From the Desk of…John Barker

Communications Today, Jan 12, 2001

Too Cheap To Meter

Opinion By John Barker, European Correspondent, tossa@pobox.com

Here I am sitting in the United Kingdom and I just checked the price of my 20-minute call to Hawaii. Wow, can that be right? $0.00. Yes folks, zero dollars, the Internet revolution is here and there's nothing much the telcos can do about it. Suddenly calls are too cheap to meter.

Just sit at to your PC and download MSN Messenger from the Microsoft site (it's free). Alternatively download software from http://www.net2phone.com. Open an account for $25 with Net2Phone, plug a microphone into your PC and you are in business.

A 5-minute local call in the U.K. cost me 25 cents ($0.05 cents per minute) but all calls in and to the U.S. are free. And Net2Phone doesn't require a PC at the other end - my friends in Hawaii just have a normal telephone. If there is a PC at the other end then all calls are free. The quality is not quite as good as a normal phone conversation, but at those prices who's counting?

Where's the catch in all this? I'm paying around $15 a month for unlimited Internet access. And I can now get unlimited free calls to the States and dirt-cheap calls to anywhere else on the planet. Where's the revenue model for the telcos in all this? I have to tell you that I cannot see one.

Since unlimited Internet access arrived in the U.K. my telephone bill has halved. It may now halve again. Eventually it may disappear completely because the cost to the telcos of that call to Hawaii was barely measurable. I was merely utilizing spare bandwidth on the TCP/IP connection. The packets of voice data were whizzing around, plugging spare spaces between data packets. Bits of my call may have gone via Moscow, others via Alaska. Who knows, and who cares. So let's face it, voice-over-IP is going to dominate.

The real winners in all this (apart from us users) are the makers of PCs. They have invented one more way of keeping the consumers tied to their desktop PC for a few more years. They have also invented a way of selling more PCs in developing countries. Imagine the money a shrewd guy with a half-decent Internet connection could make selling phone calls to relatives in far-off lands, bypassing the local telecom monopoly at 95 percent less than the normal price of a call! The other big winner is Microsoft. It has found yet another way of luring people from AOL to its MSN Web site - and blasting them with advertising.

According to Probe Research, people spent about seven trillion minutes on phone calls last year. The number routed over the Net was estimated at a mere 6.3 billion minutes (a jump from 1.7 billion minutes in 1999). But the impact of free U.S. calls and the arrival of MSN on the scene are likely to create a veritable deluge of growth this year.

So if free voice-over-IP is the future, what are telcos to do? They can take out an insurance policy and invest in or partner with the new VoIP companies (AT&T owns a third of Net2Phone). But there is clearly little money to be made from voice. The big attraction of the Net-based carriers is their ability to offer new telephony services not available from traditional phone companies - like unified messaging, the ability to check email, voicemail and faxes on your computer or phone, Internet call waiting, and call routing, a service that can redirect a call made to a person's PC to a cellular phone or voice mailbox.

To me it sounds like the same old story. Telecom giants like AT&T and BT spend billions on research. Yet none to my knowledge foresaw the World Wide Web, none foresaw the ramifications of voice over the Internet. Like the music industry, the knee-jerk reaction to anything new is to damn it or ban it. Unfortunately for them, the genie is now out of the bottle and no power on earth will put it back. The good news is that the world is now a smaller place. The poor can now speak to the rich, and if the rich live in America it won't cost them a dime!

John Barker can be contacted at tossa@pobox.com