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?

17 percent of European households now use VoIP

We discuss VoIP in class. A recent market research report shows VoIP growing rapidly in Europe. At the end of 2004, 1.9 million VoIP lines were in service, equivalent to just over 1 percent of European households. By the end of 2007, Europe was up to 25.3 million lines and 17 percent of households.

As shown here, VoIP service is growing faster in Europe than in the US, and is eating into the traditional switched circuit revenue of the phone companies.

Do you ever use VoIP? If so, do you use an Internet program like Skype or do you get your service from a phone company?

VOIP in US and Europe

We cover voice over Internet Protocol (VOIP). VOIP is widely used for phone systems within organizations, and is taking off in the consumer market. A recent market research report compares VOIP growth in the United States with that in Europe. Note that growth is faster in Europe and that independent companies like Vonage are growing more slowly than the VOIP offerings of cable companies in the US. Unlike their US counterparts, European telephone companies are active participants in the VOIP market.