A Timeline of VoIP Industry Growth

Since its introduction in the 1990s, VoIP has become a popular go-to service for many companies today. In fact, business VoIP growth in 2015 was so strong that “BYO PBX” (bring your own private branch exchange) became part of the vernacular. Business adoption will help drive the global VoIP market to expand at a 9.7 percent compound annual growth rate between 2014 and 2020, from $70.90 billion to $136.76 billion, projects Transparency Market Research.

Although business VoIP use is thriving today, the market initially got off to a slow start. Here’s a look at how the market grew from its humble beginnings to the multi-billion-dollar industry it is today.

A Slow Start

VoIP first arrived on the scene in the late 1990s, Targray reports. Its revolutionary potential was recognized early on, but it took a few years for the technology to start catching on. Broadband experts Dave Waks and Sandy Teger recall introducing VoIP concepts at their first Voice on the Net (VON) conference in September 1997. By 2000, Waks and Teger were writing articles wondering how traditional telephone companies would survive the arrival of VoIP. But such visionary talk was ahead of its time. In 2001, less than 5 percent of North American business calls were conducted using IP lines.

Broadband Brings VoIP into the Mainstream

The VoIP industry saw a turning point in 2001. The previous year, entrepreneur Jeffrey A. Citron had seeded $1 million in capital to start up Vonage, which went public in 2001 as the first major U.S. provider of VoIP services to consumers with broadband connections. The growing availability of broadband coupled with the arrival of companies like Vonage raised awareness of VoIP. In August 2004, PCMag announced that VoIP Industry was finally worth taking a look at, reporting that hundreds of thousands of consumers were now saving millions of dollars a month using the new technology.

Meanwhile, business private branch exchanges had slowly been integrating VoIP technology since the late 1990s, leading to what became known as virtual PBX. Hosted PBX technology flowered in the late 2000s, with an appeal fueled by the significant cost savings VoIP Industry delivered businesses. By 2008, 80 percent of new business lines being installed were VoIP lines, and by 2011, 31 percent of all installed business lines were VoIP lines, The Telos Alliance reports.

Competition Escalates

The maturation of the business VoIP market drew new competition into the field. Signaling this development was Microsoft’s2011 purchase of Skype for $8.5 billion, an unusual move for the software giant, which had made no major acquisitions since 2007. Inside sources explained that Microsoft had made the purchase in recognition of the fact that its own real-time communications technology hadn’t made the company competitive in the IP communications market the way Skype was, partly due to Skype’s more efficient method of connecting users to traditional phone systems. Microsoft purchased Skype after rumors that Cisco, Google, and Facebook were also interested. VoIP was now big business. In 2016, competition between VoIP providers is fierce.

Emerging VoIP Applications

As the VoIP market has matured, the number of industries using VoIP has grown, and niche markets have emerged. Transparency Market Research’s report segmented the business VoIP market into hosted business, managed IP PBX and IP connectivity services. The hospitality, health, and education industries were among the first niche markets to emerge in the mid-2010s, Targray notes. Univision general manager Chelan David sees VoIP use growing in the near future in markets such as manufacturing, financial services, and small-to-midsize medical offices, all industries where VoIP can help staff handle multiple lines more efficiently.

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