Disappearing VoIP

Irwin Lazar writes, among other things, that VoIP will have succeeded when "customers will be in a position to buy low-cost phone service that looks, acts, and performs exactly like the phone they have today, perhaps with some added features such as web-based call control."

The ILECs could do that tomorrow. (OK, the added features such as web-based call control might take a bit longer. Though Verizon is offering them now with their iobi service.) All they have to do is slash prices, and customers will be in a position to buy, yes, low-cost phone service that looks, acts, and performs exactly like the phone they have today. And VoIP as a technology will have disappeared from the customer perspective, though not perhaps in the way that Irwin meant.

To date Vonage, for example, has raised $205M in total financing as of 8/25/04. Verizon, for example, has $2.3B in cash on hand and a free cash flow of $4.3B.

In a race to the bottom, which would you bet on?

VoIP succeeded for a little while as an international calling arbitrage play. It can succeed for a little while as a low-cost alternative to POTS. Long-term, providers need to take advantage of the capabilities of VoIP and the architectures that support it to do things that POTS can't do. Like improved sound quality via better codecs, like fixed-mobile convergence, like presence and universal messaging and applications that people haven't even thought of yet.

Otherwise, my money's on the guy with the deepest pockets.