..that's not really the clear picture. the early voip adopters were in wholesale; and many are failing or cannot grow and have to merge to stay even. there are so many of them, and more entering the market all the time -- from outside the u.s. every mother and grandfather company wants a tiny piece of that business.
Ntop is facing a higher tier of competitors at the retail level where it is very competitive and at the cable telephony level where everyone is an entrant, only some of whom will ever be able to roll out cable telephony on their own. The tier 2 cable msos are moving into the market, but not on their own. Not a one of them yet -- except in Canada -- where the pricing pressure and competition is completely different in the U.S. Canadians don't look to the U.S. to run their businesses.
Vonage picks up retailers who will sell their box for a one-time fee. Vonage gets individual subscribers, who go down cable mso lines -- and will face mso competition at some point, and whatever those msos could do to competitors on their lines. Vonage gets tier 3 msos to sign up -- those tier 3's are not economically feasible for ntop to spend money on in terms of payback. The 3's get pennies from vonage, for the service. The 2's want more income -- and for providing the service ntop is looking at 80% for itself.
Voice over internet protocol (broadband voIP) is where the better competitors are going, and many of those have problems -- entry into the market isn't necessarily sufficient for success. in ntop's case, you have to measure not just look at 8 years ago in dismay, but to 2 years ago ... and that move into cable telepony. there were successes and failures. we are moving out of failure because of the dot.com and terrorist induced market. there is no cable telephony enabler that has pushed ahead of ntop; the question is whether/which msos will use ntop. they are deciding now -- not last year. the tier 2 msos are not doing it on their own -- witness mediacom. Mediacom just wants to, and can't. Ntop's contracts are supposed to run about 7 years. Somebody is setting Mediacom up for voIP -- it's not vonage.
In many senses I agree with the generality of your post. I don't like EVERYTHING that has happened either -- but it's not about EVERYTHING -- it's about getting to the thing that can work if you stayed involved in trying to make the business a success in a more significant leveraged way (appealing to cable companies and anyone in the market who can't provide telephony on their own), and seeing that it gets there as someone running a business. It does take some smarts to do this -- and not everything stands out in plain sight. It is often a pretty deserted plain.
Cable telephony is emerging; Ntop will have whatever tier 2 msos it gets this year (3 in the u.s., one in south america, and Altice in western europe?) -- and go to global SIP next year, in addition to progress this year. Not a one of those msos on Greenberg's list has rolled out cable telephony on their own; three of them at least are going to deploy cable telephony in the second half of the year.
Next year is expected to be a really PR push year for cable telephony, because the big dogs will enter and get that press. If ntop has msos signed up by then, it will get a piece of that press. There are tier 2 cable msos who have already said they are rolling out voIP in the second half of the year.
Certainly, the market sucks yet again and we are right in there -- that's my opinion sometimes too. But you have to see the incremental moves into something as well as the vacuum. This has made sense only if you look at the baby leverage steps that are going on. It's a piece of an evolving business -- some business are dinosaurs, some are moving into a better future. It's personal opinion which you think NTOP is. I want it to be and believe it is something that will get going.
The voice of the voIP market is NOT the voice of the individual players. They are fighting with one another, and fending one another off. All of them. Ntop is the enabler for the msos. Actually the only one that gives them primary phone service. Vonage sells secondary phone line service to individuals, and competes with any mso that wants a better product -- because they want to keep a good reputation. Keeping a good reputation stops churn. Bundling services reduces churn. It's easy to mail a modem box off to someone; but it's a work-through and where are we business to set up and run a cable telephony system for someone. All the players are niche players.
Ntop's problem is that it doesn't announce. That doesn't mean it isn't tracking to those events. Two years ago was far far worse, in case its forgotten. Itxc, with all of its once fabulous retail shareholder support, and ibas -- both wholesalers -- are grounded in their own problems -- with no movement out of the mud they got shoved into. They are rocking back and forth trying to free themselves, and in itxc's case shareholders may well be very screwed. That ship is already going to be owned by someone else -- who clouds their businesses.
I simply believe there is something more here, more fortuitious for ntop.
Telecoms Struggle with Impact of Internet Calls
Thu Apr 15, 2004 02:50 PM ET
By Justin Hyde
WASHINGTON (Reuters) - With Internet phone services signing up thousands of new customers a day, telecom industry observers are beginning to question how well the old local phone companies will defend themselves against a growing throng of competitors.
So far, cable companies and firms like Vonage have only nibbled at the edges of the local telephone market with voice over Internet Protocol service, or VOIP, winning about 250,000 customers.
But as more households sign up for broadband Internet service, and larger players such as AT&T Corp.(T.N: Quote, Profile, Research) unveil their VOIP service, executives and analysts see the threat to the Baby Bells rising.
"This is about choice," said John Rego, chief financial officer of Vonage, in a meeting with investors on Wednesday. "The competition right now is the 187 million wireline phones controlled by the (local phone companies), and that's what we're going after."
VOIP services convert voice signals into data and send them over the Internet, similar to e-mail. Because VOIP services use public networks and software rather than a fixed circuit, the service is far less expensive to build and maintain than traditional phone systems.
That allows Vonage to offer unlimited local and long distance calling for $35 a month, about $20 less than similar plans from the Baby Bells, and still have equal or larger gross profit margins, analysts said.
While VOIP service can suffer from lower-quality sound and more dropped or blocked calls than landline phones, the market appears ready to give it a try. According to a Gallup poll commissioned by UBS analysts, about 34 percent of broadband users would sign up for a VOIP service if it would save them 20 percent or more over their old phone service.
THE EMPIRES STRIKE BACK
So far, Vonage has about half of the VOIP market, with roughly 130,000 subscribers.
But AT&T launched its VOIP service earlier this month, and many cable companies are either already offering VOIP service or testing it. Comcast (CMCSA.O: Quote, Profile, Research) , the largest U.S. cable company, says it will test VOIP this year with a few hundred customers with an eye toward a wider roll-out in 2005.
Last month, credit rating agency Standard & Poor's cited VOIP as one of its major reasons for putting the ratings of Verizon Communications Inc.(VZ.N: Quote, Profile, Research), the largest local U.S. phone company, under review for a possible downgrade.
S&P analyst Catherine Cosentino estimates that Baby Bells could lose billions in revenues to VOIP and other competitors over the next few years, and that VOIP may turn their franchise service into a commodity with a declining price.
The Baby Bells will "be hard pressed to maintain their current 40 percent-plus margins, which have already declined from the 50 percent they had been able to maintain during much of the 1990s, when competition, particularly in the consumer sector, was nascent," Cosentino and other S&P analysts wrote in a research report this week.
Other observers see a lesser threat. Goldman Sachs analyst Frank Governali said on Wednesday that cable companies and other VOIP services could take 20 percent of local phone lines by 2013, but that the Baby Bells could offset their revenue losses by pushing their own broadband and VOIP services, along with business contracts and wireless growth.
And the Baby Bells have plans to fight back. Qwest (Q.N: Quote, Profile, Research) and SBC Communications Inc.(SBC.N: Quote, Profile, Research) are trying out VOIP services, and Verizon is expected to unveil its VOIP service in the next several weeks, offering nationwide coverage at what it calls a "competitive" price.
Michelle Swittenberg, Verizon's director of consumer voice over IP, said Verizon believes many people who get VOIP service will keep a landline phone as well.
"As much as we view this as an opportunity...if someone's going to leave for VOIP, we want them to leave for Verizon," Swittenberg told an investors' conference. |
