and upsell you on the other services. So if you are one of the millions of DSL users, watch out in 2005! Your DSL provider WILL BE calling you to offer you TV access bundled with voice and/or data.

This is a huge competitive advantage for the "big boys" to go after Vonage, which has cut into the carrier's market share. I suppose the Triple Play offering is one way of striking revenge against Vonage and the other Internet phone providers.

You are right Tom. Good point.

VoIP: My How You've Grown

Internet Telephony Conference and EXPO is a perfect barometer for the VoIP market. This is the third show in a row where we will sell out the exhibit hall. In fact, we recently had to go back to the hotel where the show is being held in Miami and plead for more conference and exhibit space. The hall is now well over 100 booths and as usual, many of the exhibitors aren't at any other show.

Many people have been asking me about VoIP 2.0 and how this event will differ from others. The reality is that VoIP is more mature now than ever. We don't ask "why" anymore. We all know we need VoIP. What we ask is "What's next?" There are so many technologies such as peering, p2p, open source, triple play and others that are so crucial and have the potential to fundamentally change the landscape of communications. Internet Telephony remains dedicated to covering these exciting new developments in our market.

People tell me Skype is disruptive. I say that is hogwash. VoIP is disruptive. Skype is just a great service leveraging VoIP. Others ask me when the killer app will emerge. To them I say please read Marc Robin's excellent Mindshare 2.0 column in the December issue of this magazine ( where he tells the industry to wake up and see the killer app is here, under your nose.

What amazes me most about this year's event is how early the hotel is filling up. It will sell out sooner than ever so please book your space early so you don't have to commute. Being a Miami-based event we naturally attract a good portion of the U.S. and Latin America. What amazes me most about this year's show is how early the international crowd is showing up. We have exhibitors from countries that never participated in this event before and conferees are trekking from countries like Hungary, Hong Kong, Ukraine, Singapore, Jamaica, Canada, India, Austria, Egypt, Mauritius, UK, Cameroon, Bangladesh, UAE, Nigeria, and Saudi Arabia.

This is now our 11th Internet Telephony Conference and we consistently hear from past conferees that we have the best conference program out there. We don’t recycle the same self-promotional speakers that are friends or business partners of the conference chairman who subsequently give you a “perspective” read (sales-pitch). We have great speakers that are there to educate you and we don’t invite the “sales people” back. This is why our VoIP show has a satisfaction guarantee. You don’t have to come to our conference but if you go to a competing one, please ask for a guarantee in writing before you spend a dime.

I want to wish you all a wonderful new year and tremendous success in all of your endeavors. From our vantage point everything in VoIP is growing as quickly as ever and if you are in this space, you are in the right place at the right time. Hope to see you in the sun this February in Miami.

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.

Agreed. This is a foregone conclusion. In fact the first moves in this battle are starting to take place already.

7) Colleges ramp up on VoIP
When I was in college they just added Ethernet to the dorm rooms. Too bad VoIP didn't exist back then as I often had $100 phone bills. Most colleges built their own phone system acting as their own little phone companies so they could charge students a "premium" and rake in the profits. Well, the colleges are really starting to hurt with cell phone market penetration as well as students using Skype and other VoIP solutions. Many colleges spent millions on their legacy phone systems and haven't recouped that investment. Well, if you can't beat em' join em'! Many colleges have already started deploying VoIP, often giving the students a Cisco IP phone or other IP phone to use. You can expect more of this in 2005. Fortunately, the easier administration (as compared to traditional PBX/phone systems) as well as the ability to partner with less expensive VoIP termination providers such as Level3 could make the colleges more competitive and with good margins.

Every university should have WiFi or WiMAX coverage. If they don't there is something wrong with them. Wireless VoIP is what students will use. All cell phones will have WiMAX and WiFi radios built in.

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. Just think of the loyalty they can build! If I have my choice between paying a private VoIP company based in New Jersey versus paying my local town, heck I'll give the money to my local town. My local town can simply send out an ad in one of those "coupon mailers" that most of us in the country receive and say, "Use us as your phone company and your property taxes will go down." SOLD! End of story. I'd drop my current VoIP provider in a heartbeat! I'd tell my neighbors to join so we could reduce our property taxes and then in turn would tell other neighbors in the town. The old "peer-to-peer" system if you will!

I predict that if cities wise up and become their own phone companies, this could be among the most revolutionary changes in the telecom industry ever. Instead of a few dozen phone companies you could have thousands of phone companies - with each town being its own phone company.

Pennsylvania recently announced it was rolling out WiFi service in parts of the state and Verizon via its lobbying efforts has put itself in a position to actually veto the roll-out of such technology throughout the state. You can't blame Verizon as it makes its living by providing paid broadband service and our political system allows well-funded individuals and corporations to change government policy in a way that is not in the public's interest. Companies like Verizon will fight state competition tooth and nail. So far Verizon is winning this battle.

9) VoIP Spam + 1st VoIP spam lawsuit
2005 will mark the first really bad VoIP spam incident. Often referred to as SPIT (Spam Internet Telephony), I predict someone looking for a quick buck will send automated recorded messages (.WAV file) to thousands of SIP addresses. If the VoIP call is IP-to-IP and never touches the PSTN, the stringent laws governing the PSTN won't apply. The first lawsuit will ensure, and the spammer will win since VoIP is still classified as an "information service" not bound by the Federal Do-Not-Call rules. The DNC law will be amended as a result. Perish the thought, but the FCC may be forced to reclassify all VoIP calls (IP-to-IP, IP-to-PSTN, PSTN-to-IP) not as an "information service" but as a telecom service bound by all telecom regulation. It's a scary thought and not necessarily a prediction.

This is a rather thought provoking prediction. I'm curious to see how this will play out.

10) Microsoft tries its hand again at VoIP
Let's recap: Microsoft develops NetMeeting, which has VoIP and video capabilities, but doesn't really capture the imagination of the market. Microsoft launches MSN Messenger with VoIP features and video, and although many people use MSN Messenger, it's primarily used for instant messages. Yet another Microsoft VoIP failure. Next, in late 2004, Microsoft pushed Live Communications Server (LCS), which boasts VoIP with SIP capabilities and collaboration features. It's a good product, but very complex to install and requires integration with Active Directory.

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.

I should point out that Microsoft does have one VoIP success - the XBOX Live service, which uses Level3's backbone and which lets gamers talk trash over the Internet as they frag one of their buddies.

Another point to ponder… SBC and Microsoft recently announced a $400 million, 10-year agreement that calls for Microsoft to provide the software SBC will use to provide television services to U.S. consumers. The technology will let the company deliver 1,000 or more new TV channels, far more than cable-TV providers currently offer. But could this be Microsoft's Trojan horse? What's to prevent Microsoft from using the experience gained and then launching their own Triple Play offering? Of course, Microsoft doesn't own any last-mile copper connections to the home, but with Microsoft's cash they could buy the last mile or simply deploy high-speed wireless.

This seems right on. All people in the industry I speak with are quietly scared about what Microsoft has up its diamond-cufflink-adorned sleeves. Microsoft could kill competition in this market overnight. This is not unprecedented. They destroyed the VoIP client market back in the late 1990s. VocalTec had a successful client that they charged money for and Microsoft launched NetMeeting, a direct competitor with more features and gave it away for free. I think this single act could have retarded VoIP development and profits by three years or more. By embedding a strong VoIP client in IM, they could do tremendous damage to Skype's growth curve as well.

What is amazing to me is that while ILECs battle CLECs by putting up regulatory roadblocks, they don't realize that Skype and Microsoft could easily take away the market they are so desperately trying to protect. Sure they own the pipes but if power line access, WiMAX, and other new technologies start to proliferate, they will have real trouble on their hands.

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