A Bad Call for IP Telephony

Internet telephony providers are in for rough times. The government recently eliminated a Federal Excise Tax (FET) charged to long-distance telecom companies. At the same time, the FCC expanded the Universal Service Fund, a tax that subsidizes services, such as Internet access in schools, to interconnected VoIP carriers. Thus, conventional telecom providers will be able to cut costs, while many VoIP service providers will be forced to increase them.

IP telephony providers competing solely on price are doomed. Just look at Vonage, whose main marketing strategy is to tout low prices. Its most recent earnings report missed analyst expectations by $148 million. Long term, differentiation is the key. --David Greenfield, [email protected]