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Investors See the Light, as the IP Communications Industry Shines Bright...



The IP Communications industry is finally getting the respect it deserves from the investment and financial services community. What we in the industry have known for years namely that the wholesale migration from TDM, ATM, and other legacy communications network infrastructures to one based on IP (coupled with the integration of the Web) will fundamentally, completely and forever change the communications industry landscape is now finally becoming hot news among the masters of the universe, including investment bankers, VCs, corporate fund managers, angel investors, and other prospective investors. It also doesnt hurt to have a few large deals open peoples eyes...

Out of this disruption, of course, is emerging a whole new set of business opportunities and new companies entering the marketplace to take advantage of them. Ive said in my recent writings that I fully expect the pace of new company launches, investment, mergers, and acquisitions to increase significantly in this year and beyond.

A number of factors are helping to create this attraction. According to TeleGeography, a global telecom industry research firm, the bandwidth glut is officially over. In a recent announcement by the company for its Global Bandwidth Research Service that provides a range of market analysis, forecasts, and essential statistics on long-haul bandwidth supply, demand, prices, costs, and competition around the world, the global bandwidth market is showing signs of improved health: supply equilibrium, price stability, and competitor consolidation. Persistent international bandwidth demand growth has depleted inventories of unsold circuits on many submarine cables and on some segments of terrestrial networks. This has led many network operators to light additional wavelengths and fiber pairs on an as-needed basis. This incremental approach to managing spare circuit inventories means that lit bandwidth supply and bandwidth demand are coming into balance.

In addition, the extension of VoIP (define - news - alerts) price wars to include the incumbent providers most recently illustrated by Verizons move to slash the monthly price of its VoiceWing VoIP service from $34.95 to $24.95 to compete more effectively with upstarts such as Vonage and far below the offerings of some of the cable MSOs means that the incumbent telcos are starting to really feel the heat from rival VoIP service providers. According to TeleGeographys latest VoIP market survey, 5.4 million U.S. households now subscribe to a VoIP service up from just 2.7 million one year ago. Even more troubling, 2.8 million of those households have defected to cable MSOs VoIP services and have cancelled their local phone lines altogether.

By year-end 2005, Verizon (news - alerts) had lost more than eight percent of its residential phone subscribers. According to the results from an April 2006 survey conducted by TeleGeography, the number of customers jumping to VoIP will only accelerate over the next year. TeleGeography projects that, by year-end 2010, VoIP will have attracted over 21 million subscribers nearly one in five of all U.S. households. These numbers spell trouble for traditional phone companies. Subscriber migration to VoIP translates to $13.9 billion in lost long distance revenues over the course of the next five years, and $17.4 billion in lost local phone service revenues.

For more information about TeleGeographys U.S. VoIP Research Service and their ongoing analysis of the US consumer VoIP market, visit products/us_voip/ IT

Marc Robins is Chief Evangelism Officer of Robins Consulting Group, which offers an array of services to the IP telephony industry. He has been involved in the telecommunications industry as a reporter and analyst, trade show producer and publisher, and marketing executive and consultant for more than 24 years. For more information, call RCG at 718-548-7245 or e-mail [email protected].

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