Today's decision by the Eighth U.S. Circuit Court of Appeals that VOIP phone calls can not be regulated as traditional phone traffic is a tremendous boost to what is still a technology in its infancy: VOIP.
The Federal Communications Commission last month had issued its own rules favoring VOIP, saying that Internet phone services should not be governed by the same state regulations as traditional telephone companies.
Fortune Magazine calls VOIP the technology of 2004. And here at iProceed, we believe that the way cell phones have replaced traditional phone lines, the day is not far off when most of the voice data will be transmitted over the Internet. It may take some time though since VOIP is not yet ready for prime time. Being a Vonage customer for over a year now, I am very satisfied with domestic phone quality but forget about a management consultant doing a conference call with his overseas clients. Not only is the sound quality bad, you can be disconnected any time. So I still pick up my traditional phone line when I am on a conference call though I have tried one-to-one calls with my overseas clients.
I have another concern about the future of VOIP technology that I have discussed at length in the past in two separate articles: VOIP future is bright but not for VOIP companies like Vonage and Paid VOIP telephony? Dead before arrival.
New business opportunities emerging from VOIP
VOIP might appear to be exciting because it is now available to consumers in their homes and many businesses are implementing them in their offices (though still on a limited scale for the reasons that I have highlighted above). But remember that VOIP is now a fairly old technology because companies like IDT have been selling phone services to consumers for several years now. An average consumer never really knew that the voice was being transmitted over the Internet. Therefore, we expect that it is a big boon for companies like Vonage that are competitive right now because they are less expensive than traditional phone companies. However, I have serious concerns about their profitability and long-term viability because I am still not convinced that anyone should pay per minute charges for making phone calls over the Internet. We don't pay for data (like email) and there is no justification for treating voice data any different.
What that means is that business opportunities from VOIP will be emerging along the lines of email. Since no one pays for having an email account these days, we will soon reach a point that we wouldn't have to pay for phone calls either. The email providers (e.g. Gmail, Hotmail, Yahoo, etc.) have figured out a business model that allows them to provide free email and so should companies that currently charge for VOIP phone calls. It is a very small window of opportunity that they have and it is closing soon. A business model transformation is needed right now.