VoIP: A New Marketing Challenge
Opinion: Readers Weigh In - By Cass Baker

Awareness of voice-over-Internet protocol telephony is on the rise, though many consumers may not just yet have a firm grasp on what exactly it is, what it does or how it works.

According to a recent Pew Internet Project & New Millennium Research Council study, 27% of Internet users have heard of VoIP, and 13% of that population has considered adopting this service in their home.

Those numbers translate into 34 million Americans who've heard of IP telephony and 4 million who have considered installing it.

While awareness is building, VoIP is also the first newly introduced cable-industry product that will have to compete directly with an existing one with nearly 100% market saturation. Practically everyone in the U.S. has a telephone, and VoIP will have to prove it's a viable option to Ma Bell's landlines, which have built a loyal commitment with phone users over decades.

Mainstream VoIP isn't set to take the stage for some time, but successful pilot programs - such as Time Warner Cable's venture in Portland, Maine, which had more than double the number of subscribers sign up than originally anticipated - already show this is a product that's in demand.

On the commercial front, airline giant Boeing Corp. announced in July that it would convert its entire company's lines to VoIP - the first major corporation to make that commitment.

Potential suppliers and competitors are lining up. More than 20 companies - including traditional telephone companies like Verizon Communications Inc. and Qwest Communications International Inc., cable companies like Comcast Corp. and Charter Communications Inc., as well as start-ups like Vonage-are plotting to unleash VoIP. But the larger question remains: How will they plan to successfully market the service?

First Impressions

Those who already know of VoIP service fit the classic "early adopter" profile, according to the Pew report: They tend to be male, well-educated, well off economically, tech-savvy and willing to try new things. Most are between the ages of 25 and 34.

The most important battle in selling VoIP to those who are not as aware - nor as willing - to try it will be to convince them the service is just as dependable, reliable and, most importantly, as good as their regular landlines. As of now, VoIP still has its problems: Sub-par sound quality, due to transmission delays, and a lack of 911 service capabilities for some providers, to name a few.

But once these small hurdles are crossed, the benefits of VoIP will outweigh potential problems. The range of current services VoIP offers will include voicemail, caller ID, call forwarding, three-way calling and call-blocking, as well as the ability to choose an area code from virtually anywhere in the country.

Once VoIP marketers clearly communicate the message and position that the service will offer the same perks and sound quality as traditional landlines, price will become the focus. Everyone will enter the mix - telephone companies, cable companies and upstarts - and will have different platforms for pricing. It will take careful monitoring of the competition, and what appeals and what doesn't appeal price-wise to attract the consumers.

The bottom line: Everything will change. This will be a new environment, where separate utilities that once held monopolies in certain areas will be forced to compete with one another.

Agility Will Be Key

In this new, competitive market, companies will have to be nimble with their direct marketing plans. As of now, no one really knows where cost-per-acquisition costs will settle, so devising ways to drive it down - attracting the most customers at the lowest possible cost - will be crucial to a successful VoIP-sales program.

In order to remain as flexible as possible, and also test new services and price offers, companies should look to the Internet as their primary testing ground and sales territory. Why? The Internet's flexibility provides one of the most direct ways to find out what consumers want to hear - and don't want to hear - and is more productive and cost-effective than most other forms of marketing.

This coupled with the fact that VoIP is also the first real Internet "killer app" (outside of e-mail) that has mass-market appeal.

Companies can test which messages work when selling VoIP, as well as evaluate which pricing offers effectively receive the most bang for their cost-per-acquisition buck, without investing a lot of time and money into a direct marketing program that simply does not offer an optimum return on investment.

Via the Internet, companies can also gauge consumer feedback about quality and service - and discover where they're most likely to shop - which, in turn, will help them better market their product.

The company that stays as nimble as possible - and can adjust its programs in real time - will be one that has a clear advantage when marketing VoIP.

Cass Baker is vice president of business development and client service at Leapfrog Online, an online direct marketing agency based in Evanston, Ill.

July 20, 2004

Government Technology

One Quarter of Online Americans Have Heard of VoIP

Twenty-seven percent of Internet users have heard of voice over Internet protocol (VoIP) phone calling, and 13 percent of that population have considered adopting VoIP in the home, according to research by the Pew Internet & American Life Project and the New Millennium Research Project. This translates into 34 million Americans who have heard of VoIP and 4 million who have considered getting the service at home.

The survey also found that 11 percent of Internet users, nearly 14 million Americans, have made some form of phone call over the Internet. This includes people who may have used VoIP at work, home, or downloaded free software that allows calls between Internet-connected computers.

The 4 million Americans who have considered switching to VoIP -- mostly technophiles and generally well off economically -- represent the near-term potential for the home VoIP market. But the emerging consumer VoIP market is just that. Of the 2,204 respondents interviewed in the Pew Internet Project's February 2004 national telephone survey, exactly one said that VoIP service was used in the home. The VoIP questions in the survey were developed in collaboration with the New Millennium Research Council (NMRC).

"Two-thirds of those who have heard of VoIP have a high speed connection either at home or work, compared with slightly more than half of all 'net users. Given the need for a high-speed connection to make VoIP work effectively, it is no great surprise that high-speed users are more attuned to VoIP," said John B. Horrigan, senior research specialist at the Pew Internet & American Life Project.

"I believe that these survey numbers highlight that the vast majority of Americans are not quite ready to throw away their land lines and cell phones for Internet telephony, said Allen S. Hepner, Advisory Board Member of the NMRC. "That said, with one in eight Internet users considering signing up for VoIP, even modest industry take-up rates over the next five years are sizeable figures."

"This 'disruptive technology' is coming to all Americans; it is not a question of 'if,' but 'when.' VoIP also disrupts existing laws and regulations in the telecom arena," said Hepner. "Legislators and regulators would be wise to reexamine existing policy sooner rather than later, so as to minimize regulatory uncertainties for business and consumers."

http://www.govtech.net/news/news.php?id=90901

July 7, 2004

Statement of Jeffrey J. Carlisle Senior Deputy Chief, Wireline Competition Bureau Federal Communications Commission Before the House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet:

"There are other indications that VoIP, while only gradually making its way into the public consciousness, is nevertheless growing at an increasing pace. A report released June 27 by the Pew Internet & American Life Project and the New Millennium Research Council estimates that approximately 14 million Americans have already made some sort of voice communication over the Internet. Skype, an Internet-based VoIP service that allows its members to speak to one another with crystal clarity for free over a peer-to-peer network connection, has been downloaded over 15 million times by users around the world."

Click Here for Full Text of Testimony

July 3, 2004

Internet telephony about to get off hold

JON VAN

Relatively speaking, Internet telephony doesn't amount to much more than spitting in the ocean when it comes to voice communications.

Only a small percentage of the nation's voice traffic originates using VoIP, or voice over Internet protocol, although a significant portion of long-distance calls uses the technology.

But at the recent Supercomm telecom show in Chicago, the shift to VoIP lurked everywhere. VoIP provides voice communication at far lower cost than traditional voice networks, as well as giving users computerized control of their calling options.

Carriers realize that these advantages make VoIP a winner, and they're scrambling to figure out how to exploit the technology rather than fight it.

Typical of the smaller companies that attracted attention at Supercomm is Go2Call, an Evanston company that specializes in supplying VoIP services to users in foreign countries.

Internet service providers are natural customers for Go2Call, said Larry Spear, co-founder of the firm, because they have a customer base and are looking for new services that can increase revenue. Go2Call also works with established phone firms looking to offer VoIP and has customers from India to Africa.

The firm can offer its service over regular phones as well as over devices that look like regular phones but plug into computers rather than standard phone jacks.

VoIP transmits calls the same way that computers send electronic mail, by breaking the information into packets and sending them into a general stream with other packets. At the receiving end, the relevant packets are reassembled into voice by computer chips.

An inherent problem is when the packets don't arrive on time, causing a degradation of the sound. The technology has improved dramatically, and several experts attending Supercomm said there's no reason why VoIP call quality shouldn't be comparable to that of traditional circuit-switched calls.

"Now that voice has become another data application, voice quality has to be high," said Dean Douglas, IBM's telecom vice president. "It's not easy--the technology needs tweaking--but they're very close right now to circuit-switch call quality."

College students using computers to talk to friends overseas at no charge may be willing to put up with static on the line, but business operators will demand top quality calls before they adopt VoIP for their enterprises, said Ed Mattix, senior vice president with Covad Communications. The company is in the process of adding voice to the high-speed data services it sells to businesses.

"We guarantee quality end-to-end," said Mattix. "If you can't do that, you won't get the business."

It has been technically possible for more than a decade to divide voice into packets for transmission, but in the early days quality was very poor, said Jeffrey Jaffe, president of Lucent Technologies' Bell Labs. Today, quality should not be an issue, he said.

"Technologically, we can deliver carrier-grade VoIP cost-effectively," said Jaffe. "Our nation deserves it. We shouldn't have to sacrifice quality. It's hard, but we know how to do it."

Interest growing: Despite the buzz VoIP is causing in the telecom industry, it has yet to burst upon the consciousness of most people, a new survey suggests.

Only about one-quarter of people who use the Internet have heard of VoIP, according to research from the Pew Internet & American Life Project and the New Millennium Research Council.

The survey also found that about 4 million Americans are considering getting VoIP for their home service. The expectation is that those numbers will rise in the coming months.

Copyright © 2004, Chicago Tribune

http://www.chicagotribune.com/business/chi-0407030102jul03,1,1181633.story

June 30, 2004

Communications Daily (and Washington Internet Daily)

About 34 million (27%) of Internet users are aware of VoIP service and 4 million (13%) have considered getting it for home use, according to a study by the Pew Internet & American Life Project and the New Millennium Research Council (NMRC). It said that 11% of Internet users (14 million) had made some form of phone call over the Internet and that 4 million Americans who had considered switching to VoIP -- "mostly technophiles and generally well off economically" -- represented "the near-term potential for the home VoIP market." It said 2/3 of those who had heard of VoIP had a high speed connection either at home or work. "I believe that these survey numbers highlight that the vast majority of Americans are not quite ready to throw away their land lines and cell phones for Internet telephony," said NMRC's Allen Hepner: "That said, with one in 8 Internet users considering signing up for VoIP, even modest industry take-up rates over the next 5 years are sizeable figures."

June 29, 2004

Kansas City Star

Few dialing in to latest service, Most unaware they can call over Internet
By David Hayes, Columnist

I had a tough time getting through on the phone last week to my niece and her family in Chicago. The family had moved to a new home and, as it turns out, picked a new phone service. The outage resulted from a learning curve and some necessary tweaking of the installation of Vonage, an Internet-based telephone service that bypasses traditional Bell telephone services. Vonage lets consumers keep their old phone numbers and make unlimited local- and long-distance calls for about $30 a month. Call waiting, Caller ID, voicemail and other services are included in the price. My niece and her husband are an early-adopter family, one of only 150,000 or so households in the United States trying out the service, known as Voice over Internet Protocol, or VoIP. But a new survey found that most consumers don't know much about VoIP. VoIP is just another faceless acronym to many consumers, according to a new survey from the Pew Internet & American Life Project and the New Millennium Research Project. The survey found that only 27 percent of Internet users — about 17 percent of all Americans — had heard of VoIP. Only one of the 2,204 consumers interviewed by Pew researchers currently used VoIP service. VoIP sends voice calls over the Internet, broken into packets that are sent and reassembled once they reach their destination. Traditional phone calls travel intact across an individual circuit, which cannot be shared. The service requires consumers to have a high-speed Internet line, either cable or DSL. “I believe that these survey numbers highlight that the vast majority of Americans are not quite ready to throw away their land lines and cell phones for Internet telephony,” said Allen S. Hepner, who sits on the New Millennium advisory board. However, Hepner noted that one of every eight Internet users say they might eventually sign up for VoIP service. “This ‘disruptive technology' is coming to all Americans; it is not a question of if, but when,” Hepner said. For some, it's already working. My niece and her family are now having surprisingly good luck with Vonage. In the Kansas City area, both startup Nuvio Corp. and Time Warner Cable are among those offering consumer-level VoIP service. Vonage isn't yet available in the Kansas City area.

http://www.kansascity.com/mld/kansascity/business/technology/9035362.htm?1c

June 28, 2004

National Journal's Technology Daily

Of the 34 million Internet users who are familiar with Internet telephone service, or voice-over-Internet protocol (VoIP), 13 percent have considered purchasing the service for home use, according to a new study. The Pew Internet and American Life Project's study found that some 11 percent of Internet users have used the Internet to make a phone call, either from home, work or via downloadable software. Pew contacted 2,204 people, 63 percent of whom were Internet users, and found that only one respondent had VoIP at home, "showing the low rate of consumer adoption of the technology so far," the report said. The study found that those most likely to be aware of VoIP are men ages 25 to 34 who are well educated, well off economically and longtime Internet users. Researchers found it most surprising that only 15 percent of those ages 18 to 24 have heard of VoIP.