Why Is POTS More Expensive than VoIP?
October 14th, 2008The usual perception is that VoIP costs so little because most things are cheap on the World Wide Web. There’s fierce competition, and very low overheads etc. However you need to understand the history of the telecommunication companies and how they relate to computer networks, and the way data physically travels around the Internet. An appreciation of this is necessary to fully comprehend the riddle behind the VoIP vs. POTS pricing riddle.
Long before computer networks became important telcos 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 up and running until 1969. The telecommunication companies used these digital circuits to send lots of voice connections over long distances something that analogue circuits did not have the capacity to do and to this day still use them for this purpose.
Voice communication have several unique 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 occurring digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is made, you will always get all the bandwidth you need. It’s not just bandwidth though; jitter is also taken care of by using small, fixed sized data packets. Essentially these networks were specially designed for voice communication.
When computer networks began popping up in the late 1980s) the {telecommunication companies wanted in. They already had the infrastructure in place so they began looking at how they could send data over their existing phone lines. They came up with quite a few different technologies with different levels of success. But there was (and still is) a problem: data networks are essentially different from voice networks.
Data is sent in packets, which can arrive in any order sometime after they’re requested, without causing any issues. Internet Protocol (IP) was created to provide more efficient delivery. Telecommunication 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 created as a compromise technology that could carry both voice and data. But in reality it’s much less efficient than a pure data network. The costs for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.