Thursday, August 26, 2004

VoiP vs the Past

Telco is heavily, and inefficiently, regulated. Phone companies must, by government mandate, support a laundry list of people at a loss. In order for them to do this, they hike up the charges on everyone else (through taxes, rates, etc) and use this money to make up the shortfall elsewhere. Major redistributions of wealth include corporate (ie. worker) calls to residential (ie. workers at home), people in (expensive) cities to people in (cheap) country, etc. This form of redistribution, btw, is very expensive compared to general taxes.

While these regulations are also burdensome, they also create tremendous barriers of entry into the telco business. If an entrant is required to support all of these loss-making activities as well, it is likely they may quit as they see their profits dwindle away. If an entrant is allowed to ignore these burdens, incumbents will (reasonably) complain that they are being treated unfairly and may sue.

Voice-over-IP enables communications far beyond straight phone calls, but it runs the risk of being regulated out of existance before it can even begin because, well, it could be construed as a telco. The alternative is reducing the regulatory burden on incumbent telcos and reduce the web of subsidies that 1) increaes their costs and 2) dissuading competitors.

I find it promising that early VoiP applications are very distinct from what we think of as phone calls.


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