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No Room For Domestic VoIP in the UK?

Posted by Andrew at 7:56 AM on March 29, 2010

On Saturday, Tesco emailed the users of its internet phone service to tell them that the service was being closed down at the end of April.  Although it’s certainly not the only VoIP outfit in the UK, it’s one of the few who have sold directly into the domestic market and are a household name.

Tesco is a major supermarket in the UK which has branched out into telecoms, primarily as an mobile virtual network operator (MVNO), but has also offered a VoIP service.  This was a rebranded Freshtel service and it appears to be the difficulties with Freshtel that have led to the closure.

Tesco made the system as painless as possible.  You could buy dedicated handsets, converters for standard phones and the usual USB handset or headset.  It was a good system with no technical knowledge required and a web interface to configure what there was.

From reading the various forums, it’s clear that many of the users were running small business through the system as an easy way to get second phone lines without incurring huge cost and I can see this is a real market.  A number of VoIP services have already posted to say that they are happy to take on ex-Tesco users (allegedly at even better rates!).

However, I’m uncertain as to the market for domestic VoIP services.  At the moment, I have a landline and I have a mobile.  On the landline, I pretty much get free off-peak calls and on my mobile I have a monthly contract which entitles me to certain number of “free” calls.  The only time the Tesco service gives benefit is on international calls, which I don’t need to make that often.  So I can see why it might be difficult to make money from the service within a purely domestic market.

Of course, Skype has been successful but I think it’s success has been through free Skype-to-Skype connections and that’s not quite what is needed here.

I suppose where it might be beneficial to both parties is when the customer gives up their landline and relies on VoIP for all their voice traffic but that’s still quite a hard sell, especially when landlines work so well.  Unless you have cable, you need your landline for your ADSL broadband anyway.

Don’t get me wrong, there are plenty of companies successfully offering SIP and other VoIP services to individual consumers for business use or as a cheap second line.  It would be too simplistic to say that if Tesco can’t make it work, no-one can, yet I just can’t see domestic VoIP services replacing landlines in the UK anytime soon.  Anyone else any thoughts?

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