The End of the Line

The Economist, October 14, 2006

Traditional fixed-line telephony has had its day
It was the industry's bread and butter for over a century. But the end is now in sight for traditional telephone service, which will soon be over taken by internet phone service calls in terms of usage, and displaced by broadband internet access as the core revenue-earning service offered over fixed lines by telecom firms. And even if the traditional telephone is not quite dead yet, its business model certainly is: metered telephone calls whose cost depends on the length of the call and the distance covered are becoming an anachronism.

VoIPocalypse
Sending packets across the internet is free once you have paid for your broadband subscription, so calls that travel entirely on the internet, such as those between two internet phone service users, cost nothing. If you use internet phone service to connect you to a traditional telephone, the call travels mostly across the internet but pops out onto the local phone network on the other end; the owner of the network then charges a fee to deliver, or “terminate”, the call, typically no more than a local call. All this reduces the price of telephone calls dramatically.

Aside from undermining the pricing model of a trillion-dollar industry that still makes most of its money from voice calls, internet phone service is disruptive in other ways, too. Internet phones can have a traditional phone number associated with them. But they work wherever they are, provided they are plugged into the internet, making a mockery of geographical conventions such as area codes. So you can assign, say, a San Francisco phone number (area code 415) to your phone, take it to another country, plug it into a broadband connection and have people in San Francisco call you for the price of a local call.

Internet phone service continues to change the landscape of the communications industry and deliver cheaper phone service without the metered calls.

For additional information about internet phone service or for a list of top internet phone service providers you may call me directly at 317.348.1134.