Wednesday, May 13, 2009

International VoIP is growing fast -- what are the implications?

As a result of globalization, we are making more international phone calls every year. In 2008, we made 384 billion minutes of cross-border calls -- 12% more than 2007.
This graph shows the annual growth rate and the total number of call minutes for both traditional time-division multiplexing (TDM) and voice over IP (VoIP) calls. Both are growing, but VoIP is growing faster.

For example, traffic on Skype, the leading international VoIP provider, increased by 41% in 2008. Skype carried 33 billion minutes in 2008, accounting for 8% of international voice traffic.

This sounds like good news for the industry, but, as we see below, prices are falling as traffic increases, keeping revenue roughly flat.
(This data was from Telegeography, a leading telephony and Internet market research firm and our class notes on VoIP are here).

Do you make international calls? How does the cost per minute using Skype or other VoIP services compare to TDM calls? Do the traditional phone companies make any money on VoIP calls?

What will happen to telephone companies if VoIP continues to outgrow TDM? How will this trend effect developing nations?