Apocalypse delayed

21 Jul 2006

Thanks to broadband, IP has in the last few years become an indispensable utility, available in any building and increasingly on the street.

It's a networking protocol originally developed by the US military, adopted by the computer industry and which has trumped frame relay, ATM and everything else dreamed up by telcos to become the world's favorite networking standard.

Ask a network engineer what comes after IP and you'll get a blank look. Which is why it's like electricity - IP is the transport engine for digital data and will be for a long time into the future.

That said, IP isn't particularly new. It has been carried in telco backbones in a major way for a dozen years or more. The first efforts at IP voice go back as far as 1995.

Which is a roundabout way of coming to the point of this week's column, which is that operators have had a long time to prepare for the all-IP world.

So when you read proclamations of the coming "VoIPalypse", the "VoIP nightmare" and the rest of it, you should regard them as the Chicken Little pronouncements that they are.

Sure, competing against "free" sounds tough no matter how low your voice rates are, and incumbent carriers in particular have high fixed costs.

For their part the challengers, portal companies like Google, Yahoo, e-Bay/Skype and AOL, have a lot of cash, marketing clout, business smarts and existing customers.


But before we all start transferring our pension funds into the Internet firms, it's worth getting this into context.

First, telcos have the reputation and the ability to provide quality voice calls. You can't say that about the PC-based services; if you've used any of them you will know what I mean. Sure, Skype to Skype on-net works very well. But the commercial PC-based Yahoo and Skype services that terminate in the PSTN use the same cheap IP voice minutes that everyone else does - and it shows. The portals have a big quality gap to bridge.

Price, you say‾ The problem with charging nothing is it's not much of a business model. Yahoo, MSN and Skype would love to charge a fee for their customers who aren't currently paying anything for email, IM or on-net calls. But free to fee is a big jump; most customers will turn to another provider.

The portal firms do have low costs, but they also lack the customer support and maintenance crews that the telcos all provide.

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