Startups in Telecommunications Once Again – and SMBs Are Winners

Have you noticed any telecommunications startups in your area recently?

I have.  I personally know two of them operating right in my backyard in Ohio in the Midwest USA.  Both are VC funded.  And both are working on some variation of VOIP (voice over the Internet).

I thought it was just coincidence to know not one, but two telecomm startups – but apparently not.  It turns out that research firm AMI Partners has noticed that the barriers to entry in the telecommunications industry have been lowered, leaving the field open to startups (or upstarts, as they call them).  From an AMI SMB Perspective document (PDF) written by Janet Stone:

Furthermore, the evolution of IP-enabled communications offers the potential to transform the dynamics of the telecommunications industry. In the past, the barriers to entry in the phone business were prohibitively high. IP-based communications technologies have lowered the barriers to entry in the phone business and leveled the playing field. By leveraging the ubiquity of Internet access, a formerly local CLEC or systems integrator can easily offer IP telephony services on a national scope. As a result, in 2006 SMBs can look forward to increased choice in the telecommunications market, with a variety of offers targeted specifically at their needs from a slew of existing and new players.

So, we have an industry (telecommunications) facing a disruptive technology (VOIP) creating all sorts of havoc to an established order that has decided to merge and find strength in numbers (Verizon/MCI and SBC/AT&T).  And we have startups once again in an industry that had been the exclusive playground of the big and famous for a long time.

As AMI Partners points out, in 2006 small and midsize businesses (SMBs) will have a lot more choice for their telephony needs.  Expect the competitive offers to be flying fast and furious targeting SMBs.  Low price offers already abound, especially in highly competitive metropolitan markets.

In my view, however, one of the keys will depend on whether the new telephony packages can be made to sound easy, with the techno lingo stripped out.  Whichever vendor(s) can figure out how to make telephony sound easy and unintimidating to SMBs will have a step up on competitors.