Don't Declare a Winner Before the Race has Begun

Reader takes ISP-Planet to task in a detailed discussion of competition in VoIP.

[Response to Large ISPs Missing From VoIP Race from September 24, 2004.]

[September 29, 2004]

Hello:

Your recent article (title noted above) said:

"Netzero's spokesman confirmed the service provider currently doesn't offer VoIP, and EarthLink's spokeswoman didn't return calls soliciting comment, but our sources say there is no clear VoIP strategy in place."

Your "sources" appear to be incorrect, in fact, it took me about a minute to find the link to a VoIP product on the EarthLink web site. I've been using EarthLink's VoIP service (a "white label" arrangement with Vonage) for over one year now, it was launced in early 2003. See the press release and the Unlimited Voice website for details. And as far as United Online not having VoIP, since they to my knowledge have no actively used agreements with telcos and/or cable companies to piggy-back off of, for them to provide VoIP under their own brand seems somewhat difficult. United Online does perhaps still have an agreement with Time Warner Cable for use of the TWC broadband pipe, but they have never used it to provision a Netzero or Juno branded broadband service.

Although you claim to be the "intelligence center for the ISP community", I'm less inclined to believe anything I read on ISP-Planet.com when I see articles like that do not appear to have been researched thoroughly.

Regards,

James N. Willis

In its SEC statement, Earthlink says:

EarthLink continues to explore new initiatives and has launched, tested or is developing voice over Internet Protocol (VoIP), converged voice/data and alternative broadband services, which can generate incremental sources of revenue and income.

but provides no actual subscriber numbers. We believe Earthlink is not a serious contender in this space. We hope to publish actual VoIP subscriber rankings in October.

Alex Goldman, Managing Editor

Alex, thank you for the reply.

I still do not believe the subject article gives a clear picture since one is left to conclude that these three large ISP's noted are not playing in the VoIP space at all, when in fact two of them are, and one of them can't since they don't even have a broadband footprint, an obvious fact which just seems entirely overlooked in the article. Entirely consistent with the SEC statement cited, EarthLink has a launched product with the "Unlimited Voice-branded" Vonage service. And in addition to the SEC statement, they have indicated in investor conference calls that they are researching/testing some sort of in-house developed VoIP as well as a SIP-based file sharing solution which would I can only speculate would be designed to replace or more likely to compliment the Vonage-provisioned service—perhaps some sort of "call other EarthLink broadband members for free" service similar to what some of the cellular providers do today. I believe the in-house service is tentatively mentioned in their investor calls to be be a fourth quarter launch if I remember correctly.

I would think that these sorts of basic facts should have been easily discovered during the research phase for the news article, however given the proprietary nature of the various players' plans at this early stage in VoIP's development, I don't find it surprising at all that it is difficult if not impossible to get actual subscriber numbers or details on future marketing plans. There's no doubt also that of the 275,000 Vonage subscribers, there is a more than nominal percentage of them who have signed on through the Unlimited Voice plan and other similar types of third-party ISP offerings that Vonage has really no obligation to disclose.

Regarding the statement, "we believe Earthlink is not a serious contender in this space", I would have to argue that it's a little early to really proclaim anyone, whether it's an established telco, cableco, or ISP, as *not* being a potential serious contender? Reason I say that is that Vonage and most of the smaller outfits like it have "brands" which have really sprung from nowhere, so whether ELNK, AOL, or United Online specifically will become serious contenders in the consumer/small business VoIP space remains to be seen. And I think any well-reasoned news article on VoIP has to really drive that point home which I think the subject article does do, except for the oversight on the various national ISP's involvement.

I also think it's interesting to note that Covad and EarthLink are really the only broadband service providers with a national marketing footprint, and in Covad's case, they own the central office infrastructure as well. Thus, it doesn't seem too far out of the realm of possibility to see entirely new marketing/business combinations emerge in the coming couple of years which will shake things up more than we can really imagine. Sprint PCS has, for example, shown great vision in providing a back-end cellular infrastructure which various others (i.e., Virgin Mobile) are successfully reselling under their own brand names, and there's no reason why Covad couldn't do the same. And given the fact that the telcos and cable co's must, to varying degrees, obtain the local, state, and/or federal government's permission to sneeze, it's not entirely unreasonable to speculate that pure service providers will comparatively little infrastructure (and government oversight) such as AOL and/or EarthLink might just be major players in the VoIP market. The "government can't really touch us" situation with Vonage certainly has aided their growth.

James N. Willis