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![Page 1: 1 University of Toronto Master of Engineering in Telecommunications Voice Over IP Industry Analysis Katherine Lam (Class of 2003-04) September 23, 2004.](https://reader035.fdocuments.in/reader035/viewer/2022070323/56649da25503460f94a8f5e7/html5/thumbnails/1.jpg)
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University of TorontoUniversity of TorontoMaster of Engineering in TelecommunicationsMaster of Engineering in Telecommunications
Voice Over IP Voice Over IP Industry AnalysisIndustry Analysis
Katherine Lam (Class of 2003-04)
September 23, 2004.
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Key Research ObjectivesKey Research Objectives
Objectives: To answer 2 key questions:
1. Is carrier VoIP “disruptive” in the consumer market?
2. Will carrier VoIP “cross the chasm” quickly and easily in the consumer market?
In the context of the big picture of VoIP industry!
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Disruptive TechnologyDisruptive Technology
VoIP is disruptive in Enterprise space Is VoIP equally disruptive in the Consumer space?
Source: Professor Clayton Christensen’s books titled “The Innovator’s Dilemma” & “The Innovator’s Solution”
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Gorilla Game Gorilla Game Home
Networking
Main Street Main Street
Toll Bypass
Consumer
Wi-Fi VoIPEarly Market
Early Market
Enterprise Enterprise
Source: Geoffrey Moore’s book titled “The Gorilla Game”
Chasm
Hot Spots
Chasm
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MET Report ContentsMET Report ContentsObjectives and MethodologiesService ProvidersEquipment VendorsSummary of FindingsAppendix
o Gorilla Gameo Disruptive Technologyo U.S. Service Providers Profileso U.S. Overall Observationso U.S. and Canadian VoIP Markets
FOCUS
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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AcknowledgementAcknowledgement
Special Thanks to MET Advisory BoardJim Glover, BDC Venture Capital
Mark Woollam, Nortel Networks
Peter Rhamey, BMO Nesbitt Burns
Mark Goldberg, Mark H. Goldberg and Associates Inc.
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Industry Analysis MethodologiesIndustry Analysis Methodologies
Industry Analysis
MarketAnalysis
CompanyAnalysis
Competitive Analysis
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Industry Analysis MethodologiesIndustry Analysis Methodologies
Industry Analysis
MarketAnalysis
CompanyAnalysis
Competitive Analysis
VoIP in the U.S. Major battleground for Enterprise VoIP
A lot of hype and news on Consumer VoIP
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Industry Analysis MethodologiesIndustry Analysis Methodologies
Industry Analysis
MarketAnalysis
CompanyAnalysis
Competitive Analysis
Service Provider Groupings1. Existing Incumbents
• IXC, ILEC and MSO2. New Players
• Vonage-like
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Carrier VoIP in Consumer MarketCarrier VoIP in Consumer Market2003 - 20042003 - 2004
Years 2003 2004U.S. Residential Voice Lines (Million)
118 115
U.S. Consumer VoIP Subscribers (Million)
0.13 1
% of VoIP Subscribers in Consumer Market
0.1% 1%
Source: Yankee Group
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Market Dynamics 2003Market Dynamics 2003
Vonage – Consumer VoIP market leader in 2003
Vonage60%
Other11%Time Warner
7%
Cablevision22%
U.S. Consumer VoIP Market Shares as of Year-End 2003
Total: 130,000 Consumer VoIP SubscribersSource: Yankee
Group
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Current Market DevelopmentCurrent Market DevelopmentCategory of
Service ProviderCurrent Player(s) Current Business Priority
Pure VoIP Players VonageNet2Phone
Attack as new market opportunity
Incumbent Multiple Service Operator
(MSO)
ComcastTime Warner CableCablevisionCox
Attack ILECs on local voice businessDefend from satellite operators’ attacks on video business
Incumbent Local Exchange Carrier (ILEC or RBOC)
VerizonQwestSBCBellSouth
Attack IXCs in the business segment as new source of revenueDefend home base business on residential voice
Incumbent Inter-exchange Carrier
(IXC)
AT&TMCISprint
Defend home base business on business/enterprise customers
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Pure Players VoIP TimelinePure Players VoIP Timeline
Jun 01: Net2Phone announced the launch of its VoiceLine broadband telephone service
Apr 04: Vonage launched VoIP service in Canada
Jan 01: Vonage was founded and started providing service in the U.S.
Nov 02: 8x8 announced the availability of its Packet8 broadband telephone service
May 04: Vonage consumer VoIP subscriber number reached 155,000
Pure VoIP Players are the earliest entrants
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Pure VoIP Player - VonagePure VoIP Player - Vonage Nowadays, Vonage is the
most successful pure VoIP player
Significant factors to determine the future of pure VoIP players: Regulation Resell Partnership Piggybacking on
broadband connection MSOs’ market entrance
Linear Projection• In 2003, Vonage had 78,000 subscribers (60% market share)• Add 20,000 subscribers/month
78
318
558
798
1038
0
200
400
600
800
1000
1200
Num
ber o
f Sub
scrib
ers
(Tho
usan
d)
2003 2004E 2005E 2006E 2007E
Vonage VoIP Subscribers
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MSO VoIP TimelineMSO VoIP Timeline
May 03: Time Warner Cable launched the commercial VoIP service in the U.S.
Dec 03: Cox launched its residential VoIP service to customers
Sept 02: Charter launched residential VoIP service
May 04: Comcast confirmed its VoIP roll-out plans in the residential market
Sept 03: Cablevision launched “Optimum Voice” VoIP services in the U.S.
MSOs will become the most active players
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ILEC VoIP TimelineILEC VoIP Timeline
May 04: BellSouth launched IP Centrex to business customers
July 04: Verizon launched its unmanaged “VoiceWing” VoIP service to its residential customers
Nov 03: SBC launched nationwide Hosted IP service to business customers
Jun 04: Qwest launched its “OneFlex” VoIP services to both of business and residential customers
ILECs will focus on enterprise market first
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IXC VoIP TimelineIXC VoIP Timeline
Mar 04: AT&T rolled out its national VoIP service named “CallVantage”.
Dec 03: MCI and Sprint partnered with Time Warner Cable to offer VoIP service
July 04: AT&T announced to retreat from residential voice market.
Aug 04: AT&T co-markets “CallVantage” VoIP with MSOs and Best Buy in U.S.
July 04: AT&T’s “CallVantage” has been successfully launched and is available in 100 U.S. markets
IXCs will also focus on enterprise market
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Market Projection 2005Market Projection 2005
MSO56%
IXC & ILEC25%
Pure VoIP Provider
19%
U.S. Carrier VoIP Consumer Market Projection in 2005 by Yankee Group
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Carrier VoIP in Consumer MarketCarrier VoIP in Consumer Market20072007
Years 2003 2004 2005 2006 2007U.S. Residential Voice Lines (Million)
118 115 114 113 113
U.S. Consumer VoIP Subscribers (Million)
0.13 1 4 7 12
% of VoIP Subscribers in Consumer Market
0.1% 1% 3.5% 6% 10%
Source: Yankee Group
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Potential Market Dynamics 2007Potential Market Dynamics 2007
Our Market Projection (By Linear Projection) Wide deployment of VoIP by MSOs in the U.S. ILECs and IXCs are broadening their VoIP priorities to
both businesses and consumers Pure VoIP players will remain to be niche players
MSO59%
IXC & ILEC28%
Pure VoIP Provider
13%
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Potential Market Dynamics 2007Potential Market Dynamics 2007(Separate ILEC & IXC)(Separate ILEC & IXC)
ILECs show more interests and potentials than the IXCs in the consumer VoIP market
Pure VoIP Provider
13%IXC4%
ILEC24%
MSO59%
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Carrier VoIP in Consumer MarketCarrier VoIP in Consumer Market
Now, we can answer the 2 key questions.
1. Is carrier VoIP “disruptive” in the consumer market?
2. Will carrier VoIP “cross the chasm” quickly and easily in the consumer market?
The answer to both questions is NO!
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Enterprise VoIP Equipment MarketEnterprise VoIP Equipment Market
26%
27%14%
6%
4%3% 9%
4%
7%
Cisco
Avaya
Nortel
Alcatel
Mitel
Siemens
NEC
3Com
Others
Worldwide Enterprise IP Telephony (IP PBX, IP Phone & Hybrid)
Market Shares 2004 Q1
24%
25%13%
8%2%
16%
4%
7%
1%
North America Enterprise IP Telephony (IP PBX, IP Phone & Hybrid) Market Shares 2004 Q1
Total Revenue 2004 Q1 U.S. $596M
Total Revenue 2004 Q1 U.S. $307M
Source: Synergy Research
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Carrier VoIP Equipment MarketCarrier VoIP Equipment Market
28%
21%20%
5%
4%
18%
3%1%
Nortel
Cisco
Sonus
Siemens
Lucent
Telica
Alcatel
Others
Worldwide Carrier VoIP Market Shares 2004 Q1
Total Revenue 2004 Q1 U.S. $159M
40%
13%
26%
1%
1%12%
5%2%
North America Carrier VoIP Market Shares 2004 Q1
Total Revenue 2004 Q1 U.S. $90M
Source: Synergy Research
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Carrier VoIP Equipment MarketCarrier VoIP Equipment Market Lucent has created an
opportunity for Sonus Lucent acquired Telica
in May 2004 VoIP is an extremely
high growth market, but not a disruptive one in the sense of Clayton Christensen’s model
40%
13%
26%
1%
1%12%
5%2%
Nortel
Cisco
SonusSiemens
Lucent
TelicaAlcatel
Others
VoIP is not disruptive in equipment market
Sonus + Telica = 31% Market Share
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Future of VoIP in CanadaFuture of VoIP in Canada
Canada will lag behind the U.S. in the carrier VoIP deployment in the consumer market
2 Major Reasons:Less price differentiationLess direct competition
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ContentsContents
Introduction and ObjectivesMethodologiesCurrent Carrier Market DynamicsFuture Carrier Market ProjectionsEquipment MarketCanadian VoIP MarketFuture Work and Summary
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Future WorkFuture Work
Industry Analysis
MarketAnalysis
CompanyAnalysis
Competitive Analysis
2. Study on other nations such as Korea, Japan and China
1. Enterprise VoIP3. VoIP value chain and supply chain
4. Wireless Substitution
5. New Business Models (P2P/Skype)
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P2P/Skype as a disruptorP2P/Skype as a disruptor
P2P has disrupted the music industryNapster and KaZaa are the best examplesFounder of Skype is the founder of KaZaaSkype could be potentially disruptive to
the telecom industry
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SummarySummary
VoIP’s disruptiveness in carrier VoIP space
VoIP’s capability to cross the chasm
VoIP’s disruptiveness in equipment market
VoIP’s deployment in Canada
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The End.The End.Thank You!Thank You!