VoIP enters the ascendancy
Published: 03 Feb 2005 16:10 GMT
Small mammals outwit dinosaurs
The shift in strategy comes none too soon. The incumbent telcos have already been facing competition from upstarts taking advantage of cheaper IP technology.
Three years after launching, Vonage is the largest US VoIP provider. for a flat fee, the company lets users make phone calls over the Internet using their existing broadband connections. Skype, which offers free software for Internet calling, has signed up 28 million users -- and counting.
Cable companies are planning to roll out their own Internet phone services. Time Warner Cable and Cablevision have begun selling voice calling over the Internet, and Comcast plans to join the crowd later this year. The old-model phone providers can't keep up.
"In an IP world, voice is easy and cheap," says Scott Cleland, chair and chief executive of the Precursor Group, an independent research company. "The traditional telecom companies are an anachronism."
Yeah, MCI, he's talking to you
Cleland says AT&T is only the first casualty in the changing telecommunications climate. He says he expects MCI, another traditional long-distance phone carrier, to follow a similar path toward acquisition. Sprint, which has a strong wireless business, may also be an acquisition target.
The consolidation is not likely to end there, he adds. Since IP shifts the value from inside the network, where switches once controlled services, to the edge, where a handset or PC controls the service, it's easier for competitors to offer advanced services over networks they don't own.
"In the IP world, you don't have to own the facilities to do business," Cleland says "Look at how Internet companies like eBay and Amazon operate... We see the decline happening rapidly on the long-distance side to AT&T and MCI. But it will eventually happen to the Baby Bells, albeit much more slowly."
Some analysts say that, though the phone giants' current business models might have to change to accommodate new services, there's no reason to start writing eulogies.
"I wouldn't give up on the local phone companies just yet," says Eli Noam, director of the Columbia Institute for Tele-Information. "They own one of the two major pipes into people's homes. But the days of a communications company only selling wireline voice is over. If they turn into bit transporters and offer more valuable services on top of those connections, they can grow strong."
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1 comment
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Your article is so misleading that
it isn’t even f... Bennett hatchett
