Voice over Internet Protocol, or VoIP, services are provided for two segments: businesses and consumers. Consumer VoIP is targeted at homes and hence referred to as residential VoIP. As with any other consumer product, the demand for residential VoIP is driven by cost and quality of service.

With more homes taking to the broadband services for entertainment, news and online purchases, voice-based services, almost free, have caused the consumers to switch to the VoIP telephony. The demand is such that according to Frost and Sullivan Research, consumer VoIP is expected to grow 77 times in the next three years, and the market is expected to generate $700 million in revenues by 2007.

The residential VoIP components are ATAs, phones with built-in routers, IP phones and other hardware accessories. Software services are also slowly catching up. Software providers like Skype have recorded thousands of downloads so far, and the software is free upon registration. At this moment, the residential VoIP market is dominated by hardware-based services.

In the hardware-based service, the market is dominated by ATAs, as they are still cheaper than phones with built-in routers. But with the market zooming, prices of the latter will come down, and it is expected that the standard in the future will be phones with built-in routers and IP phones.

The advantages of residential VoIP over PSTN lines are that the calls to the subscribers of the same service are free or cost almost nothing, and the area codes to which the calls are placed are free and are spread across geography, eliminating the long-distance calls and international calls. Some service providers provide connectivity to GSM networks. The convergence of voice and data enable transmission of voice, video and also synthesis of voice mails.

For homes, the convergence of voice and data through the Internet is an advancement towards flexibility, as communication and computing can happen together.