This week is VON, perhaps the leading trade show focused on service provider VoIP topics, issues and trends. And not coincidentally, perhaps the most hyped show in the VoIP space.
In his Blog, Om Malik's questions whether or not VoIP is over-hyped. It's a question that certainly needs to be asked. Time and time again we've seen Internet-based technologies promoted as the savior of the world, only to see real-world markets fail to meet expectations.
While VoIP continues to take over the enterprise, it still faces serious issues as as a mass-market consumer technology, some of those we're seeing first hand with Vonage's major outage this past weekend.
I'm still not convinced that Vonage-like residential VoIP services offer enough benefit for the average consumer to warrant all the hype. Most folks I know either use their mobile phones for cheap (or free) long distance, or the truly savvy use free services such as Skype. Vonage just went over the half-million mark for subscribers, but there are numerous reports of call quality issues (not including this past weekend's issues). What we really need to keep an eye on is the customer retention rates. I'd bet that the average consumer will quickly switch away from Vonage if they experience service-related issues, the few dollars they save each month won't be worth putting up with VoIP-related quality issues such as echo and mysteriously dropped calls that early adopters know all too well.
As the "Vonabees" quickly go after this market (credit to the folks at Neustar for that term), they will find themselves butting up against more flexible (and possibly cheaper) services such as Skype and the previously discussed Teleo, which offer a lot more to the home worker looking for a second line. We've seen the residential phone line market in decline for the last several years, will that decline lead to an increasingly difficult market for the Vonage's of the world who are essentially offering the same service, though via unpredictable broadband Internet services instead of circuit switching?