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When someone first described Fonolo to me I couldn’t fathom it.

I mean…it can’t be true. A voice service that is both useful AND easy to use?

But that’s just what Fonolo’s “Deep Dial” service delivers.

If you’re not familiar with Shai Berger and his company Fonolo – look out – their company enables you to take control of your calling by allowing you to “Deep Dial” into large companies phone menus, automatically building an intelligent call history along with recordings for those calls. Sounds like the sort of service that you’ve always wanted, right?

That’s why I am bringing you thoughts on the near future of VoIP from the guy who is “already” there. Grab a pop for this one!

Shai, Mobile VoIP was one sector of the industry that really took off in 2008, what sector(s) do you think will take off or see tremendous growth in 2009?

Yes, mobile VoIP will continue to expand in 2009, driven by two forces: smarter handsets (iPhone, Blackberry, Nokia N95 etc.) and flat-rate data plans that are becoming more common (and WiMax will make them even more common). But I see mobile VoIP as part of a bigger trend which is that we, as consumers, are breaking out of the constraints set up by phone companies and taking control of our telephone experience.

Unlocked phones and phone number portability got this trend started by making it easy to switch carriers. The primary motivation behind switching (and also behind mobile VoIP) is cost reduction. This will continue to be a motivator, of course, but in the last two years, things have gotten much more interesting thanks to a series of innovative start-ups.

Grandcentral (now owned by Google) is a great example. It lets you take control of your call routing by setting up rules based on who is calling and the time of day. Skydeck lets you take control of your call records by pulling them off your carrier’s web interface and presenting them in a more flexible and informative way. Several companies, like Phonetag or GotVoice, let you take control of your voicemail experience.

My company, Fonolo, lets you to take control of your calls to large companies, by allowing you to “Deep Dial” into their phone menus, and automatically building an intelligent call history, along with recordings, for those calls.

What all these examples have in common is that they empower the consumer and that they are built outside of the phone company. Carriers aren’t sitting still, though, and a number of them are opening their networks to allow 3rd party innovation in a cooperative fashion. So in addition to the carrier-independent innovation, we are also starting to see carrier-enabled innovation. The bottom line is that the consumer telephony experience will continue to become more customizable and personal.

It’s certainly clear that applications are driving the future of voice communications. So, who are the VoIP companies to watch over the next six to twelve months? Who will have the hottest products and or will be releasing the most innovative or game changing services?

In consumer VoIP, the big winners, by far, have been the cable companies who have used Voice-over-cable to take customers away from the phone companies. Outside of the cable companies, Skype is still the only consumer VoIP company with any appreciable market share. They have 370 million users and, by any measure, continue to grow their reach and usage.

They’re worth watching over the next year for two reasons. 1) They just put in place a new CEO and management team with terrific credentials; 2) I believe there is tremendous power in Skype as a communication platform that has yet to be unleashed. Their current plug-in approach has spawned some successes (Desktop-sharing application Unyte was acquired by IBM in 2007) but it is still quite restrictive. If they open their platform properly, Skype Apps could be bigger than Facebook Apps.

Hrm. You’re the first bring Skype to the forefront of the conversation. I hope they get bought and go private so they can be truly innovative again.

Are there any market segments or verticals looking attractive to VoIP companies over the next six months to a year?

On the small business front, the dominant theme will be a continuing trend towards self-serve. Companies like OnSip, Phone.com, Packet8, Ringcentral provide online services that allows anyone to provision and configure phone numbers, routing rules, basic IVR functionality, voice mail systems, etc. What’s different here is not just VoIP vs PSTN but also hosted vs premise-based. When you combine VoIP and “cloud telephony” it adds up to very compelling cost savings.

The reason to watch this space is that the economic downturn is motivating business owners to look hard for places to save money. This space is a bit crowded (there are probably 5 others in addition to the list above) so not everyone will succeed, but this is definitely a space to watch.

Do foresee any sizable shifts in the type of businesses migrating to VoIP in the next six months to a year? Are they the same as this year or will they be different?

Going back to the “self-serve” trend I mentioned in the last answer, I believe these solutions will find their way into businesses with less and less technical proficiency. That’s because 1) As these products get into their 3rd and 4th generation, the interfaces are getting tuned to be very user friendly and 2) businesses are getting used to putting more of their key services “in the cloud”.

The hosted folks we have talked to are very bullish on 2009 thanks to the cloud, but some feel the industry might not be a rosy in 2009 as many of those folks are proclaiming. What’s your take?

It will be interesting to watch consumer spending on communication services and see how “recession proof” it is. There is a strong feeling that people have developed such a dependence on their cell phones, that they will cut anywhere else, before they cut there. This recession is the first opportunity we have to actually test that.

And speaking of demand elasticity, the Canadian carriers have just embarked on an experiment (ill-considered, in my opinion) by raising prices on SMS . This has already caused Twitter to discontinue sending SMS updates in Canada. It will be interesting to see whether that pushes people over to alternate messaging systems, especially since this is happening at the same time that flat rate data pricing is becoming available. Are they killing the goose that lays the golden eggs?

As the CEO of a start-up yourself, what advice you offer to companies in the VoIP industry for the next year? What are you doing to make sure that your company continues to grow?

As always, you need to be keenly aware of your competitive differentiation. Start-ups especially are going to be facing a difficult year, so it is important to stay focused on a path that will get you to revenue.

In the consumer space, companies with an ad-supported model need to re-evaluate that quickly. Relying on advertising, for any company but Google, was a stretch even in the best times. (We just learned that even Digg hasn’t been doing so well on ad revenue) Expectations for 2009 are for decreased ad spending across the board, so this model even less likely to work.

For voice services, you need to have a value proposition that is more than just lowering the cost of minutes, because the carriers are going to keep coming up with more aggressive bundles and flat-rate schemes.

At Fonolo, we’re not about making calls cheaper, we’re making them better. We have tackled one of the top frustrations people have when calling large companies – navigating the phone menu – and created a process called “Deep Dialing” that makes it much less painful. Furthermore, we can track and organize your calls for you, along with notes and recordings. Thus we are creating an alternate way for you, as a consumer, to engage with insurance companies, airlines, banks, wireless carriers, etc.

I like that line Shai. You’re sort of like 3M. On to another thing making telephony better, open source telephony platforms continuing to grow each month it seems. Do you see open source telephony continuing to grow in importance and prominence during 2009?

It’s hard to overstate how groundbreaking Asterisk was. It did for the phone systems what Linux did to operating systems. As we saw with Linux, when you have a key component available as open source, it spurs innovation both in technology and business model.

So yes, open source telephony will continue to grow. Working with Asterisk is getting easier because of tools like Visual Dialplan, which lets you configure your phone system visually, and services like CloudVox which gives you access to a hosted an asterisk implementation along with the ability to write your own Asterisk extensions (AGI scripts). In addition to Asterisk, we also have Freeswitch and OpenSIPS (aka OpenSER), gaining ground. Companies like Voxeo and IfByPhone insulate the developer even more from the nuts and bolts and make telephony development nearly as easy as web development. So the main headline is that telephony development is getting easier and easier and we are poised for an explosion of creative applications in the next year.

It seem that telephony is becoming more and more like Legos. What do you think about Unified Communications, the one trying to “put all of the Lego’s together”? Will 2009 finally be the year for that UC finally sees “big” adoption rate increase?

At this point, almost every carrier (traditional or VoIP-basaed) has a UC offering, so we’ve reached phase where the adoption will slowly spread to more and more companies. Features like voicemail-by-email that today define “UC” will become standard offerings, like call-waiting and caller-ID, within a few years.

The more exciting trend is what’s called “Communication Enabled Business Processes”, which sounds like consultant-speak but is actually an excellent descriptive phrase. When you start to think of telephony as a function that you can quickly adapt and integrate with processes like employee training, emergency notification or supply chain management, you really start to reap big benefits. Companies like Voxeo, Jaduka and Ribbit (now part of BT) are focusing on providing the building blocks for enterprises to seize this opportunity.

JP Ragaswami from BT presented an analogy (at the Telco 2.0 conference) that does a great job of illuminating this concept. “Printing presses were once centralized… there was a central printing shop in every company to do reprographics. Now, we see a ‘Print this page’ icon on your screen, and the printing press under your desk can smudge some ink on paper fiber for you in a moment, at a cost low enough you don’t even think about it. ‘Print’, therefore, has simply been embedded into every other application.” (http://www.telco2.net/blog/2008/11/future_of_voice_telephony_deat.html)

You are absolutely correct that voice enabling business processes and systems is where the true promise of IP communications can be seen. It proves that VoIP is about more then savings on your phone bill – it can increase your sales and decrease your costs through productivity increases.

This is a slow growth path still – people need to see it in action before committing (which doesn’t scale well) to it. Eventually it will get easier. This why I think there is more market opportunity today then ever before.

I’ll pass the mic back to you now. Close the show my man.

VoIP companies targeting consumers have to face two big realities: 1) They need a value proposition that is much more than “cheaper minutes” and 2) Ad-revenue is not going to pay the bills. We’ve already seen several early stage VoIP companies reposition themselves away from direct-to-consumer, such as EQO and Mobivox. Expect to see more of that.

For VoIP companies targeting the enterprise, the key will be to keep switching costs low and voice quality high. VoIP still struggles to maintain the reliability and call quality of PSTN. Even though many companies do it right, the ones that don’t continue to perpetuate the quality concerns which create a barrier to adoption. The acceleration of VoIP peering might be a real breakthrough in this department.

For start-ups, whether consumer- or enterprise-focused, it’s going to be a demanding year. New funding is going to be very tough to find. VCs are holding on to their existing funds for follow-on rounds to their portfolio companies, and new funds are going to being delayed. Meanwhile angel investors are nervous and still reeling for losses on the markets. So it will be essential to keep burn-rates extremely low and not take your eye of the path to profitability.

In the bigger picture, both consumers and businesses will continue to wrest more control over their own “phone clouds”. Either carriers will give them the control they need, or they will find ways around it. A growing number of carriers are sensing this and are moving to enable innovation so that they are part of the picture for new services (and hence able to collect revenue from them). For example Verizon, O2, Vodafone and Telus have all created gateways or programs to allow 3rd party development on their networks. BT took the boldest move of all in this direction, acquiring Ribbit (for over $100m) and making that its interface for developers. Take the innovation that is happening outside the carriers and combine it with the innovation that is being enabled by these carriers who are opening up their platforms, and it will add up to an exciting year!

Garrett Smith

Garrett Smith is an author, consultant, and marketer with almost 20 years of experience selling and marketing VoIP solutions. Garrett has helped thousands of businesses select the right VoIP system over his career, in addition to helping hundreds of vendors, and dozens of service providers with their go to market strategies. This experience gives him a unique position in industry that allows him to cut through all the noise. Garrett has been named one of the most influential people in the VoIP, and has written over 3,000 articles about VoIP since 2004.

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