VoIP grabbing more attention

Kevin Rademacher

Thursday, Jan. 6, 2005 | 11:09 a.m.

Voice-over Internet Protocol -- the use of broadband connections to send voice calls, bypassing the aging copper-wire system -- is currently estimated to have about 1 million U.S. lines.

That's not much compared to the 113 million copper land lines, but VoIP is growing quickly.

The fledgling technology had just over 100,000 lines in 2003, said Daryl Schoolar, an analyst with the market research firm In-Stat/MDR.

"VoIP has come out of nowhere to get to that point, but it is still less than 1 percent of the market," Schoolar said recently from his Scottsdale, Ariz., office.

He also disputes claims from some in the industry that project VoIP hitting 60 percent of the market before the close of the decade. Schoolar's more modest projection would be for about 9 million VoIP lines by 2008.

Still, the interest in seizing a foothold in the industry was evident in an overflow crowd Wednesday at a Consumer Electronics Show event focusing on VoIP technology and its evolving regulatory climate. The event drew hundreds of attendees, despite the fact that CES did not formally open until this morning.

The Federal Communications Commission recently ruled that VoIP is an interstate service and will be governed only by the FCC and not state regulators.

Robert Pepper, policy development chief for the FCC, told the CES crowd that such a move was key to preventing a patchwork of regulations that would stifle development of the new technology.

"The commission ruled that this is interstate and not a local service for states to regulate and get this all cobbled up with different regulations," he said.

Pepper pointed to the current patchwork system for traditional service that can cause access fees charged between carriers to make some intrastate called drastically more expensive that interstate calls.

"It doesn't make sense," he said. "That's why cellular and VoIP is so exciting is because of the system needs to be rationalized ... The goal doesn't change. It's just the way we achieve it that's going to have to change."

Balz Wyss, a product manager for Microsoft Corp., said the technology giant is well aware of the possibilities in the VoIP market.

"Initially, we saw VoIP mainly employed in (business) space, not consumer space," he said, adding that Microsoft now expects the market to be as big as 12 million U.S. households in the next five years.

"When that sort of significant marketplace is up for grabs, it's going to attract significant participation," Wyss said. "Obviously, Microsoft would like to be a participator."

He said the marketplace -- which he estimated at about $2.5 billion now -- could be as much as $6 billion by 2009.

David Clark, president of CommPartners, a Las Vegas-based VoIP technology company, said the strong presence of VoIP technology at the consumer-focused CES convention is a good sign for the industry.

"It's all moving faster than we though it would," he said, adding that the interest in the industry comes as little surprise.

"This is as close in the telecom industry that we've been to a green field of competition since the break up of Ma Bell and long-distance competition," Clark said. "The most recent FCC projections show that it's a $300 billion local phone market. The argument can be made that over the course of time all that will be open to VoIP."

VoIP has drawn praise from FCC Chairman Michael Powell as a low-cost, viable competitor to traditional phone companies. Companies such as Vonage and AT&T's CallVantage -- both provide service in Las Vegas -- offer unlimited local and long-distance service via the Internet for less than $30 a month.

Competitors point out drawbacks such as the lack of standardized 911 service and the current regulatory loophole that allows VoIP providers to escape mandatory contributions to the Universal Service Fund, which subsidizes competition in rural and underserved markets.