VoIP: Not So Fast

Even though the VoIP market has all the makings of a boom, it's not without its hurdles. Solution providers interested in pursuing the space should monitor ongoing developments in several areas:

Government. As is often the case with new technologies, the industry has to keep an eye on D.C.'s inclination to overregulate it. In February, representatives from several telecom companies warned Congress against making too many changes to the Telecommunications Act of 1996; the emergence of VoIP and the rampant consolidation within the telecom sector had prompted Congress last summer to begin examining whether to levy some kind of tax on VoIP communications.

Although the industry opposes any such tax, the hope is that whatever regulatory changes occur happen quickly, because the longer it takes Congress to act, the more it encourages a wait-and-see attitude among companies that might invest in VoIP, thus slowing the market.

The funds for any proposed tax have been earmarked to help pay for service in rural areas and for schools and libraries. But they might fall hardest on VoIP providers, who for this debate are being lumped in with phone carriers and, thus, in the eyes of some in the government, are subject to the same taxes as voice carriers. Already there have been legislative efforts in Kansas to tax VoIP 911 services. Industry lobbyists insist that technological advancements and falling costs would obviate the need for any new taxes.

The Bells. Questions abound as to what will happen to the legacy phone companies. Consolidation will resolve some of the confusion, but the volume and varying types of telecom providers could complicate things. There already have been allegations of shenanigans by the legacy phone companies. Last year, VoIP provider Vonage filed a complaint with the FCC, alleging that an unnamed broadband provider had been blocking its phone calls. And in September, VoIP provider Nuvio filed another complaint alleging discriminatory practices by broadband providers. Both issues are unresolved.

"The question is what are the Bells, RBOCs and ILECs going to do about integrating TDM with VoIP," asks Nicky Smith, CEO of Carolinanet.com, a VoIP reseller in Greensboro, N.C. "We're in the early-adoption stage right now, but what will happen when VoIP begins taking major dollars away from the phone companies? I expect to see some price gouging going on."

Performance issues. Though most vendors and VARs insist VoIP is ready for prime time, some questions remain. The technology's developers still need to come up with a viable 911 service, and individual VoIP deployments tend to hit their share of snags, especially in the SMB space, where the networks often are more patchwork than streamlined.

"Our biggest problem is going to an existing customer that has an old hub full of nonintelligent switches all daisy-chained together, and we have to tell them to rip it all out and start over," Smith says. "There also are occasional issues with firewalls...some firewalls aren't VoIP-ready. These aren't things you can train someone on over the Internet; customers need someone to hold their hand."