Report: Microsoft a potential telecom force

Microsoft could emerge as a "major force in telecom" once converts to Net-based phoning choose to add advanced services like Web teleconferencing, a new IDC report suggests.

Unlike traditional phone systems, Internet-based, or voice over Internet Protocol (VoIP), setups are run by computer networks. As a result, VoIP systems rely heavily on software, and adding a feature such as one in-box for both voice mails and e-mails is a software-only upgrade in most cases.

That potentially gives an experienced software player like Microsoft a solid piece of the corporate and home telephone market, Tom Valovic, manager of IDC's IP telephony program, told CNET News.com last week.

"The whole (IP phone) business model is pretty radically different," Valovic said. "Hardware becomes commoditized. The value-add is software."

Valovic said Microsoft is already crafting such advanced applications with telephone equipment makers Siemens, Avaya and Mitel, and more partnerships are expected.

Although analysts have been predicting a nearly limitless market for IP phones, so far global economic gloom has kept most from upgrading. But if, as some suggest, corporate and consumer spending starts to increase, "Microsoft is getting a whole new market, and it's not a trivial one," Valovic said.

Because the market is still in its infancy, it's hard to pinpoint the stakes or even to predict if Microsoft will have a competitor. But software makes up a chunk of the budgets of many corporations that are looking to upgrade their telecommunications services and equipment, and businesses will spend $76 billion on such telecommunications needs this year, according to market research firm In-Stat/MDR. About $12 billion will be spent solely on voice data, while $33 billion will go to data-transport services.

A Microsoft representative had no immediate comment. "It's not something they've placed a real strategic bet on yet," Jupiter Research analyst Michael Gartenberg said.