Internet Telephony

The Economist writes:

Because VOIP service relies on software, rather than the traditional physical telephone infrastructurevoicemails, for instance, come into one’s e-mail inbox and can be saved and forwardedit upsets the entire telecoms industry, for two reasons.

First, while traditional telephony takes account of geography, distance, and time, says Michael Powell, America’s telecoms regulator, VOIP shatters all three. In most cases it makes no difference to a VOIP caller where he is, how far away from the person he is calling, or how long they talk. VOIP phones can have traditional telephone numbers, yet still work no matter where they are, provided they are plugged in to a broadband internet connection. Lots of Indian mothers in Delhi have Vonage phones with the American area code 650 so that they can make cheap local calls to their sons in Silicon Valley.

Second, VOIP uncouples the two previously intertwined components of telephony: access to the network (via a wire running into your house, for example) and service (the ability to make and receive calls). Traditionally, both have been provided together. With VOIP you can buy broadband access from one firm and a telephony service from anotheror even from a company in another country altogether.

Who will be the biggest losers? Not the fixed-line telcos, even though their revenues may fall by 25% by 2010 due to VOIP, according to Mr Mewawalla. The mobile operators are likely to be the big losers, with their revenues plunging by 80%. Together, VOIP and wireless broadband could fatally undermine their costly third-generation (3G) networks.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.