Critical mass needed for independent VoIP, says new operator

A new entrant into the VoIP market in New Zealand says the time to establish independent providers is limited to "two to three years" and perhaps some form of "co-opetition" is needed to establish a critical mass of such operators.

The major telcos are stringing out their PSTN revenues as long as possible, but they will come into the market sooner or later, with immense marketing power, particularly as a viable broadband infrastructure extends through the country, says Paul Butterworth, director of Wellington-based Merge Communications. Butterworth sees a viable market for the company among small and medium enterprises.

Larger providers already in the market, "the telco wannabes like Orcon and CallPlus", typically bundle their VoIP offering with other services, he says.

"We're a voice company only," he says.

Customers of a certain size and inclination will appreciate the greater flexibility that brings, he says, adding that customers "resent lock-in".

Merge Communications has no committed clients yet. It aims to stake a place in the VoIP market by pitching its services strictly in terms of business.

"We won't be selling in terms of VoIP or SIP [session initiated protocol]; we're selling a service," Butterworth says.

The market still needs educating on what SIP can do in those terms, he says. It's not just a cheaper phone service; it can do useful things like ringing phones in two offices in different parts of the country simultaneously, so whoever is staffing one of the offices will answer the call.

The rise of dedicated broadband links and the investment signalled by this and the previous government has led to an improvement in the quality of DSL, he says. The company had been steering clear of DSL, preferring to work with cable-based broadband providers like Wellington's CityLink

"We ran a trial in May," says fellow director Peter Flowers, and DSL was unexpectedly good; some customers said it was better than PSTN.

"Now we have DSL2+ coming".

But there remains the problem of size for an independent operator, hence the suggestion that the smaller operators work out a way of connecting with one another and dividing up the market among them geographically or according to vertical industry specialisation.

He suggests an industry organisation such as InternetNZ might act as a neutral facilitator in such an exercise.

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