With 100 million-plus registered Skype users, and the other Internet giants — Google, Yahoo, Microsoft — moving rapidly to establish themselves as communications providers, telcos are facing a complicated competitive landscape. To successfully compete, they need to rethink their traditional marketing approaches, as well as their product strategy.

Although many people still don't consider any Internet player a true threat to the telcos, the ability to acquire millions of registered users with minimal advertising expenditures is a feat that can't be dismissed. The reality is that viral marketing on the Web is more than simply “word-of-mouth” on steroids. Internet companies have created unusual efficiencies in customer acquisition that are disruptive to the traditional marketing mix. Deep pockets notwithstanding, the telcos must think creatively about what this means.

The secret sauce of viral marketing on the Internet is the ability to build not just a customer base but a connected community. Skype has followed the classic example we first saw with the instant messaging phenomenon and have seen with every successful Web product since: The key players employ a combination of specific product features to make it easy for users to invite their friends and families to join the service. But perhaps more important, the products themselves make it in the best interests of users to invite as many people as possible to join.

By building community around the products, users become hooked, thereby creating a powerful customer acquisition tool. No one should be fooled into thinking that viral marketing only works because the products are free; these companies stand to make lots of money on the premium services they are rolling out to their huge customer bases and/or on advertising.

While in the past, telcos might have had an overwhelming product advantage with the quality of audio, that no longer carries the same weight. Not only have voice-over-IP (VoIP) providers improved their technology, but sadly, users have become accustomed to less-than-stellar voice quality because of their experience with wireless.

But herein lies the opportunity for the telcos, if they can cut through the myriad distractions arising from intensifying competition to exploit their strongest suit. Presently, in pursuing their greatest imperative — the migration to an IP network — they may be putting too much focus on “new” media, especially video, to the detriment of seizing IP-driven opportunities in communications. Imagine what a laser-like focus on innovations in the voice experience could mean.

The combination of improved audio quality in mobile phones, better integration of mobile and Web and a speedier launch of new VoIP services with a suite of presence-based features would be a huge winner in the consumer marketplace. Aggressive rollouts of such capabilities not only would out-flank the feature innovations in Web-based VoIP; it could go a long way toward persuading mobile users to keep their landline service, thereby staunching one of the biggest forces behind telco line attrition.

Telcos have understandably focused on competition from the cable companies, which pose the more obvious threat to their core businesses. As a consequence, they have spent time and effort thinking about the triple and quadruple play and how to bundle and price these packages of services. But in the new world of IP voice, this is barely scratching the surface of what must be done to attract customers and is likely to lead to a race to the bottom in terms of pricing.

What does this all mean? Voice doesn't have to be a commodity. That's what the Web upstarts are telling us. Think about product innovation and get creative about customer acquisition. After all, the telcos aren't strangers to viral marketing themselves. Remember MCI's “Friends and Family” program? Maybe it's time to return to their roots.

Janet Hall is vice president, principal and marketing practice lead at TMNG Global, a professional services firm. She can be reached at (703) 336-6629 or Janet.Hall@tmng.com.