( If you are reading this anywhere but my blog, you can find the original post here. )
Just a few weeks after SunRocket.com closed shop another VOIP provider has done the same. allo.com has posted a goodbye letter on their site as of 8/2/2007.
 ”ALLO.COM SERVICES TO BE DISCONTINUED AUGUST 2, 2007
As previously announced to all customers, Allo.com has decided to discontinue providing VOIP Services. We will keep offering innovative VOIP related hardware such as Analog Telephone Adapters and MicroPBX systems.
All services will be discontinued no later than August 2nd, 2007″
What is going on with these VOIP providers? Have they priced themselves out of business? I have a feeling that the $24.95 a month plan is not sustainable to keep these companies alive. There are plenty of posts all over the net about how “Pure Play” VOIP providers cannot last, I disagreed with most of them however it seems that maybe there is some truth to that fact.
;)
I think the problem with most VoIP providers is that they don’t seem to manage their finances very well. With a $199 a year plan and 200,000 subscribers (like Sunrocket), this is more than $39 million a year. A VoIP company doesn’t appear to have huge overhead (thousands of employees and tons of equipment to maintain), so in my opinion they are overspending and not controlling expenses very well.
Debbie, thanks for your comment but it is not so simple to calculate the profit/loss from the numbers above.
Not to defend these VOIP companies but it is not as cut and dry as you think. There are a lot of expenses to running a VOIP business that are not right in front of you.
If you have any real number of clients you need a call center to support them. It costs real money to pay people to answer the phone 24 x 7.
You need advertising as there is much competition in the VOIP market. If you are pure play VOIP provider it is even harder.
Then there is the actual cost of the calls. You need equipment to process the calls you need datacenter space to put the equipment in and you need a way to get the call from/to the regular PSTN (Public Switched Telephone Network). This all costs real money as well.
The termination & origination fees alone could bankrupt a company if they are not careful. Most of these VOIP companies are trying to compete with the mother of VOIP Vonage. This is understandable because why would I choose a lesser know brand unless they have a better price or they have a service I need that Vonage doesn’t provide.
So with this thinking all smaller VOIP providers have to set their pricing to match or beat the leader. What’s the going rate? $24.95 a month for unlimited calls in the US. At this rate providers cannot make money with users that actually use the phone alot. It costs provider per minute fees to place your call. Let’s just say it costs $.01 per minute to the provider (I am sure it is less for bigger providers) it would only take 2495 minutes (1.5 hours a day) to use up the monthly fee for that customer and this is not taking into consideration the cost of the incoming number (DID) that the provider has to pay for to give you calls into your house.
I could go on and on but I will stop now as I just wanted to show you that it is not cut and dry with the numbers you gave above.
/Phil
I haven’t looked into the numbers, but if these folks can’t make a buck, something’s wrong. The idea may be good, the package may be pretty, but, if the numbers don’t add, someone’s arm is gonna get broken..
I dont understand how these companies are shutting down with what they charge while skype charges at least 90% less and stays widely popular.