Internet Telephony and Its Impacts on Long Distance Voice Services

Abstract

The Internet has been a network of computer networks. In the near future, the Internet will provide integrated services that combine audio and video appliances. Internet telephony (IT) represents a viable example of this extended Internet. IT indeed poses a potential threat to toll service provided through Public Switched Telecommunication Networks (PSTNs) because of its substitute quality and competitive prices. This paper is then written to analyze the impacts of IT on PSTNs in three parts: 1. the potential competitiveness of IT vs. PSTN long distance, 2. the possible consequences of imposing interconnection charge on IT vs. PSTN long distance, and 3. the potential threat to the collection of the accounting rates applied on international voice telephony. The paper first briefs the technologies and the architecture of IT, and it constructs the cost models of IT in comparison with that of toll service following the discussion of the technologies. It then predicts the substitution effects between IT and\ntoll service, provided that IT is exempted from the current pricing structure of interconnection charges. The paper finally concludes that the availability of IT indeed causes a bypass from PSTNs, which results in an unsustainable collection of the accounting rates. The perfectly substitute IT with a lower price then presses the need for renegotiation about the accounting rates among countries.