Converged packages will lead to Vonage's doom

If keeping track of the ways wireless and wireline carriers are blurring together is giving you a headache, join the club. Over the next two years, cable companies are going to offer wireless services ranging from vanilla WiFi to rebranded WiMAX services, while broadband wireless companies are going to offer femtocells for broadband connections. The permutations are endless, but it's all boiling down to everyone offering everything.

Verizon offering VoIP over FiOS is one of those "What took you so long, again?" moments.  The cable companies have engaged in wholesale pillaging of landline voice lines from wireline business for the past three years. It looks like FiOS Digital Voice will have a bunch of features that you won't find anywhere near a consumer legacy landline. Bundling it into FiOS just makes sense. (Please, don't anyone email me about Iobi, the service that couldn't get marketed).

However, Verizon needs to start moving faster to catch up with competitors' voice innovations. Getting VoIP to FiOS has occurred at Detroit auto manufacturer speeds, and while that was OK when the first wave of CLEC competition died off during dot.com, the cable companies realize that it's going to be a battle royale with death to the losers. You'll see cable pushing Casabi-based services more; Comcast started offering Casabi last year and they'll likely push it as a "stickiness" feature to keep customers on board as FiOS comes calling.

Cableco's figured out that they need to have a quad/converged play, so WiMAX is the best game in town in some respects (Well, Cox is going to build something on 700 MHz,  but that's a different story). 

At the same time, AT&T and Verizon (following Sprint) are going to roll out femtocells hooked into the end of broadband offerings, so you can see where the whole quad/converged play thing is going. Buy a broadband pipe, bundle it with VoIP, TV, and wireless, and the player with the most seamless bundle wins.

Compared to the hardware and software going into the core of the network to enable femtocells, VoIP is, if not quite free, a lot cheaper than a lot of folks are letting on. It's not CHEAP, cheap, since a number of the me-to Voice 2.0 players have flamed out over the past year, but if you're already sitting fat and happy upon a large IP network to deliver video, it's an easy upgrade.

All this leads to the conclusion that the era of the stand-alone VoIP service provider is coming to an end, as triple play/quad play/converged play services make bundles too attractive. 

Verizon's FiOS Digital Voice service will exact some measure of payback on Vonage, but it will have to act fast before the cable companies triple-play their way to more than 2.6 million Vonage subscribers.

Vonage brags about direct margins of 66 percent year over year. Phone and cable companies touch Vonage's customer base on a monthly basis. Phone companies want some of their money back, cable companies wouldn't mind more money.

- Doug