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Consumers say VoIP not essential; magicJack begs to differ

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Consumers are much less likely to cut back on landline spending than they are on either free or paid voice-over-IP services, according to Alcatel-Lucent's Market Advantage Program study released yesterday. These were surprising findings to hear given that VoIP players are thought to be cord-cutting catalysts. Even more surprising, these results come at the same time key VoIP players are seeing significant traction in the market.

Out of 3200 respondents to Alcatel-Lucent’s survey, 74% said they considered their landline telephone essential and would not reduce spending on it versus the 32% that said the same for a paid VoIP service. Even when the VoIP service was free, though, only 48% deemed it essential. Yet for a non-crucial service, VoIP is doing fairly well in today’s market.
magicJack — the device that consumers either love or love to hate — reportedly is selling its USB dongle at a rate of 9000 to 10,000 units per day, bringing in revenues of nearly $100 million to parent company YMAX in 2009 alone. It reached its two-millionth customer earlier this year and announced four million devices sold last month, the company said, and these customers — typically retirees or those overseas — are using about 500 minutes per month.

Driven by its success, magicJack also plans to jump into the market for femtocells, according to a VoIP Planet interview with Nathan Franzmeier, CEO of magicJack sister company Stratus Telecommunications. Within the next six months, the company will begin producing wireless base stations that hook the magicJack service up to GSM cell phones, most likely through a partnership with a wireless operator, Franzmeier told the Web Site.

Perhaps fearful of Jack’s success, competing VoIP device-maker ooma revamped its business model, aimed at achieving profitability by the end of 2009. The company announced last week it has received $18.3 million in venture capitalist funding to drive its transformation. Rich Buchanan, its chief marketing officer, said consumers still are paying for VoIP, too — 26% of the company’s user base has signed up for its premier service, which costs either $12.99 per month or $99.99 per year for added features, he said.

Skype also ditched the beta label today for the 3.0 version of its VoIP app for Windows Mobile devices, and Voxbone announced this week it will work with mobile voice and messaging app Nimbuzz to provide local access numbers so that Nimbuzz users can make calls to their IM or VoIP contacts without relying on 3G or Wi-Fi connectivity. Start-up IP services wholesaler XCast Labs also received its first round of venture capital funding this month, as it looks for partnerships with service providers for IP voice and video.

With this slew of VoIP benchmarks and news already announced this summer, it would appear that while VoIP may not be viewed as essential, providers of the technology are doing something right.

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© 2014 Penton Media Inc.

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