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Article by Mohan Babu


Net phones and wireless

The interesting aspect of the race towards VoIP is that cable and Internet companies are also jumping the fray along with the telcos. MOHAN BABU says that who wins in the long-run is anybody’s guess

As telecommunications companies in the US emerge from the long slump, which included the bankruptcy of the giant Telco MCI (formerly Worldcom), they are faced with yet another paradigm shift—the move of voice calls onto the Internet. Voice over Internet Protocol or VoIP, has the potential to shake up the industry further by slashing costs and offering new features that the ‘Plain old Telephone System’ (POTS) can’t offer. This trend has not gone unnoticed by business leaders; in a recent article in the Wall Street Journal, titled ‘Telcos Embrace Internet Calling, But Is It Trouble?’ the author intones: “A mythical lode of software applications—called “the next Napsters” —is expected to save the world’s biggest telecommunications companies from ruin. Whether the likes of AT&T and Quest Communications International can come up with them will be one of the great business stories of the next decade.

The interesting aspect of this race towards VoIP is that cable and Internet companies are also jumping the fray along with telcos, and who wins in the long-run is anybody’s guess. In the short run, however, the customer continues to be the king. In the past, customers in the US had to jump through hoops to choose the ‘best deals’ offered by local carriers and long-distance companies.

A residential customer would typically sign up with at least two telcos—a local carrier—generally a spin-off of the former ATT-Ma Bell like Qwest, Bell South, et al—and a long distance carrier like ATT, Sprint, MCI, etc. Although the charges and chargeback’s were transparent to the end consumer, each carrier managing a ‘leg’ of a call would get a cut of the total charge or fees which would eventually be borne by the consumer. In effect, the customer was subsidising the inefficiency of the telcos. Though this archaic billing process began to get streamlined towards the end of the last decade, the ultimate choice of having a cable company carry a voice call is proving to be a boon to the customer. (See the attached table for some of the indicative rates)

The technology behind VoIP of digitising voice and transmitting it in the form of ‘packets’ over the Internet or other networks is not brand new and has been there for a while. However, the technology to stream and provide ‘near phone like’ quality is being ironed out. The advantage of VoIP is that it is much cheaper than transmission over traditional phone lines. The technology also makes it feasible to add a number of other features, including using video phones, listening to voicemail from the Internet, etc. The flip side is that the VoIP connections are not totally reliable; and also not as reliable as voice calls over traditional landlines. Cable companies that are jumping into the fray by providing VoIP services concede that challenges remain to be overcome.

Interestingly, the low-cost push for VoIP is prompting telcos to slash prices on traditional long-distance and local services too. For them also the cost is coming down drastically because some of them are able to leverage the benefits of VoIP over regular lines, helping reduce infrastructural costs.

In a recent Wall Street Journal article, Robert Allen, the former AT&T CEO was quoted saying, “the companies that add the most value as they handle transactions electronically from end-to-end—collecting, processing and delivering information—will be the leaders in the global information market of the 21st century.” It goes without saying; the end consumer is eagerly awaiting ubiquitous, cheap telephony, and thanks to VoIP, this dream is closer than most people concede.

Commercial VOIP providers
Service Details User base
Skype P2P calls are free, but you can only connect with other Skype-heads. 1.2 million downloads
Net2Phone Ring any phone in the world with a pre-paid calling card. Long distance costs as little as a penny per minute. Users: 110,000
Free World Dialup Calls are free to the US and UK, and very cheap worldwide. But you can only talk to other VoIPsters. PC and headset required. 72,000
Vonage Reach any conventional phone in the world using your existing handset (free adapter required). The price: $35 a month. 64,000
SipPhone Free calls to anywhere once you buy the $80 handset. But you can only call other IP phone fans. Users: would not disclose
Source: Where To Get Connected (Wired magazine)




About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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