IP Telephony Won't Kill Telephone Cos,
By VOCLF's Elon Ganor
Thursday , Sep 3, 1998
By Elon Ganor
What happens when technological innovation and
the entrepreneurial spirit meet, in a field hitherto
considered conservative and monopolistic? The
encounter between the Internet world and the
telephone communications market resembles a
laboratory experiment, likely to become the ideal
model of tremendous technological influence on the
ordinary individual's quality of life.
The combination of technological advantages,
convenient use, and in particular, the attractive
price, makes the Internet the most preferred
communications infrastructure. Telephony and
communications companies providing international
communications services understood a long time
ago the need to adopt the new technology and to
offer services based on Internet Protocol (IP), as a
communications mediator between telephones.
Simultaneously, specialist companies spring up
offering telephone communications services on the
Internet and computerized telephone services as
independent services. This process is sweeping
along with it anyone involved in the industry. We
have not yet even mentioned the
intra-organizational networks - the Intranet - where
voice communication technology over IP will be
adopted as the guaranteed formula for making
communications more efficient and reducing costs.
The field of Internet telephone communications is
thriving, thanks to the successful encounter
between technology and deregulation of the
telephony communications sector.
When cable television and satellite communications
breathe down telephony companies' necks, and
when Internet suppliers offer an inexpensive
alternative for international lines at access prices
that are no higher than a regular local call, the entire
market opens up to competition.
When there is competition, prices plunge. The
Israeli consumer first discovered this when the
international telephone calls market was opened up
to competition. The next round of price reductions
will be based, among other things, on technological
innovations that enable more efficient use of the
communication bandwidth. Companies that are
ahead of their competitors are expected to acquire
increasingly large market shares.
When the Internet telephone market made its first
strides, the impression was that it was intended
solely for the home user, and there were those who
estimated it would appeal to freaks and crazies.
Shortly thereafter, the press labeled it the worst
enemy of the traditional telephone companies, set to
destroy them. Today, it is already obvious that none
of these assessments were accurate.
Consultants Forst & Sullivan predict that revenues
from the Internet telephone market will amount to
$1.89 billion in the year 2001, compared to only $19.8
million in '96. If we assume that the Internet form of
international calls is 80% cheaper than the price of
the same telephone call currently transmitted by
international telephone companies in various
countries, we reach figures approaching the amount
of $10 billion per annum for international telephone
calls.
Will Bezeq International, Barak, Golden Lines and
equivalent companies around the world inevitably
go bankrupt? Not necessarily. In fact, the opposite
is true. Experience gathered to date indicates that a
reduction in price to the consumer creates further
demand. It is true that telephone companies will be
obliged to become more efficient, but nevertheless,
they are expected to establish themselves more
firmly , with the new technology.
Everyone knows that Internet telephony is first and
foremost IP communications, and is the business of
telephone companies, just as they are the business
of Internet services providers, and perhaps even
more. The same applies to cable television
companies, and even to local telephone call
companies that, for example, will want to
simultaneously offer Internet and voice services on
a single existing line.
Surveys and forecasts anticipate impressive growth
in the telephony market, and point to the enormous
potential of this market. Forecasts note that by the
year 2002, every fifth telephone call will be made on
Internet lines.
The writer is chairman and CEO of VocalTec
Communications
Published by Israel's Business Arena September 3,
1998
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