VoIP And The Fiscal Cliff

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Nowhere have I seen mention of VoIP anywhere in the billion or so words written so far about the potential effects of the so-called “Fiscal Cliff,” but indeed the VoIP industry does face a significant potential loss … in the range of $500 million or more … if the political horse trading goes the wrong way.

At stake is a program to transform the U.S. Army’s communications system from its current stone age POTS (plain old telephone service) technology to UC (Universal Communications) technology, the stuff on which VoIP runs, by 2016. The Army spent $131 million on that program in FY 2012, and is hoping to increase that amount to $142 million for FY 2013, although realistically the most it will get, according to most analysts and gurus, is the same as it got for FY 2012.

But that’s without taking into account the fiscal cliff, and its sequestration requirements. The UC program is part of a $13.3 billion “other procurement” line in the military budget which is where the most draconian cuts are expected to occur, at least $1.2 billion of them. And it’s all too easy to see some politician harping that the last thing the taxpayers need to pay for is a shiny new $500 million telephone system (that’s roughly the total amount to be spent preparing for Army-wide VoIP by 2016, given the annual run rate and anticipated size of various contract awards involved).

The irony of it all, as any business VoIP user is well aware, is that a pure VoIP system will save the Army, and thus taxpayers, far more than it costs to implement the UC system. In the medium to long term taxpayers will have to ante up far more money than if the investment in UC is made in the short term.

Meanwhile the VoIP industry, including hardware manufacturers, software vendors and carriers should be sitting on edge, and perhaps even lobbying their congressmen, before the loss of a huge amount of investment that will undoubtedly help fuel the continued growth and development of VoIP.


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