VoIP Revenues Have Room to Zoom

Talk may be cheap, but it is also very profitable, if recent stats are any indication.

Infonetics Research said Voice over IP  service providers in North America, Europe and the Asia Pacific regions saw their revenues double between 2004 and 2005.

The firm said it expects to see about $120 billion spent on VoIP services in these three regions between 2005 and 2009.

North Americans are expected to shell out the biggest chunk at $13.3 billion over the next few years, with about half of those revenues coming from residential customers.

Businesses in Europe and Asia Pacific are expected to be the biggest users of VoIP services to satisfy their appetite for business trunking and IP Centrex as well.

The number of worldwide VoIP subscribers is expected to hit 47 million subscribers this year, almost double from last year at the same time.

The latest stats dovetail with Infonetics’ stats from a report last month, which said the WiFi phone market increased 116 percent between 2004 and 2005 to reach $125.5 million in revenues. These revenues are expected to double this year, and possibly triple by 2009 to hit $3.7 billion, according to the firm’s forecast.

By the looks of the research, businesses are buying into the idea that VoIP is just plain cheaper than traditional wired phone services. Given that it operates over the Internet and with generally-available WiFi networks, VoIP is considered more functional and flexible, and even has an edge over traditional phone service when it comes to customer service, said Infonetics Research.

China is also coming on strong in the VoIP stats. The government is encouraging carriers to accelerate the migration to IP Centrex and IP PBX from their existing TDM Centrex systems, said Stéphane Téral, principal analyst at Infonetics.

Hold the phone, though. It isn’t all smooth sailing for the VoIP service providers, despite the rosy numbers and financial outlook. Increased competition, especially from the cable companies, is putting the squeeze on VoIP pioneers like Vonage. The company presently is the leader in terms of North American residential/SOHO VoIP subscriber market share, although this share has been chipped down to about 27 percent in 2005 from 34 percent in 2004, Infonetics said.

Most of its competition comes from the traditional telcos, cable service operators like Time Warner and Cablevision and low-cost entrants. Cablevision and Time Warner Cable combined hold about 39 percent of all North American residential VoIP subscribers, noted Infonetics.

Cellular carriers are also taking a serious look at VoIP as well, especially as the technology takes a bite out of their subscriber turf.

Take the Sprint/Nextel example. Last year the two teamed up with Avaya to develop hosted, wired and wireless VoIP services in North America. Last year, Sprint also sued Vonage and a smaller VoIP provider, claiming their technology had infringed on its patents.

More recently, Verizon sued Vonage, claiming Vonage stole the framework of its business to establish its own telephony structure.