As the CEO of the second-largest (after Vonage) "pure play" VoIP provider, Packet8's Bryan Martin is pretty much plugged in to the whole sector.
At ITExpo I had an informal background conversation with Bryan. He feels that the SunRocket implosion cost all VoIP providers some credibility on Wall Street, and also feels that because termination fees VoIP providers have to pay to complete phone calls to traditional phone numbers are going up, that competing on price is no longer the compelling strategy it once was.
Bryan repeated and broadened these perspectives in the conference-ending keynote.
For one, he strongly implied that we might see some more VoIP company failures, not all that unlike SunRocket's:
SunRocket is not the only company having problems. We know of about three or four major players in the space that have significant customer bases, they’re both into both business and residential applications, and we’ve heard rumors that they’re interesting in exiting the market as VoIP service providers.
And as to price wars as a competitive strategy for VoIP, Bryan added:
"Second, when you add in the fact that you must interconnect to the PSTN and that the PSTN is going to be around for a long time, and mobile phones are going to be around forever, then the cost of the interconnection to a carrier such as ourselves at 8x8/Packet8 is going up. It’s going the other way. So the whole market has been forced to react to that. We raised prices across the board in March by about 25 percent.
Other than with SunRocket gone, there’s not a service provider out there with more than 100,000 customers that is charging less than ourselves or Vonage in this space right now. So that’s a very new dynamic. It just happened this year. The price elasticity is finally improving, and I think the business models will improve as well."
Bryan's probably right, but in light of some Internet-based phone services' consistent use of discount pricing as the overarching marketing message, I don't see 100% buy-in to that message.