Users Weigh in on VoIP 'Must Haves'

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One out of five online Americans would love to make phone calls over the
Internet with all the bells and whistles of their current systems, according
to a report published today.

Research firm Ipsos-Insight found the top four most desired add-on
features for Voice over Internet Protocol (VoIP) service are caller ID,
voicemail, battery back up and call waiting.

“Providers entering the market need to offer these must-have features to
gain entry, but need to look beyond these basic offerings to differentiate
themselves from the competition,” Lynne Bartos, Ipsos-Insight senior vice
president said.

VoIP is making headlines
in the tech industry these days. A June industry survey by research firm
Radicati Group estimates 279 million telephony lines, or 44 percent of the worldwide
total, will be IP based by 2008. The study also found that IP telephony
systems cost providers between $375 and $1,000 per user.

The Ipsos-Insight study found DSL and dial-up customers, as well as people who spend
more than $40 a month on phone bills, are most likely to sign up for the latest
technology in Internet-based telephone service.

“The cost savings proposition of VoIP will play a major role in drawing
new subscribers into trying out Internet-based phone service,” Bartos said.
“This applies primarily to those with high phone bills.”

However, analysts were stunned to discover that cable Internet users are
more reluctant than DSL and dial-up users to try VoIP.

“In order to use VoIP services, subscribers need to have a broadband
Internet connection,” said Bartos. “So it is not surprising that DSL Internet users who
already have this high-speed connection — meaning one less technology
barrier — would be more inclined to try VoIP.

“What is surprising is that
dial-up Internet users are more likely than cable Internet users to try
VoIP, despite cable users’ broadband hook-up,” Bartos said.

The study bodes well for the major providers. Half of the people surveyed
by Ipsos-Insight said they felt that a telephone company would be the best
provider for VoIP. ISPs came in second with a vote of confidence from 35
percent, and cable companies came in last with only marginal favor (15
percent).

“Right now, it looks like telephone companies would have the advantage
when it comes to the ability to capture VoIP market share,” said Bartos. “Until
consumers become more savvy about VoIP technology and services, most will
naturally turn to familiar providers of telephone service, even if the
service is Internet-based.”

And even though cable companies may face an uphill battle in the emerging
VoIP marketplace, Bartos said cable operators could definitely rise to the
occasion.

“They have already proven they can transcend their traditional video
services by offering a reliable, compelling high-speed Internet access
product,” Bartos said. “With solid marketing and substantial bundled offers,
cable operators should be able to overcome VoIP barriers and gain market
share pretty quickly.”

Still, many customers are having a hard time visualizing the total VoIP
package. An Ipsos-Insight study released last month found more than half (54
percent) of Internet users in the United States are still unaware of VoIP. Among
those who have heard of it, the majority (56 percent) are confused about how
the Internet-based telephone service really works.

On the positive side, the study found the vast majority (73 percent) is aware
that they can use their Internet connection as normal while making phone
calls.

But understanding levels about other VoIP advantages and limitations are
mixed. For example, consumers are split almost evenly about whether they can
or can’t keep their home phone number with VoIP. This is a reflection of
what’s happening in the marketplace; some providers let you keep your home
phone number and others do not. And, for the most part, consumers don’t
understand that they can use their regular phones with VoIP or that they can
have multiple telephones connected to their VoIP service.

“Consumers definitely need to understand that making a phone call using
VoIP doesn’t mean throwing away their existing regular telephone, and that
more than one phone or device can be connected to the service. These
misperceptions could be barriers to conversion for many consumers,” Bartos
said.

In the meantime, Congress continues to hammer out the legalities of how
and where VoIP can be regulated. A Senate Commerce Committee is meeting in
Washington Thursday to discuss the VoIP Regulatory Freedom Act.

The legislation, sponsored by Sen. John Sununu (R-N.H.), would, among other
things, bar state and federal authorities from regulating providers of
Internet telephony the same way they regulate traditional telephone
companies. A parallel bill, sponsored by Rep. Chip Pickering (R-Miss.), is in
play in the U.S. House of Representatives.

And in what appears to be good news for IP vendors and SMBs, the Internal
Revenue Service and Treasury Department strongly
deny they are considering an excise tax on Internet telephone calls or
any other IP-based services.