As I write this column, thoughts of Spring Break are foremost on my mind.
And, it's not that I'm necessarily thinking of winging it down to Mexico
instead of writing this column. I have a very large family and many of my
college age cousins are about to embark on trips to Jamaica, Florida, and
Cancun. Lest you think that all my cousins spend their entire year talking
about Spring Break, it's only fair that I point out that many of them even
go to class regularly and sometimes they even ask my advice on what they
should study. As you might imagine, I always steer my relatives toward
technology and the Internet. As my cousins are members of "generation
Y," they already understand how rapidly the Internet advances and the
potential business opportunities the Internet holds in store for them.
One of the greatest effects the Internet has had on students is in the
realm of research, where reams of information are no more than a mouse click
away. Before the Internet, students who needed to gather information on any
topic would make a trek to a library, search the appropriate card catalog,
and then go rummaging the stacks for material. For those students who
procrastinated (such as myself) they found that often, all the related
research material had been checked out, leaving them in a difficult
situation at best. In a sense, you could say the Internet has evened the
playing field... allowing procrastinators an even opportunity to research
most any topic without fear of the necessary information being checked out.
(Not that I'm endorsing procrastination, but more on that later...)
Students aren't limited to just researching Web sites. In many cases they
can pose questions to industry experts they've never met. In fact, we've
been receiving a steadily increasing stream of letters from students, trying
to learn more about the leading edge of the communications market. In most
every case, the answers to questions we receive can be found in the articles
and columns that appear within the pages of TMC publications. When I receive
such letters, I usually help students just enough to get them started and
then steer them to TMCnet.com or
individual issues of one of TMC's publications. Sometimes though, I get a
letter that inspires me to invest the time to answer completely. Sometimes
the whole endeavor even seems worthy enough to publish. This month I
received such a letter:
Dear Mr. Tehrani,
I am a graduating student in Master in Information Technology from the
prestigious University of Asia and the Pacific of the Philippines. I would
like to request your comment and opinions on the following questions for
purposes of my thesis, titled "Internet Telephony in the
Philippines." I have been deeply fascinated by the constant
technological development and tremendous market benefits and potentials of
Internet telephony. As this technology is not yet deregulated, I am a
strong advocate for its liberalization in our country. I understand that
you are highly knowledgeable of this industry, and thus wishing for your
Thank you for the nice e-mail. I am so happy to hear that Internet telephony
is making it into academia and I am flattered that you chose me to help you
on your thesis. I wish you the best of luck in your degree and will do my
best to assist you.
1. What are the effects of Internet telephony on the telecommunication
industry in the United States and other developed countries in general? What
will be its effect on developing countries such as the Philippines, which
have not deregulated the industry in particular? What are the benefits and
arguments to open the industry in these developing countries?
The effects of Internet telephony in the U.S. have been nothing short of
dramatic and the effects can be seen in many areas.
One of the largest areas of impact has to do with price. There has been a
dramatic decrease in long-distance rates by traditional long-distance
providers in an effort to reduce customer loss to Internet telephony
carriers. The cost savings has many ramifications, not the least of which is
lower corporate long-distance bills. As far as I know, telecommunications
service and high-speed Internet access are the only two products or services
that have been steadily decreasing in price for decades. These reduced costs
in turn lead U.S. corporations to be more efficient and more competitive in
an international market.
Stanley, I notice you use the term "telecommunications
industry." I feel "communications industry" is more
appropriate, as Internet telephony brings telecommunications to the realm of
data communications. As telecom has migrated to datacom, it has begun to
enjoy the rapid advances in microprocessor performance and reliance on open
standards that the datacom market has enjoyed for decades.
The development of Internet telephony coupled with the Telecom Reform Act
of 1996 that allows competition in communications has truly launched an
incredible proliferation of new products to the service provider market.
Traditional central office equipment is much more costly than IP telephony
equipment. So emerging service providers, also known as CLECs or competitive
local exchange carriers, are able to compete against incumbent providers
with a minimal investment. In addition to providing telephony, these
providers are also able to offer broadband access as well in the form of DSL
or wireless broadband.
I am an advocate of open competition at all levels. The U.S. economy is
vibrant with communications companies that are continuously innovating in
order to supply products and services to next-generation service providers
who compete in an open market where customers are free to choose whichever
provider they want. These service providers are in turn offering more
services for their customers to choose from and as competition increases,
these services become even more affordable.
2. What are the effects of Internet telephony on traditional telcos,
considering that Internet telephony service providers compete directly with
them? How could they (ITSPs and telcos) co-exist in this competitive
industry? What are the advantages, if any, to the telcos for this industry
to be deregulated?
Long-distance carriers and RBOCs (Regional Bell Operating Companies) have
been steadily decreasing their prices to stay competitive with ITSPs. They
will certainly continue to lose revenue as consumers realize that they have
less expensive alternatives. Traditional service providers realize that they
will lose revenue to ITSPs, and are looking for opportunities to expand into
markets where they can increase revenue. For example, the international
long-distance market still has many arbitrage opportunities left to exploit.
One of the most positive effects that Internet telephony has had on
traditional service providers is that of providing less expensive equipment
choices than traditional legacy equipment. These service providers can in
turn use this equipment to supply voice, data, and enhanced services more
economically than they ever could before.
3. To the general public consumers who have tried VoIP, how do they
accept this technology, and what are the most common
problems/comments/suggestions? Or do they notice at all that they are using
Internet telephony instead of traditional toll calls?
The general public doesn't always know when they are using Internet (IP)
telephony. Many ITSPs tell me that consumers are less likely to purchase
their service if they learn that their conversations travel over the 'net.
Certainly, the biggest problem with Internet telephony is lack of control
over the quality of the conversation. I have used many international
dial-around services that don't advertise that they are using Internet
telephony. I have had results that vary from atrocious to incredible. I
don't think that consumers would ever know if they are using Internet
telephony. Even if they have a poor quality conversation, they probably
wouldn't even think of why the quality was lacking. They would just blame
the poor quality on the calling card or dial-around vendor.
QoS (quality of service) is the greatest factor in determining the
quality of Internet telephony phone calls. Unless your ITSP has control of
the network or has agreements to determine levels of bandwidth, calls are at
the mercy of the public Internet, which of course means call quality is
4. In your opinion, how would you see Internet telephony and other
related value-added services in a global environment in the next five years?
Any projection on what will happen to traditional telcos and the governments
should they refuse to open this industry?
The proliferation of Internet as well as managed network IP
telephony-based services will continue to grow rapidly both domestically and
internationally. Enhanced services will continue to proliferate. Internet
fax, unified messaging, and call waiting are just a few. Web-based control
of all phone functions (e.g., distinctive ring for specific calling numbers)
will be commonplace by that time. I suggest contacting industry analysts as
to the more precise rate of this growth.
I can assure you that predicting the downfall of international
governments due to the lack of open telecommunications is beyond my scope of
expertise. I can however look to our own booming U.S. market and see how the
competition in the service provider space has had a profound effect on our
economy. There is a mad dash in our market to provide equipment to next-gen
telcos and/or to become a next-gen service provider. Huge amounts of
investment capital are flowing into the pockets of next-gen telcos and
equipment providers. Many analysts believe that this market will continue to
be one of the fastest growing segments of our economy for years to come.
Beyond just the general health of the economy, it should be readily
apparent that a country's ability to prosper economically and compete
internationally will depend heavily on the level of technological adoption
within the country. As e-commerce proliferates, the need for every company
to have access to inexpensive broadband access will grow exponentially. The
fastest route to broadband access is an open service provider market where
customers given choice will choose providers based on superior value and
5. If you were a citizen of the Philippines, would you be in favor or
against the deregulation of Internet telephony in the country? Why or why
not? What would you suggest/do to speed up the opening of this industry?
Although I can't speak for your country specifically, it is obvious that
free, open markets breed tremendous entrepreneurial competition and this
competition in turn leads to more choices for consumers. Increased choice
leads to decreasing communications rates, which of course leads to increased
profits, a more vibrant economy, and more taxes. From the government's point
of view, I can see how they view a monopoly on long-distance as something
that can't be beat. Why open a market that is doing so well and generating
so much profit?
We have a similar argument here among political parties. Some feel that
lowering taxes is good for the economy and others see it as a way of
decreasing government revenue. It becomes a philosophical debate it seems.
The obvious fact is that in the U.S., we are reaping tremendous rewards from
a deregulated communications infrastructure and there is no reason why this
success can't be duplicated worldwide.
6. Any other comment and information will be highly appreciated. I hope
to have the honor to work in this industry after graduation and meet you
Perhaps the most important and controversial comment I can make is that
there is a trend toward all long-distance eventually being free. Please see
the sidebar entitled, "Dial W-E-B For Free Long-Distance" for more
Rich Tehrani is President, Group Publisher, and Group Editor-in-Chief for
TMC publications. He welcomes your comments at firstname.lastname@example.org.