(VoIP) Forecast Calls For Pain

Frost & Sullivan says that the North American VoIP residential revenues will hit $4.07 billion by 2010, up 1300% from 2004 sales of $295.1 million. Do some math here, you can very quickly find out that the numbers paint a pretty bleak picture for most VoIP providers. They are forecasting VoIP lines to grow from 1.5 million in 2004 to 18 million. By all estimates, 2004 the total US VoIP lines were about a million. Given the late start of Canadian VoIP, I find the 1.5 million number hard to believe. But that’s me nitpicking.

$4.07 billion divided by 18 million lines works out to annual VoIP revenues of $226 per line. Or about, $18 a month. “Residential subscribers are likely to replace second lines with wireless or VoIP,” Frost & Sullivan Senior Analyst Lynda Starr said in a statement. What she did not say – if her forecast is true, then residential VoIP is nothing but a cheap tack-on service. Unless you are bundling VoIP service with cable or DSL service, or packaging it as a part of some triple-play offering, there is little chance of making money in this game. Research from In-Stat supports this. Nearly half of US telecom customers are buying some sort of a bundle from their service provider, up from just one-third in 2004. SBC softphone for $10 a month? I will take that!

And if you are a VC looking to cash-in on the VoIP madness, think again!