VoIP adoption and market positioning strategies among telecommunications companies

Rita would retain all of the regular service perks of using a telephone, like call waiting and caller ID, if she switched to VOIP. There are no long distance charges and the possibility of video telephone calls and other innovative telephony features may be in the near future for consumers. However, there is always a certain amount of inconvenience in switching telephone services, and not all of her friends and family may have the necessary technology to receive the calls. Quality of service is still questionable, although this may change in the future. The government may change the regulations that allow VOIP to operate so cheaply. Finally, Rita does not seem to make many long distance phone calls. She does not travel a great deal nor does her household have multiple potential users living in different locations. Getting a service which includes many product elements Rita does not need and cannot use for an added cost seems questionable, especially if her loved ones are not technological 'first movers' in their own households. Thus for Rita, VOIP does not seem like a good choice, based upon the profile given of Rita in the first paragraph of the case study.

Question

Time Warner has made a commitment to market VOIP based on quality of service, not upon pricing. Its likely target market would be affluent individuals who are not overly price-sensitive, but depend upon VOIP for their business, or because they have many individuals in their family living in different areas of the world. "It's like being in the same room -- even though his room is thousands of miles away" might be one marketing 'tag line' to lure such non-price sensitive consumers into subscribing to Time Warner's Internet telephony service. Time Warner's planned product positioning would be of the superior quality of VOIP, not its discount pricing.

Question

VOIP is in various stages of the growth phase of its development, for almost all companies listed. Cox Communications clearly wished to take advantage of being a first mover in the market. It spent a great deal of revenue developing and improving the technology, and it is seeing a substantial return on its investment. However, the market is still expanding, thus it is still far from mature. It is only past the very, very beginning of the introductory phase, as most Cox consumers are familiar with the technology, if only through advertising, but Cox is still refining the technology. Time Warner clearly feels that the introductory phase of the product life cycle is going to end soon, as it is using positioning in terms of quality, rather than novelty or discount pricing, to create its target market. Comcast feels that the product life cycle is still in its infancy or introductory phase, and that costs will plummet once the technology improves, and more consumers use the product and make it integral to their lifestyle. Vontage like all of the companies has the advantage of the lack of federal communications regulations regarding the technology, but these laws may change in the future -- thus for all companies, the product is still in its growing phase, as branding, positioning, quality and also federal regulations are still an issue, but things are not competitive enough for companies to have a market-wide price war, as sometimes occurs during the growth phase of the product life cycle.

Question

Comcast's strategy seems like a wise move. It cannot offer its service at slashed prices without compromising quality of service, given the developing state of Internet telephony technology at the present. It does not want to start a price war at this early juncture of the product's life cycle. Time Warner has chosen to stress the quality niche market of the service at non-discount prices. Comcast can piggy-back off of the other companies' advertising for the service in the future. This will allow consumer desire and interest to heat up, and then Comcast offer slashed prices with the same amount of quality once the introductory phase of the product life cycle fully terminates, and the market enters the price-competitive growth phase. Also, many questions still remain as to how the U.S. government's regulations regarding the communication technology may change in the future, as it is only because of current laws that the companies are able to offer a flat rate, regardless of where and to whom the calls are made. Comcast can hedge its bets regarding how popular the technology becomes in the future.