Voice over IP

The FCC has ruled that VoIP is an interstate service, in response to a petition from Vonage, one of the best known national VoIP providers.

CNet has an article on the "plunging" prices of videophone systems, heralding a drop to under $500.

These are hybrid phone systems that wed old phone system technology with video, in an attempt to create a bridge between conventional phone systems and Internet-based protocols.

All through the nineties, and especially during the dot-com silliness, hundreds if not thousands of companies talked about the "killer app." Usually those who claimed they had it were making some thinly veiled sales pitch for some proprietary piece of software that they believed would make them kings of the world.

I argued, at the time, that the killer app was email, and I still think I was right. Email is one of two things that virtually everyone does online. The other is search, and of course, the founders of Google, if not kings of the world, are now insanely rich.

This story says the FCC is interested in regulating VoIP [link no longer available].

Earthlink faces the same problem AOL is already struggling with--a shrinking market for dial access to the Internet. Earthlink has been staying in the black by slashing customer support and by providing barebones access, as opposed to AOL's tedious, ad-laden interface.

In an indication that the company intends to provide still competition to the regional telephone companies, AT&T has cut their CallVantage VoIP service price by 25%, from $40/month to $30/month.

CallVantage, which works only if you have broadband service, provides local and long distance service nationwide for a flat $30 a month--the lowest call plan we've ever seen, including those offered by some of the cellphone providers.

Daily Wireless discusses a new NetGear home router product that has voice phone ports built in. NetGear is one of the biggest manufacturers of those cheap WiFi router/hubs that have been selling like hotcakes.

This article [link no longer available] suggests I was write a couple of months ago when I said that AT&T still planned to offer consumer dialtone, despite their announcement that they were getting out of the consumer local and long distance market.

I suggested that this masked a push by AT&T to become a major VoIP player. AT&T is helping consumers who don't yet have a broadband connection to get one, using CableLabs' Web-based tool. This is a shrewd move, and VoIP may yet save AT&T, which over the past twenty years has made a whole series of poor business moves.

Om Malik points to a story in the Tri-City Herald about the benefits reaped by a local small business that is using VoIP. A local florist with stores in both Washington and Oregon estimates that he is saving $100/month by using VoIP instead of traditional long distance services.

CNet writes about the next potential spam horror--voice mail spam sent to your Voice over IP telephone. VoIP phones have an IP address, just like your computer, and spammers will probably figure out a way to send spam right to your phone.

USA Today (Monday) has a front page article (Business section) on AT&T and its decision to get out of the consumer market for local and long distance services. Opinions are mixed on the wisdom of this approach, but the company does not really have much choice. With the FCC decision to allow the regional Bells to charge whatever they like for wholesale access to their infrastructure, AT&T could no longer profitably offer local dial tone service.

As I've said before, I think that the FCC made the right decision. If the Bells are expected to compete with unregulated companies (e.g. the cable and WiFI firms), it does not make sense to hobble them by requiring them to sell their own network to competitors below market rates. It is no coincidence that since that ruling a few months ago that the regional Bells have begun to announce FTTP (Fiber To The Premises) projects--they finally know they can make money doing so.

Buried in the article is a one line reference to the "Cable-Phone Wars." One reason the phone companies have finally jumped on the fiber bandwagon is that the cable companies have captured a large part of the broadband customer base by investing early. DSL is now selling in most of the country for about $15 less than cable service because the phone companies have to do something to get customers back--like actually compete on price and service. Horror stories abound, but generally, the cable companies, which tend to have more local offices and real service people working for them, seem to be winning the service battle.

The phone companies, in a better late than never strategy, are winning the price war right now. This is all good for consumers, up to a point. Quality of Service (QoS) is still shaky for both cable and DSL. Both are copper-based legacy systems that were never designed to deliver high speed data to homes and small businesses. Fiber and wireless can deliver data much better, but can't always provide the content (e.g. cable TV) and/or some services (like dialtone)--yet.

An article in today's Wall Street Journal (B1) discusses the growing trend, mostly among businesses, to take advantage of ability of VoIP to offer a choice of area codes. Area codes like 212 and 415 (New York and San Francisco) are very popular.

In a widely carried AP report, AT&T has announced it is getting out of local dial tone and long distance in several states, and may abandon most other states shortly. There are two things going on here, and only one of them was discussed in the article.

The article correctly notes that the proximate cause for the AT&T pullback is the FCC ruling that allows the local phone companies to charge higher wholesale rates for their antique copper telephone lines. AT&T has been leasing these in bulk to provide local dialtone. The higher rates make it unprofitable for AT&T to do so.

On the face of it, this looks bad for local communities, as there seems to be less competition, and puts the local phone companies back near their previous monopoly status for dialtone.

What was not covered well in the AP article is the fact that AT&T is making a major push for Voice over IP local and long distance services. The company has wisely decided to abandon the antique phone service market and concentrate on selling what is going to count in the future. It's a smart move.

Some of the phone companies are not standing still, however. SBC has announced it will spend billions on fiber to the neighborhood and fiber to the premises, although the latter will be done only in new neighborhoods for now. The new system will have the capacity for a single channel of HD TV--much higher capacity than existing DSL lines, but still not what will be needed in the future. But the fiber has the carrying capacity--SBC is reluctant to put in the electronics, probably because of cost and because they are trying to control access.

Communities getting these new systems may breathe a sigh of relief that they don't need to do that telecom planning after all, but their headaches are simply being deferred to the future. A monopoly is a monopoly, and it does not matter much if it is a legal monopoly (the old, pre-1996 approach) or a de facto marketplace monopoly.

Here is just one of several new phones that are WiFi only. These wireless Internet phones allow you to make voice phone calls anytime you are in a WiFi hotspot--yet another reason to sprinkle WiFi hotspots around your community.

Lucent, the manufacturing arm of AT&T, just bought Telica, a manufacturer of VoIP equipment. As I've written recently, AT&T seems to understand the potential of VoIP to revive the companies fortunes. AT&T has floundered ever since the breakup in the mid-eighties.

The most recent mess was at AT&T Wireless, which was apparently run by a hapless and arrogant group of what former AT&T folks call "Bellheads," which are company people that can't step outside the traditional boundaries of the the "old" telephone business.

CNN reports that cellphone number portability is about to reach rural and less populous areas of the country. The introduction of the service has been phased in, with the 100 most populous parts of the country getting it first. Customers will be able to move their cellphone number from one company to another, and will also be able to move a landline number to a cellphone, with certain restrictions on area codes.

Forbes reports that Vonage, the start-up Voice over IP company, has dropped prices while adding new customers at a furious rate.

Forbes speculates that pressure from AT&T's VoIP offering (six months of unlimited local and long distance service for $20) has forced Vonage to adjust their prices. Competition is a wonderful thing. Vonage now has 155,000 customers and is adding new ones at a rate of 666 per day.

Om Malik reports that AT&T has saved more than $250 million dollars in the past four years by routing phone calls over the Internet instead of the switched telephone network. In a classic counter-attack, the phone companies that did not get to switch AT&T's calls are suing the company for lost revenue--apparently they think they have a "right" to make other companies use their antiquated systems.

Following Nokia's initial foray into dual mode cellular/WiFi phones, phone giant Motorola is entering the marketplace. Motorola's phone automatically switches to WiFi mode if you enter a WiFi hotspot, meaning that you save your cellular minutes and your cost of calling will be lower overall.

FCC Chairman Michael Powell has it exactly right in an article in the Business section of the Rocky Mountain News. At a speech in New Orleans to the National Cable & Telecommunications Association, Powell said, "I think it's going to be the very, very best and biggest breakthrough in our ambitions and dreams about competition ever."

Exaggeration? I don't think so.