By Dr.Mitul Mehta

[ Article done for Electronic Business Europe - JUNE 2001 http://www.eb-mag.com ]

What Happened to Free Voice? There used to be a great deal of hype surrounding Internet Protocol (IP) telephony and the provision of free voice. Free voice has not happened - excluding PC-based calls and a limited number of promotional services. For its success, free voice needs to be a part of bundled, but tailored, services that will meet users’ communications requirements.

The lack of enhanced applications, services and delivery of IP telephony as an end-to-end solution has resulted in a depreciation of its attractiveness to end users. In order for IP telephony to really become an alternative to the public switched telephony network (PSTN), it has to deliver greater value. The ability to save money on calls is attractive for certain end-user segments, but the most profitable end users will be those that require value-added services and applications. Such users need targeting by IP telephony service providers in order to sustain long term growth opportunities. IP telephony will need to become more than just voice; it must become a converged communications solution.

The business end-user market has tended to steer clear of IP telephony, but improved quality of service and increased provision of ‘must have’ applications is beginning to change its perception of this technology. IP telephony service providers have realised that end users require applications and services tailored to individual requirements, rather than generic bundled services. This will attract business end users to IP telephony. The value is being increased with the addition of ‘mini’ killer applications that deliver excitement in different end user communities, rather than one all-encompassing killer application. IP telephony will become a business driven market. This is not to say the consumer market will disappear, it will just become less important than it is at present. Business end-users will also increase their need for IP telephony as they begin to replace existing PBXs with IP-PBXs in the LAN, seeking to truly use converged networks.

There will be winners and losers in the new IP telephony business model of the future. Exchange carriers and simple wholesalers will come under increasing pressure to add value to their basic voice offering. IP telephony service providers must not fall into the trap that former incumbents and other PSTN service providers have demonstrated, by relying on present market models as a basis for future growth. The winners in the IP telephony market will be those companies that are able to deliver value to end users and influence them. This doesn’t mean that IP telephony service providers need to own all the value delivered to the end user. There are few companies that have the ability to manage and develop all the applications, services and access devices that are needed to meet end-user expectations and perceptions. Service providers delivering IP telephony need to become the hub of eco-system partnerships and drive the value delivered to end users, in order to extract improved margins and revenues.

Eco-system partnerships will include IP equipment vendors, content providers, application developers, back-end service developers and many other companies. There are a variety of companies that have demonstrated their ability to start such partnerships by embarking on joint ventures, acquisitions, partnerships and alliances, or so called JAPA strategies. Companies such as iBasis, a wholesaler, has taken a significant step in delivering value to its customers (alliance partners) and eventual end users.

IP telephony service providers need to open up access to their end-user community to content aggregators, application developers and other service providers in order to extract significant revenue streams. IP telephony service providers need to evaluate their core competencies, strengths and weaknesses and then determine and develop a critical mass of JAPA strategies in order to head off new competition. The IP telephony market has a few more headlines to make and it will begin to capture the imagination of the end users to the extent they become IP users or IPsers.

Dr Mitul Mehta is managing director of business transformation and strategic direction consultancy firm TekPlus Limited. He can be reached at mitul@tekplus.com

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