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Is The Internet Killing The Phone Business?

|  4 min
In this article

Many people use VoIP every day without realising it is a disruptive technology. A disruptive technology is not just new and innovative, but disturbs or even displaces technology that already exists. Think back to the PC, which essentially spelt the end of mainframe computing on a large scale. It appears that VoIP is having a similar effect on the traditional phone system.

Disruption a la VoIP has many benefits for consumers and businesses alike, offering substantial cost benefits and flexible services for firms which include giving clients dedicated lines that can route straight to a human being. And this can happen without having to install the costly infrastructure of cables required by a traditional PTSN phone system.

Skype was probably the first encounter many people had with VoIP. The added benefit of video when the connection supported it, meant that it quickly became popular among those with access to the technology.

Back in 2005, those with an appreciation for the technology could see the potential of Skype. Skype then had revenues of $60 million annually and was not making a profit. Notwithstanding this, eBay was prepared to pay $2.6 billion for it, with another $1.5 billion to come if Skype met several performance targets. Other companies, which have gone on to become tech giants or continue to dominate, such as Microsoft and Google, were also interested in Skype.

From niche to mainstream

In 2011, Microsoft finally acquired Skype, for $8.5 billion, arguably more than it was worth, but the service rapidly expanded to 300 million users. Although fluctuations in audio quality continue to be an issue for Skype users, about a year ago, it was reported that Skype in business was soon expected to exceed 100 million enterprise seats and more than 50 percent of enterprises were using Skype for business. Wholesale VoIP Termination Rates

Wholesale VoIP termination rates have become more competitive

Now, of course, businesses have a lot more choice when it comes to VoIP and there are companies such as IDT which specialise in global networks and deals to make using VoIP a more seamless and cost-effective experience. As the many benefits of VoIP address the limitations of old-style phone networks, it now appears that VoIP is poised to replace traditional phone networks entirely. Even BT has a plan for phasing out its PSTN over the new few years. Voice calls have become another facet of exchanging data via an internet connection. As internet connections continue to become faster and more sophisticated, using them for voice calling will become even easier, with consistently high-quality audio.

Free for all

Niklas Zennstrom, one of the founders of Skype, believed that phone calls should not cost anything the way that sending an email doesn’t cost anything (provided of course that there is an internet connection).

The technology has certainly caused huge disruption to the price models of traditional telephony, with ever-reducing returns for charges based on time or geography. Traditional network providers are seeing their profits rapidly shrinking and the payoffs for investing in new infrastructure tailing off.

Another benefit of VoIP is the choice it gives consumers and businesses. Rather than being limited to a small number of telecoms networks, there are numerous VoIP providers from which to choose, with a whole raft of extras and services that can be added on. These include video, conference calls, conference calls with video and different types of voicemail and messaging.

A VoIP account can also have several different numbers associated with it, so your business can generate what appear to be local numbers in a variety of cities, and customers can contact you on those lines as a local call. Since the number only requires an internet connection to function, it can be routed as desired and will continue to function as normal. With low costs and so much flexibility, it is little wonder that traditional providers are suffering.

Networks in need

Telecoms operators have responded to the evolution of VoIP by either hoping it will go away, or attempting to embrace it. Network providers have struggled to convince users to spend more on data and as networks become more sophisticated, they make VoIP still easier, which shreds telephony voice calling revenues further.

Operators that have chosen to invest in internet technology will probably be those best positioned to survive this particular battle in the technology revolution. The question is not whether VoIP will kill off old school telephony, but when this will happen. It is likely in the near future that free voice calling will simply be another feature that is part of a bundle based around access to broadband.

Why not contact the experts at IDT today to find out just how easily your business can capitalise upon the latest VoIP technology.

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