Emergic: Rajesh Jain's Blog

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Flat-Rate Telecom Plans

May 25th, 2003 · No Comments

Something interesting is happening in the US telecom industry. As the NYTimes reports, phone companies are moving to flat-rate plans. Geography and distance are truly becoming irrelevant in the voice business, as much of is now carried over data networks.

These unlimited-use plans offer callers the advantage of predictability and less time spent checking monthly bills. They commonly cost $50 to $60 a month with services like voice mail and caller ID bundled in, making the price only slightly higher than the $48 that American households typically spend on local and long-distance calling, according to the FCC.

Positive responses from customers are good news for an industry that faces a number of incipient threats, including the loss of market share to calls made over the Internet, cellphone-addicted young customers who spurn land lines, and families who swap their second telephone lines for high-speed Internet connections.

Most calls now travel most of their journey over fiber optic lines that connect the whole country. A company’s expense in routing a call depends very little on the distance the call travels, but largely on whether a call needs to travel across lines owned by other phone companies and the access fees charged for that use. In most cases, calling a friend across the country now costs your phone company about as much as calling your next-door neighbor.

Bundling is coming to the “connected world” with flat-rate plans of the future likely to encompass voice (wired and wireless), data and cable.

Tags: Telecom

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