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Leader: The dirty little secret of VoIP
How an industry standard can dampen competition

By silicon.com

Published: Monday 28 June 2004

The market for voice over IP - the routing of phone calls over data networks - is finally taking hold after many years of talk thanks in part to the emergence of a standard known as Session Initiation Protocol, or SIP. Or so say many industry experts.

SIP enables communications between multiple users involving voice, video, instant messaging and other multimedia elements. At least that's the best we can explain it in plain English. Everyone we talk to tells us it's quite complex.

The good thing about SIP, say the experts, is that it allows for interoperability. It provides a way for companies to know whether the software they buy from Vendor A will work with what they already have from Vendor B, and so on, and thus makes them more inclined to switch to VoIP than they were in the past. Hence the recent uptick in the use of the technology and the bullish predictions for the future.

The bad thing about SIP is that it is such a complex standard. Because it's complex, it's very expensive to implement and support into a VoIP product. This naturally creates a high barrier to entry for smaller, cash-strapped players or even large players who don't want to invest huge sums to get in on VoIP.

Going with SIP - instead of some other standard - means, in the end, there will be less competition in the VoIP arena because only a few can afford to compete.

Big companies won't mind - we're not saying they're rubbing their hands and cackling but they should be pleased with fewer upstarts getting a piece of the pie. No, the casualties are the little guys in the market that can't stick around and even more importantly the potential upstarts with great ideas that would have become involved in VoIP but now can't, at least not on a commercial level.

Less competition is bad for companies using the technology because it means less innovation and likely higher prices. It could also mean poor service because an IT director has few competitors to go to should his vendor disappoint him.

This isn't the first time smaller players have been elbowed out of a business sector once the resource-rich big guys came to play, surely. And it's not likely to be considered 'anticompetitive' in the legal sense.

But that still doesn't mean it's a good thing.