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I’m old enough to remember when a long-distance call was a special
event. Our family would drop everything to crowd around the phone. We’d
take their turns, trying to speak quickly so as to not run up an
enormous bill. Even while we were paying an exorbitant amount by today’s
standards, the quality was often crackly and faint.
I’ve also seen many voice and data integration startups come and go
over the last 25 years. From a technologist’s perspective, voice bits
aren’t all that different than data bits, so there’s an appeal for a
single digital pipe. However, technology promises don’t always drive
consumer behavior. Today in the U.S., the promise of VoIP (Voice over
IP) has created more static than clear communications.
Why is this important?
As companies like eBay pour billions into this still-embryonic
“killer app” through their acquisition of Skype, other companies are
likely to also bring their attention and resources to bear. If accepted
by consumers and businesses, VoIP promises to upset a lot of apple
carts. At the end of the day, the most important thing to watch is
customer behavior: if the American public won’t use the technology, then
the fastest bandwidth fanciest headphones won’t amount to much.
U.S. Households haven’t been flocking to use VoIP. Today, nearly 1
in 20 home PCs (4.5%) make voice calls over the Internet. That’s even
down from last year, where this number stood at 7.8% of home PCs. These
figures are based upon surveys taken from 8,203 computer users as part
of the Technology User Profile 2005 Annual Edition, and 7,527
respondents in the 2004 Annual Edition.
Use among the self-employed is higher, at 7.2% of self-employed
PCs. At least there is growth for VoIP among the self-employed, as this
rate stood at 5.5% of self-employed PCs last year. These are still
relatively small numbers, and largely unchanged over the past three
years.
There are numerous factors that explain why VoIP has yet to take
off in the U.S.
Frankly, speaking over a crackly connection can be painful and
annoying, even when free, and dial-up connections just don’t give enough
speed for high quality. The highest-bandwidth connections were at first
being adopted by people who aren’t as price-sensitive – the wealthiest.
In 2004, 46.3% of households with home PCs and $50,000 or more household
income had DSL or Cable Internet connections, compared with 28.7% of
lower-income households. In 2005, this gap has narrowed but still
persists, with 68.7% of high-income home PC households having either DSL
or cable access, compared with 54.8% of lower-income households.
At the same time, competition among cellular carriers drove prices
down. Furthermore, a growing number of consumers pulled the plug on
their home phone lines. So, Americans learned to enjoy having easy,
mobile, low-price access to long distance. Furthermore, cell phone
penetration grew faster among lower-income households and worked its way
into American’s daily lives.
Fundamentally, Americans like the convenience of having a clear
phone line accessible wherever they may be. It trumps needing to make
phone calls while tethered to a computer workstation and headset.
Although it’s true that American consumers like free or low-cost
services, they continue to pay premiums for convenience.
Yet another factor to dampen enthusiasm for VoIP is the prevalence
of email and consumer’s preferences for email over the telephone. Among
7,599 home-PC households we surveyed as part of Technology User Profile,
less than one in seven (14.1%) agreed or strongly agreed with the
statement “I Would Rather Use a Telephone than Use Email,” ranking it a
6 or 7 on a 7-point agreement scale. Nearly double that rate, 27.8%,
disagreed or strongly disagreed, ranking it a 1 or 2.
What does this portend for the future of VoIP in the U.S.? Most
likely, VoIP as a separate service will continue to be a niche offering.
It will be most popular among the price-sensitive, the tech-savvy, and
the self-employed. It will also likely do well outside of the U.S.,
where long-distance charges can be so much relatively higher. As a
bundled service along with cable, satellite, or ISP services, it is
likely to increase in adoption, further challenging the landline phone
companies. |