Internet Voice/Fax Calls Could Cost Telcos $8B

Consumers and businesses turning to the Internet for voice and fax phone calls could end up costing phone companies some $8 billion in lost revenues worldwide over the next four years, according to a new research report.

A study released by Action Information Services, a Falls Church, Virginia telecom consulting firm, finds that "the potential for substantial savings, compared to calls on traditional phone networks, is the primary motivation for using Internet telephony."

The report also notes that since Internet access generally is purchased at a fixed monthly rate, individuals or companies with the proper equipment can place Internet voice or fax calls between computers anywhere without incurring per minute fees.

"Cutrate phone calls over the Internet soon will transform the huge telecom business, especially on expensive international routes," Sim Hall, vice president of research for Action Information Services, said.

According to Hall, discounts from 40 percent to 50 percent off standard international phone rates already are being offered by some Internet telephony providers.

Hall noted that the software needed to make Internet voice calls now comes bundled with the latest Web browsers, and also can be downloaded free.

Recent industry consensus on interoperability standards further facilitates Internet calling among users of software from a number of suppliers, Hall said, adding that "more importantly, several manufacturers have introduced gateway servers that greatly expand the potential market by relaying Internet calls to and from ordinary phones and fax machines."

Hall noted that corporations can use these servers to route international calls over their data networks, avoiding local access fees, long distance charges and high international rates.

"In addition," Hall said, "new phone companies can use the relatively inexpensive gateways to quickly implement alternatives to traditional carrier networks."

Last July he noted, WorldCom became the first big player to announce plans for a commercial Internet phone service. The company, which also recently put in a surprise bid to buy MCI, is deploying proprietary Internet fax servers in 100 business centers throughout the United States, Europe, and Asia.

"This move, by a major firm with worldwide support capabilities, serves as a wake-up call for international carriers accustomed to fat profit margins," Hall added, noting that "WorldCom’s planned acquisition of MCI could provide access to a much larger US customer base, as well s MCI’s extensive Internet backbone network."

According to the study, "by providing a cheap alternative to traditional carriers, the Internet telephony aids the FCC’s efforts to force international phone rates down.

"Phone companies also stand to benefit mightily from the Internet revolution," he said, "as the demand for access lines accelerates and data traffic soars."

Hall added that Internet voice "is paving the way for personal videoconferencing, an emerging market that may eventually surpass the enormous telephone business."

(Contact: Sim Hall, Action Information Services, tel 703-847-9805)