VoIP and ENUM

At least one incumbent seems to get the message (see also the story from Mark Evans about the situation in Canada).

After RedHerring already reported 3 weeks ago that BT offers VoIP services cheaper than Skype (BT Begins Skype Backlash), it is reporting now in BT challenges VoIP Providers from a meeting in London, where the carrier detailed a long-range plan whereby BT would embrace the changes taking place in the voice world even if it means transitioning a significant portion of its more profitable, traditional voice subscribers to cheaper services such as VoIP.

Unlike many of its counterparts around the globe, BT Group, the United Kingdom’s largest telecommunications carrier, has embarked on a plan to use its ownership of the country’s largest broadband network to challenge VoIP service providers such as eBay’s Skype division.

I have always considered BT as one of the most advanced incumbents, but I am really astonished about the statements from Gavin Patterson, BT's managing director of consumer and ventures. Maybe he is reading my blog ;-)

"Whether Skype’s business model is sustainable or not is yet to be determined, but this is our wakeup call. Rather than let VoIP be done to us, it is our single-minded intent that we transform our own business behind it and use it as a way of increasing our customer base on other people’s networks too.”

“The key to this is getting the cost base right on the new services and aggressively going after market share so that your core business is not eroded,” said Mr. Patterson. “We are actively migrating price-sensitive customers over to VoIP.

“Trying to defend your traditional PSTN [public switched telephone network] business as an incumbent and saying VoIP will never happen is pointless,” he added. “The business model for voice traffic is changing fundamentally, and incumbents such as BT have to be out on the forefront of that.”

Many traditional carriers complain about the fact that VoIP carriers such as Skype are able to build competitive businesses on their networks without compensating them.

Most incumbents have competitive VoIP services, but they take a low-key approach to promoting these products. They want to avoid encouraging large portions of their traditional customer base to switch to the cheaper voice service and significantly reduce their overall voice revenue.

“We did not market our VoIP services as hard as we could have, but we are now committed to a VoIP world and we see that traditional call revenue will inevitably come down,” said Mr. Patterson. “We need to plan for a scenario where that is not our major source of contribution. That leads you to see VoIP as a bridgehead into a whole range of new paid-for products and services.”

BT believes there is life in the voice market beyond VoIP, and long term, the real losers would be VoIP service providers such as Skype.

“We are committed to voice as a market, we will continue to make it our core business, but we will be at the forefront of innovation and change, so that we are able to meet our customers’ needs at least as well as anyone else. We already have the Skype-beating prices. We will merge VoIP into some of our other services, which is a natural incumbent’s advantage.”

BT embarked on its Skype-beating strategy less than two weeks ago when it announced it was slashing its prices for voice services in half and offering free calls to 30 different countries during the holiday season.

The company already prices its international calls made from PCs to regular telephones via its BT Communicator service cheaper than Skype does with its SkypeOut service. BT also plans to introduce an enhanced VoIP service in the spring that would significantly improve sound quality.

“The overall service experience such as billing, technical support, and repair are important to customers,” said Mr. Patterson. “It’s also important to customers to provide them with a one-stop shop for all of their communications needs. Then we have a trusted brand. Whom do you trust to provide you with these important services?”

But brand loyalty seems to be fading as a differentiator in a world where young customers switch service providers fairly frequently, based on small incremental savings.

“The boundary-less world created by the Internet is thrilling but scary for the vast majority of consumers. Sometimes we can get carried away by teenagers and pre-teenagers and use them as a measure for what is happening in the world. A 40-year-old with three kids has different needs from teenagers, and teenagers get older and their needs change.”

But can there be a challenge or competition if there is still no real business model for VoIP 2.0?

See Re-format your Skype business model? from Martin Geddes.