Is VoIP Significant?

Some years ago, many observers were convinced VoIP would be "disruptive" to the global telecommunications industry. There's much less certainty now. In fact, one might ask: is VoIP mostly a better way to do voice, or just a new way? Mobile clearly is a new way, and might be disruptive in many ways. So is VoIP. But "different" isn't the same thing as "disruptive."

The global industry made a transition from analog to digital switching, as it earlier made a transition from mechanical to electronic switches. New services and efficiencies were gained in each of these transitions. But one can question whether the differences were transformational.

Likewise, most of the U.S. competitive local exchange carrier industry thought it was doing something revolutionary in buying its own Class 5 switches to compete with incumbents. As it turns out, that wasn't hugely disruptive.

These days, most tier one carriers earn only about 20 percent of total revenues from consumer voice, and not significantly higher percentages even if enterprise voice is included in the total.

The point is that "voice," though still hugely important as an end-user value, is less and less the revenue driver for the global industry. So VoIP is in many ways a much-better way to use voice, but such a smaller part of total revenues that it cannot strategically change industry dynamics, one way or the other, so long as a transition away from reliance on voice revenues is predictable.

There are precedents for that as well. Long distance revenues have been declining, in terms of revenue per minute, if not volume, for decades. But the industry had time to transition away from long distance as a driver of profits.

At this point, it certainly looks as though VoIP is more nearly the latest enhancement to basic voice, rather than a disruption. If anything, it is mobile that represents the big "disruption."