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To: Glenn D. Rudolph who wrote (7207)	10/21/1997 8:33:00 PM
From: Moonray	Respond to of 22053

Internet May Cost Phone Companies $8 Bln Over 4 Years Washington, Oct. 21 (Bloomberg) -- Telephone companies could lose $8 billion in revenue worldwide over the next four years as more consumers turn to the Internet for voice and fax phone calls, according to a research report released today. Lower prices on the Internet will prompt phone companies worldwide to lower their prices, said the study by Action Information Services, a Falls Church, Virginia-based consulting firm that does research for phone companies. ''Cut-rate phone calls over the Internet will soon transform the huge telecom business, especially on expensive international routes,'' said Sim Hall, vice president of research at Action Information Services. ''Because the Internet is going to make certain routes more competitive, the telephone companies are going to have to respond with discounts.'' International long distance companies will feel the biggest impact from the Internet, Hall said. Overall, he said, it likely will come to about 4.5 percent of the total revenues from telephone business between countries by the year 2001, Hall said. ''It's not a huge number worldwide,'' said Robert B. Wilkes, an analyst at Brown Brothers Harriman, but ''it's coming, and it will definitely displace some of the revenues.'' International phone calling by voice and fax will generate more than $62 billion in revenue this year. Based on the International Trade Union's revenue figures, that will likely grow to about $77 billion over the next four years, said Hall, whose firm generates reports for telecommunications manufacturers and service providers. Clients include the Baby Bell local phone companies and AT&T Corp., among others. ''This is a very young capability,'' said Mike Miller, AT&T spokesman, hesitating to call Internet telephony an industry yet. ''How it will unfold (or) how pricing will unfold is very unclear at this point.'' He said he had not seen Action Information Services' report. If it becomes an important medium, and ''we've always seen it as promising,'' AT&T will look to become a player in the Internet telephony market, Miller said, noting that revenues traditionally shift from one medium to another. ''The copper cable and microwave are pretty much gone,'' he said. ''Now you have cable optics and soon the shift to digital.'' Cheaper Rates ''Since Internet access is generally purchased at a fixed monthly rate, individuals or companies . . . can place Internet voice and fax calls between computers anywhere without incurring per-minute fees,'' Hall said. Right now, though, it can be more difficult for customers to call long distance by Internet than by telephone. While a phone caller dials a number directly, an Internet user must place the call through a special number, or gateway. As it develops further, Internet telephony should affect the U.S. long-distance companies first, Wilkes said. ''I think AT&T and MCI (MCI Communications Corp.) see this is coming,'' and will operate in a way that will bring them revenue, Wilkes said. ''It could be a threat, but . . . they'll be actively participating in (Internet telephony) to maximize the positives.'' It will take two or three years to get enough gateways running for voice calls, Hall said. Internet fax traffic will increase steadily over the next few years, which will account for a large sum of Internet revenues, he said. ''PC-to-PC'' Internet calls won't come under federal regulation because ''it's virtually impossible to separately track voice or fax packets . . . traveling over the Internet,'' Hall said. U.S. President Bill Clinton is trying to get countries to keep Internet commerce free from heavy regulatory burdens. Last July he announced his plan to keep electronic commerce free of taxes and tariffs. And during a recent trip to South America, Clinton signed an agreement with Argentina to bar new taxes and tariffs on electronic sales over the World Wide Web. o~~~ O