Why Is VoIP Cheaper than POTS?
The normal perception is that VoIP costs so little because most things are cheap on the internet. There’s fierce competition, and a fraction of the overheads etc. However you need to acknowledge the history of the telecommunication companies and how they relate to computer networks, and the way data actually travels around the net. An appreciation of this is necessary to fully comprehend the riddle behind the VoIP vs. POTS pricing structure.
Long before computer networks became important telephone companies were using digital communication. At the start the very first digital voice circuit was used in Chicago in 1962 although ARPANET, the predecessor to today’s Internet, wasn’t in operation until 1969. The telecommunication companies used these digital circuits to make lots of voice connections over long distances something that analogue circuits were unable to do and they continue to use them for this purpose today.
Voice communication has a few special characteristics. For one thing, it’s inherently real-time. You’d get annoyed if phone calls consisted of long periods of silence followed by a burst of fast conversation to catch up with the conversation on the other end. To keep this from happening digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is made, you’ll always get all the bandwidth you need. It’s not just bandwidth though; latency is also taken care of by using small, fixed sized data packets. The point is the infrastructure was specially designed to facilitate voice communication.
When computer networks began emerging in the late 1980s) the {telecommunication companies wanted in. They already had the infrastructure there so they started looking at how they could send data over their existing phone lines. They came up with a number of technologies with varying levels of success. But there was (and still is) a problem: data networks are essentially different from voice networks.
Data is transferred in packets, which can arrive randomly sometime after they have been requested, without causing problems. Internet Protocol (IP) was designed to provide best effort delivery. Telecoms companies had an expensive network in place, so there was a lot of incentive to use it. After a few misses Asynchronous Transfer Mode (ATM) was designed as a compromise technology that could carry both voice and data. However it’s much less efficient than a network intended purely for data. The costs for data transfers on ATM is more than 10link, compared to about one percent for an Ethernet running full-throttle.
