VON: Consumers not thrilled by cheap VoIP

SAN JOSE--A surprising 71% of consumers would consider switching to voice-over-IP service, but a more surprising 60% of those lose interest when the service gets too cheap, according to a research study commissioned by Level 3 Communications, a provider of wholesale VoIP services.

The survey of 1400 people, conducted in December of 2004 by Marketing Advocates Inc., explained to participants that VoIP operates like existing telephone service, but will be cheaper and can provide additional features, said Cynthia Carpenter, vice president of marketing for Consumer Voice Services at Level 3. "It was an aided study," she explained in an interview at the Voice on the Net show in San Jose.

Only 40% of those surveyed had ever heard of VoIP before the survey, but once it was explained, 71% of the total number expressed an interest in switching. The survey was conducted online, so all of the participants were current Internet users.

One point of the survey was to test the popularity of various features and the price sensitivity of potential buyers, Carpenter said, and it turned up surprising results where price was concerned.

"About 4% of those surveyed had already switched to VoIP and they were very price sensitive," she said. "In fact, they were 50% more likely to switch again. These are customers who aren't satisfied with their current service provider, and who probably make a lot of long-distance calls."

Among the 60% of respondents that had not heard of VoIP, however, "demand for VoIP dropped dramatically when the price was reduced below a certain level, around $35," said Carpenter. "These are customers who are satisfied with their phone service but were interested in looking at VoIP. For this group, there's a price point at which the lower price implies something bad."

Level 3 is sharing the results of its research at VON and with its current VoIP customers to demonstrate its thought leadership and its understanding of customer challenges, said Myrle McNeal, company vice president.

Among the service features that most appealed to customers were wireline-wireless integration, integrated messaging/screening features, enhancement of home phone service through things such as personalized ring tones and bundling of VoIP with high-speed Internet access.

"There are a variety of applications drawing people in," says McNeal. "A number of people are looking at VoIP for a second line to support a home office. There is also a niche of customers who buy a terminal adapter and take it out of the country--it's easier for relatives to reach a military base overseas using a local number."

Survey respondents were most interested in buying VoIP "from a trusted brand name, like their telephone company, their cable company or an ISP," said Carpenter.