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A View from Brad King

VoIP Subscribers Grow; Net Neutrality Bill Dies

Consumers continue their switch to cheaper, Internet-based phones. We have net neutrality to thank for that.

  • December 15, 2006

More than eight million subscribers (including me) have ditched their traditional phone service for a cheaper Voice over Internet Protocol (VoIP) alternative, and according to an Associated Press story, the number is expected to climb into the high nine millions within the next quarter.

The reason: cheap pricing, ease of use, and a clean interface make it simple for consumers to switch. Many VoIP services cost less than $20 per month, and some, such as Skype, cost less than $3 for outgoing phone service.

The rapid development of the VoIP industry, which is certainly cutting into the telecommunication companies’ bottom line, can be traced to one factor: net neutrality, which means that all packets routed across the Internet are treated the same way. And, at least for the near future, that idea is safe. The COPE Act, which would have ended net neutrality, has died in the final days of the Congress, according to this SavetheInternet.com post.

So how are new services such as VoIP, which provide a low-cost alternative to the communications oligopoly, related to net neutrality? Here’s an example:

Verizon and AT&T want to deliver television to your home to compete with the cable companies. They’ve spent billions upgrading to fiber-optic systems. Once they have that infrastructure in place, they claim, they will need to “optimize” their network to ensure that their digital television packets don’t get stuck en route to your home. In other words, they need a Quality of Service (QoS) assurance for its customers. To do that, they say, they must tier the packet-switching network to ensure that certain packets (re: their packets) get through first.

Of course, these companies could invest in developing better compression technologies and routing software. This would solve the future bandwidth issue (because as of today, there isn’t a dangerously troublesome bandwidth problem). However, it makes more business sense for the telcos to tier their video service, while slowing voice service. Why? VoIP service providers would have a hard time competing with traditional phone service.

On one hand, telcos could put Internet-based voice packets on a lower tier, insuring that Internet-based calls sound worse than traditional long-distance calls. Meanwhile, the telcos could put video packets on the upper tier, insuring the highest quality (re: TV quality) video is on the fast track to your home. And, to add insult to injury, net neutrality would be a negative incentive for telcos to invest in new technologies that make the network run better. In fact, it would be in their best interest to stifle innovation, so they could charge more for new tiers of service.

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