Price war! At least one cable operator offers bare-bones Internet voice service for less than $15 per month.
Eight years ago it was still an $80-billion-a-year industry. A few years from now voice phone service will scarcely figure as a footnote in the books of account of the telecom industry. Following five years or so behind voice, cable television and the video rental industry will go exactly the same way.
Techies began using the Internet to place voice calls to each other in the late 1990s, but for years such connections were of little practical importance in the marketplace. Dial-up connections were unreliable, transmission quality was low and setup was a hassle.
With the broadband connections now available, that's no longer true. Voice services travel at least as easily and economically on the new, high-speed data networks as on the old voice networks. Broadband connections are always on and can thus connect a call as fast as (or faster than) a conventional line. New quality-of-service standards and protocols allow network operators to give voice traffic priority over data, which ensures high-quality voice connections. New phones incorporating these standards can be plugged into an Ethernet jack as easily as an ordinary telephone can be plugged into a conventional phone jack. Backup batteries are now routinely included with the hardware on the customer's premises, making the new lines as reliable as the old. And voice over broadband supports calling features (like multiparty calling) far superior to any offered to users of conventional phone service. Voice over Internet is no longer a toy. It's a replacement for primary phone lines.
Incumbent phone companies certainly don't own this new market; they have no monopoly over broadband facilities. All six of the big cable operators, which collectively reach 85% of U.S. households, have begun commercial deployment of Internet voice telephony or have announced plans to do so imminently. But the cable operators don't control the market, either. The Internet's protocols are inherently open; voice services are being marketed throughout the country by an altogether new breed of dot-com-like competitors.
About one household in four already has a broadband connection; providing Internet-based voice service over that already-established connection costs well under $10 per month, far less than the cost of a conventional phone line. For most households Internet telephone service is cheaper even when you factor in the cost of the broadband connection itself. You can easily spend $60 a month on local and long-distance service, caller ID, voice mail, a second line for the computer and (low-speed) Internet access. A broadband connection with Internet voice service folds all of this into a single, integrated package. For now, at least, Internet providers typically dodge the federal, state and local taxes imposed on conventional phone service as well.
Indeed, broadband costs have now fallen to the point where voice over broadband can be marketed profitably even to households that subscribe only to bare-bones voice service and use no data or cable services at all. With the new data networks deployed almost everywhere, the incremental cost of extending service to an additional household is tiny. At least one cable operator now offers stand-alone, bare-bones, Internet voice service for less than $15 per month.
This is why telephone calling could be the killer app that will propel the purchase of broadband itself. Voice is still the most widely used telecom service and still generates the most revenue. If one customer in five finds the price of a broadband connection acceptable for Internet access alone, three or four in five will find it acceptable for voice-plus-Internet.
Video services will follow just as soon as the pipes get fast enough to handle them. That will probably take no longer than five years. Phone and cable companies alike are now deploying fiber-to-the-curb, and in short order both will be competing to extend fiber to the home. Fiber supplies truly gargantuan amounts of capacity.
Competitive video over broadband services have already been rolled out. Some 60 small phone companies are offering cable-like video services using digital subscriber line technology in the U.S., and video over DSL has been widely deployed in Canada, Japan, Korea and Italy. Five Hollywood studios have joined with Intel to form Movielink, which allows users to download films on demand. Disney, Microsoft and Time Warner's AOL have launched a video-on-demand service as well. Numerous Internet video services are also available--Sony's SoapCity, for example--and many more are certain to come online year by year.
Video will push us beyond broadband service; then something else--online games, perhaps, as fast and graphically rich as a Spider-Man movie--will push us beyond the beyond. And with each new leap in broadband capacity, another 11 digits or so of old GDP will tumble into the new wires.
Original Source: http://www.forbes.com/free_forbes/2004/1018/142.html