• United States
by Steve Taylor and Larry Hettick

The battle over tenths of a cent

Apr 30, 20032 mins

* VoIP providers’ price war keeps margins low

Recently, Larry bought a prepaid calling card. The rate was 1.8 cents per minute, or just about 0.8 cents per minute for domestic long-distance profits left to the service provider and distributor of the cards. That’s not much profit – so we wondered about the competitive voice-over-IP long-distance market, asking ourselves if VoIP providers can survive on such low margins.

We asked Sarah Hofstetter, senior vice president for communications at Net2Phone about it, and she confirmed that domestic markets are extremely competitive for long-distance – that VoIP providers are fighting over a few tenths of a cent per minute.

The good news is that growth opportunities are still available outside North America. In the case of emerging markets like India, Asia, and Africa, Internet cafes are turning into VoIP phone banks. VoIP is making phone calls affordable and available where calling was neither before.

For the enterprise, quality-of-service advances in codecs, gateways and network-planning tools have made VoIP fully “ready for prime time.”

As for the SIP vs. H.323 vs. MGCP debate, there isn’t one for Net2Phone; the company supports all three, and offers network interworking between the protocols. Net2Phone has also found success with cable operators that want to enter the “phone” business. Given the market’s acceptance of cable as a preferred broadband technology, that’s a boon for those who want a broadband alternative to DSL and can’t get cost-effective fiber connections.

Looks like VoIP service providers are going to be around for a while longer – and that’s good news for both consumers and enterprises.