30/06/2006

Voice pricing - when will it hit zero?

Both fixed line telcos and VoIP service providers are moving to flat rate bundles with all you can eat national dialing. This is all based on people not actually using their phone all the time, as in Europe termination charging still occurs on the public switched telephone network (PSTN).

BT's new broadband packages start at £9.95 (for the first 6 months) which includes free evening and weekend calls. Vonage's service costs £7.99 per month with free anytime packages (but you need a broadband package on top of that).

The broadband offerings may not quite be what they seem as they are bandwidth capped, so using the phone all the time may push the user over their limit (so extra charges may apply - BT may not count VoIP packets, it not clear).

Even with landline packages, Carphone Warehouse's TalkTalk packages include all you can eat national dialing for £10 per month (and they throw in broadband).

When BT release their 21CN network, it's going to cost them more to bill (UK) calls than to charge for them - or at least flat rate them.

Skype offers sensible international rates, but even they are being forced into price drops as the competition hots up, signing up in the US now gives completely free calls to the US and other countries.

As everyone moves to zero or flat rate calls the telcos are going to struggle, they're used to billing minutes and have an industry out of it. They are going to suffer badly when their revenues decline. More consolidation, more firms going belly-up. That all sounds good initially, but then there's actually less competition and the market will end up with a few super Telco/ISPs.

It all comes down to Bell heads vs Net heads, and the Net heads are winning, though there's trouble in that area too as the US is fighting to make content providers pay more for people accessing their services, VoIP may fall into that category.

What's good for the consumer in the short run, may be disasterous for the industry and thus competition long term.
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