Be Wary Of Fly-By-Night VoIP Service Providers

While most businesses are just now considering how and when to move to voice-over-IP services, hundreds of VoIP service providers already are battling for share in a market that's showing strong growth. But business-technology mangers should be cautious, since not all of the service providers are expected to survive a forthcoming shakeout.

The competition is expected to intensify, says Chris Lewis, founder of VoIPAction, which runs an informational Web site on VoIP and has just published the VoIP North America Directory. The directory lists more than 400 VoIP service providers and more than 450 providers of VoIP networking gear for businesses and service companies.

The November decision by the FCC that VoIP services are interstate in nature and will fall under federal regulation, rather than state regulation, "clearly opens up the marketplace to even more competition, lower prices, and more consumer choice," Lewis said in a statement.

Most major domestic and international communications service providers are selling, or have revealed plans to sell, VoIP services to businesses and consumers. And more businesses are beginning to deploy VoIP technology to cut costs and better integrate their voice and data networks. A survey of 131 companies in October by the technology, media, and telecommunications group at Deloitte & Touche suggests that two-thirds of businesses will have started to deploy VoIP to the desktop by 2006.

Many alreeady have started. In an InformationWeek Research survey of 300 business-technology managers conducted in February, more than 80% said their companies are using (29%), testing (18%), or planning to deploy the technology. That level of interest in a relatively new technology has attracted a flood of vendors, ranging from those who make and provide equipment to build VoIP networks to carriers providing VoIP services to businesses and consumer.Not all will survive, says William Stofega, a senior analyst at IDC. "There are going to be some that just aren't going to be around, even by next year," he says. "It takes money and expertise to do VoIP well. And it is difficult to compete against the large carriers that have network assets and a lot of technical expertise."

Large national and regional service providers offer a full menu of VoIP services, including hosted and managed services. Newer and smaller competitors tend to compete on price. "The big boys can provide just about everything, but you pay for that," Stofega says. He cautions business-technology managers to choose their service providers carefully and to resist jumping for the cheapest price. "When people tell you that you only have to pay pennies for telecom services, it just ain't so."