proprietary and confidential. do not distribute. 2005 level 3 communications, inc all rights...

Proprietary and Confidential. Do not distribute. 2005 Level 3 Communications, Inc All Rights Reserved.

VoIP Market Growth: VoIP Market Growth: Poised for TakeoffPoised for Takeoff

Myrle McNealMyrle McNeal

SVP Local Voice ServicesSVP Local Voice Services


Where we’re going…

• While we have advanced VoIP a long way in the past several years…

• …we are just starting to move the mark…

• …but the prospects for significant growth is higher than ever!


Where are we today?

• Gartner Survey:

• 50% of businesses surveyed are still only investigating whether to adopt IP telephony.

• But almost 75% of those who have adopted VoIP are extremely satisfied with their choice.

• iSuppli Report:

• In 2005, VoIP equipment revenue is expected to be $12.9 bln, up 60% from 2004. Worldwide VoIP equipment revenue to reach $24.5 bln in 2010.

• Residential segment will grow 650% from $1.4 bln in 2004 to $10.6 bln in 2010

• IDC:

• US Business VoIP Market - $3B in ’04 going to $20B in 2009

• JupiterResearch:

• Forecasts 20.4 mln US households will subscribe to a VoIP by 2010


How can we grow in 2006?


VoIP Research Overview

Q2 & Q3Q2 & Q3

20042004

Q4 2004 &Q4 2004 &

Q1 2005Q1 2005

Q2 & Q3Q2 & Q3

20052005

Q4 2005 &Q4 2005 &

Q1 2006Q1 2006


Phase 1 Key Learnings

• Unaided awareness of VoIP is low.• 60% of respondents have never heard of VoIP.

• After hearing a description of VoIP, the number who would consider switching was surprisingly high.• 71% indicated that they are open to considering switching to VoIP.

• While price has been an important factor in gaining the early adopters, price discounts alone will not win the mass market.• Discounts of more than 25% off current phone bills may raise concerns about

quality and reliability.

• Features alone will not drive adoption.



• Unaided awareness of VoIP has increased, but familiarity barely budged.• The message is getting through but consumers are confused.

• Among the mass market, interest in switching is essentially flat.• 70% are satisfied with their current service.



• When asked to rate specific reasons as to why respondents haven’t signed up for VoIP, the top 5 most important reasons were:

• Satisfaction with current phone service.• Haven’t received a special offer to Sign-Up. • Not sure how much it (VoIP) costs.• Not familiar with any companies offering VoIP.• Concerned with quality/reliability of VoIP.



• Price discounts alone will not win the mass market.• Discounts of more than 25% off current phone bills may raise concerns

about quality and reliability.

• Compelling offers must address key consumer needs:• Reliability: Guarantee / Pay to Switch Back / Cancel at Any Time• Counter Short Term Risk: Up Front Free Period or Item /Get Paid to Use • Long Term Value: Tenure Rewards / Loyalty Benefits

No current offers address key consumer needs.


VoIP Basics…How to Succeed

For consumers, don’t forget the basics of your VoIP service offering…

• Product

• Price

• Distribution

• Promotion


Offers to Consider

Top 5 – and ONLY – promotional offers that moved the ball forward…

• Sign up for VoIP and get one or more other communications services FREE for one year.

• Sign up for VoIP and receive a consumer product of high-net perceived value FREE each month for one year.

• Sign up for VoIP and get the first six months FREE.

• Sign up for VoIP and get your choice of a FREE gift with a pre-paid or multi-year plan.

• Sign up for VoIP and get FREE Phone for Life after paying 12 monthly installments of $83.50.


How to Succed With Business VoIP

• The SMB Market is aware of and interested in VoIP products…but is underserved

– They don’t know where to turn for answers

• Products are not differentiated

– Feature sets of competing offers are very similar

• Its tough to buy!

– Traditional SMB sales channels are not doing the job. Sales forces and channel partners are not well prepared

• No one is taking a portfolio approach

– Sales teams are in silos, unable to sell solutions to SMBs

• TCO can drive sales but no one is talking about it

– For the customer, economics drive the purchase decision…but providers insist on selling features.


How we will win in 2006

Moving the mark for VoIP…

• Finding the right marketing mix

• FCC has made safety a “table stakes” issue

• Increasing public profile for VoIP: awareness continues to rise!

• Simultaneous consumer and enterprise adoption

• Potential breakout catalysts like wireless/wireline integration are just around the corner

proprietary and confidential. do not distribute. 2005 level 3 communications, inc all rights...

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