The emergence of IP telephony as a lower-priced alternative to traditional phone services has raised questions of what users want and what vendors have to offer. In this article we investigate the views of both users and vendors on critical issues for IP telephony diffusion based on diffusion of innovation theory. We draw our conclusions from the study of a dynamic IP-telephony market where we interviewed IP telephony providers and surveyed residential users. Our results indicate that vendors’ main concern is users’ lack of technical skills, while users are comfortable with technical complexity, and are interested in price reductions.