Fortune magazine has a “special report” on VoIP in its July 26 issue. This report assumes that the “VoIP revolution” (in the words of the report) now is inevitable and will hit many of the current telephone players quite hard. I was surprised that important things were not covered in the report, but because Fortune says that VoIP is inevitable I guess it must be the case.
The idea of running voice over the Internet is hardly new; the first experiments were performed over the ARPANet in the 1970s, and the VoIP standards (primarily the International Telecommunication Union’s H.323 and the IETF’s Session Initiation Protocol) are more than 5 years old.
Two other factors seem to have come together to finally cause people like this Fortune writer to think that they see some handwriting on the wall. The first is the increasing deployment of broadband Internet access in the U.S., which now has reached more than 20%. The second factor is the belated realization on the part of some pundits that VoIP will not just duplicate the limited set of functions that traditional phone companies and standards organizations came up with even though they had a century to work at it.
I’m surprised that the Fortune report said almost nothing about QoS for VoIP. I’m surprised not because QoS should be a determining factor for VoIP but because almost everyone in the traditional voice business claims that the lack of QoS dooms VoIP to a niche business.
The Fortune report points out something that I’ve tried to tell Bell-heads for years: that the cell phone experience has taught telephone consumers that quality is only one factor to consider when evaluating voice services, and maybe not the most important factor.
I’m also surprised that the Fortune report said nothing about the very busy and confused discussions on regulating VoIP. The report talked about the fact that VoIP services cost less than traditional line-based or cellular-based phone services but somehow failed to note that some of the cost difference stems from VoIP currently being un-taxed. Congress, urged on by the traditional telephone industry, is quite busily trying to figure out how to get VoIP customers to pay taxes like those that support the Universal Service Fund and the federal line charge. Those fees, along with state and local taxes, easily make up for the lower VoIP prices.
It’s not clear what commercial VoIP services should cost. The actual cost of providing VoIP to a customer is likely less than one dollar per month. The cost of using gateways to pass VoIP calls to and from the normal phone system should add only a few dollars per month. So the coming VoIP price war highlighted by Fortune might result in VoIP service being offered for a quarter of what it is now. Of course, anyone calling directly between standard-based VoIP phones does not actually need to pay a carrier anything. That’s an even more attractive price as long as I don’t have to collect taxes on my own calls to you.
Disclaimer: As Harvard students can tell you, attractive prices are in the mind of the beholder. But the above observation comes from me – not the university.
