could be undermined by larger players entering the

VoIP picking up pace
Chris Jenkins
MAY 16, 2006

MORE than 600,000 Australians are expected to be using internet-based telephone services by mid-year, according to research by Market Clarity.

Many will be pay services capable of making calls to the existing phone network, they say.
By the end of June, almost 610,000 users would be using voice over internet protocol services, up from 410,000 at the end of December, Market Clarity chief executive Shara Evans said.

The figure includes free services, such as Skype, and paid subscription services.

About half of new VoIP users would be paying for some part of the service, Ms Evans said, with paid service numbers more than doubling from 97,000 in December to 195,000 by the end of June.

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Broadband voice-over-IP telco engin announced yesterday it had more than 31,000 paying subscriber lines, with its end-of-March figure of 27,400 up 51 per cent on the preceding quarter.

Engin chief executive Ilkka Tales said the company had about 5000 users on free phone services.

Some 45 per cent of subscribers were businesses, he said.

Mr Tales declined to detail the split between on-net and off-net calls made by engin users, nor would he make a forecast on subscriber numbers.

But engin's infrastructure was being upgraded to cope with up to 250,000 subscribers, he said.

"Our expectation is that this will be complete by the end of the quarter."

A survey of 1300 engin customers found that 29 per cent of households had given up their conventional fixed-line phones, he said.

Ms Evans said services complete with phone hardware to replace the conventional home phone, such as engin's, were expected to total more than 111,000 by the end of June.

While VoIP service operators such as engin are reporting good growth, some analysts said they could be undermined by larger players entering the market.

With VoIP uptake often relying on on-net calls to recruit new subscribers, smaller players could be swept aside as larger groups brought much larger scale to the market.

As well as incumbent telcos such as Telstra, newer, net-based players such as Google and eBay-owned Skype, have the potential to offer their voice services to millions of users worldwide, either on their own or as an adjunct to other services.

Freshtel, an engin rival, was seeking partnerships with companies that had large customer bases to drive growth, executive director Peter Walker said.

Freshtel had 70,000 free peer-to-peer and paying subscribers signed to its service in Australia, but had kept marketing of its retail service relatively low-key in anticipation of wholesale deals such as the one it signed in Britain with supermarket chain Tesco, Mr Walker said.

The company was aiming to replicate its British deal in Australia by the end of the year, he said. "We are in early discussions with companies similar to Tesco," he said.

While overall VoIP subscriber numbers are small in comparison to the total market, their ability to hit telco revenue is huge.

UBS Investment Research has reported that Telstra lost between 14 per cent and 73 per cent of retail and wholesale voice revenue per user for every customer that moved to a software based VoIP service.

The Australian