Still room to fall
AT&T started complaining recently that the Philippine domestic telcos won't terminate any of its calls. AT&T says this is because it won't accept a 50% increase in termination fees. In
this article in the WSJ (subscription required, sorry), Tim Kelly, a researcher at the
ITU (in Geneva) said "It's not logical or possible that prices can fall forever."
He could have justifiably said "It's not logical that
profits can fall forever," but the fact of the matter is that voice revenue is headed to zero. As network capacity and data transfer levels continue increase, voice traffic will eventually move completely
to the IP backbone and will be an increasingly smaller percentage of overall data traffic. This transition is already starting in the US with companies such as "Vonage":http://www.vonage.com (recently called the
'Napster of Telecom') undercutting the RBOC's with flat rate pricing over broadband.
Telcos that don't quickly find other revenue sources will eventually pay the price, because one way or another, voice revenues will eventually go to zero. Countries whose governments protect the incumbent telcos will pay the price even sooner - although it may sound trite, information is the foundation of the post-industrial world economy, and higher costs of communication lead directly to higher costs for both the receipt and the transmission of information.
Aside: The ITU is both dominated by the incumbent telcos, and European. So it's not that surprising that they are blatant advocates of the status quo. But still.
Posted by Stephen Bronstein at February 28, 2003 12:36 PM