There may be hope yet

In the absence of regulatory distortions, it has been hard to see much of a long-term future for most of the traditional phone world. But a role may be emerging, one based on what has been one of the functions that traditional phone companies do best.

For good or ill, the Internet is spreading its tentacles everywhere. It will not be long before broadband Internet service will be available to most homes and businesses in the U.S. and a number of other countries. This service will be distributed via cable modem, DSL lines and, it now appears, fibre in the case of many apartment buildings and office parks. This service will easily be fast enough to support high-quality, real-time interactive voice-that is, service that, at its minimum, will be equal to traditional phone service for all but a few functions. This service also will be far superior in the availability of advanced features because of the integration with IP service.

The few places where current IP telephony technology does not measure up, such as lifeline and enhanced 911 services, are being worked on. It may even turn out that mixing wireless telephony with Internet-based telephony may be a good way to meet the lifeline requirements rather than bulletproofing IP-phones.

One of the Internet’s features is that providers of IP-based services do not need to be associated with carriers. Thus it will be easy for new companies to set up to do most of the “advanced” (advanced in the context of phone service, anyway) functions such as call forwarding and voice mail without giving the local phone company a piece of the action. And because IP phones themselves can mimic the operation of wire-line phones, no relearning is needed.

In the above environment, the future of traditional phone companies’ voice business is, at best, threatened. It will be hard for them to compete where voice rides for no additional cost on a data infrastructure. The only time that the user should get a bill for minutes of voice use is when he or she has to contact someone still on the old voice network. There will be a lot of these people still on the old net at the beginning, but the number should decrease quickly as the economic factors hit.

But there is something that the phone companies are quite good at, and that is billing. Phone companies may have a viable future as billing service providers.

Already, in Japan NTT DoCoMo Inc. makes a good chunk of revenue by acting as a billing service for Web sites that provide services to the more than 10 million users of its I-mode IP Internet-connected cell phones. The Web sites can charge very small fees to their customers and not have to worry about the costs of collecting the money. The phone companies should play to their strength and start getting out of the wire business.

Bradner is a consultant with Harvard University’s University Information Systems. He can be reached at [email protected].

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