VoIP to Reach 10% of US Homes in 5 Years

JupiterResearch report says IP telephony growth will be steady despite challenges posed by entrenched landline carriers and the rising popularity of wireless telephones among the young.

VoIP will reach about 400,000 US households by the end of this year, a number that will grow to 12.1 million, or 10 percent of all homes in the US, by 2009, according to a forecast by New-York-based research firm JupiterResearch.

The report predicts that 17 percent of all U.S. broadband households will use a VoIP telephony service in 2009, up from only 1 percent by the end of 2004.

VoIP faces two key challenges, according to JupiterResearch: The traditional carriers have a strong, well-established customer base and wireless telephony has been adopted by the younger generation. And current consumer telephony preferences will create challenges for VoIP start-ups establishing themselves in the market.

The traditional carriers have unmatched brand strength and marketing clout due to their existing customer base, according to JupiterResearch. Broadband consumers evaluating landline telephony rank quality and reliability over price and features; and bundled services are growing steadily as purchase motivators.

Jupiter adds that demand for landline VoIP service is not very price elastic: While about one-third of online consumers rated themselves somewhat or very likely to turn to VoIP at $39.99/month, demand increased only 10 percent in response to a 38 percent ($15) decrease in price. Major VoIP providers have been slashing prices in the last couple of weeks, with some dropping to $25 a month and Broadvox Direct down to $19.95 per month.

Even these declines are unlikely to push broadband users to VoIP unless they were thinking of making the move anyway, said JupiterResearch senior analyst Joe Laszlo. “What these price changes do help is raising awareness about VoIP because the press has been writing a lot about it recently.”

The better the awareness, the more likely the potential user will at least try the technology. However, the VoIP providers can’t just position themselves as a lower-cost alternative to landline phones, Laszlo said.

An increasing number of people, particularly younger consumers consider their wireless phone their preferred telecommunications device, with some dropping landlines altogether. Wireless VoIP is still in its infancy, and the technology still needs to improve before most cell phone users would consider a VoIP-capable phone a reasonable alternative to a traditional cell phone. The devices offering Wi-Fi and traditional cell phone capabilities still need to improve their integrations of the two technologies, Laszlo added.