March 8th, 2005
There are a lot of discussion about termination charges at VON. Particularly, the recent Madison River blocking Vonage incident bring out more horror stories about Rural LECs (e.g. high termination charges).
Well, what do you expect? RLEC used to be a mini-monoploy and the gateway to their communtiy. In the past, there are no way you can get to them without going through them but now all that is changing due to VoIP.
If RLECs are bad, wait till you deal with developing country incumbents who used to get a lot of termination revenue. In fact, AT&T is a largest contributor to their GDP at one stage. Some already starting to voicing that VoIP is hurting their revenue stream at ITU and WSIS.
All these are are signs of a painful transition of a US$1T industry to, say US$100b one. For every dollar they used to made on voice, they going to get only 10cent in future – this means for every 10 jobs we have today, 9 has to go.
Now, this does not mean VoIP is destroying value. Instead, think of it as freeing up value. Now, I am paying 100-200$ on phone bills per month compared to 500-800$ few years ago. But this also means I have 300-500$ spare cash which I now pays for other new services – bigger broadband, dedicated server (for this blog :-) etc.
It is important to free up such value for consumer because then consumer have more free cash to buy new services. This will encourage companies to start offering new services, new jobs will be created to replace those lost and all of us will have better quality of life.