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Rural SMBs get VoIP shaft

When it comes to voice-over technology, a new report warns that vendors need to go out of their way to court rural small businesses.

Small and midsized companies in rural areas must keep a close eye on their urban counterparts when considering Voice over Internet Protocol options -- mostly because VoIP vendors aren't courting SMBs the way they should.

That's according to a recent report by Steve Hilton, SMB strategies director for Boston research firm Yankee Group. Titled "RLECs Must Have a Plan to Introduce VoIP to SMBs or Risk Irrelevance," the report compares rural local exchange carriers (RLECs) strategies and VoIP needs for SMBs from different locations. The survey divided SMBs into four geographic categories: urban, suburban, ex-urban and rural, based on U.S. census categories that are determined by population density.

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Rural SMBs "may not have that many choices," Hilton said. "They may not be able to get [VoIP] at all today. But the way they make their decisions and their business operational challenges are all the same."

The study found that, given a choice, one-quarter to one-third of SMBs prefer to get VoIP from their Internet service provider. Fewer SMBs want to purchase VoIP from a traditional phone or cable provider. Hilton's study based its definitions of urban and rural on U.S. census categories, which define as urban those areas with a population density of 1,000 or more.

This means RLECs or rural cable channels now providing Internet access to rural SMBs should boost customer satisfaction and add service options, as competition in the rural VoIP market heats up.

VoIP technology routes voice calls through the Internet. This can reduce costs by eliminating long-distance charges and consolidating local, long-distance and Internet service providers into a single vendor and add new features for routing and screening calls.

The market for telephone and data service for rural SMBs today is "a strange place," Hilton said, where competitive local exchange carriers do not compete as fiercely as they do in larger markets and deep channels for phone vendors do not exist.

Rural SMBs use less technology than their urban counterparts do, according to the report. It shows that 68% of rural SMBs use analog lines to connect to the Internet and 3% use a T1 line, compared to 46% of urban SMBs that use analog lines and 28% that use T1 lines.

Inevitably, as vendors expand into rural areas, SMBs will have more technologies to choose from. In the meantime, they should watch the SMBs that are getting the most attention from vendors.

Hilton estimates that between 4% and 7% of the roughly 5.6 million SMBs in the U.S., or between 225,000 to 400,000 SMBs, have adopted VoIP. VoIP adoption rates hold steady from urban to rural SMBs, though urban SMBs have more VoIP vendors to choose from.

Rural SMBs should monitor the experiences of urban SMBs to "separate hype from reality" when it comes to promises of cost savings and better services, Hilton said.

Rural SMBs are more loyal to their service providers than urban SMBs, with about 25% of rural SMBs saying their local phone provider has earned their loyalty and 14% of urban SMBs expressing strong loyalty to their local phone service, according to the report. Similar percentages carried over to loyalty toward long-distance phone and broadband services, the study found.

A cheaper price from a new competitor is not always the best choice. "Saving $5 a month on telephone service isn't going to be worth it if your service quality is low or you can't get answers to your questions rapidly and efficiently," Hilton said. "Talk with businesses similar to yours when deciding on technology solutions and see what's worked for them."

So when fast-talking VoIP salespeople come to town preaching the cost savings, SMBs should check around to make sure the promises of ROI match reality and search for VoIP features that best fit their business needs. For example, salespeople from rural SMBs may cover a larger geographic area than those from urban SMBs and may have a greater use for a VoIP unified mailbox, where messages from mobile voice, fixed voice and e-mail messages are stored in a single mailbox.

"It's hard to separate hype from what's real," Hilton said, of VoIP vendor promises of cost savings and service improvements. "That hype is going to be borne out in the market. After the SMBs in more urban markets decide what's hype, the hype will go away and everyone will know what's real."

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