Will VoIP providers' high termination fees ultimately (and irreparably) stovepipe the Internet?

Will VoIP providers' high termination fees ultimately (and irreparably) stovepipe the Internet?

Summary: All around us, it seems, there are forces conspiring to stovepipe the Internet. That's where there's no single Internet.

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All around us, it seems, there are forces conspiring to stovepipe the Internet. That's where there's no single Internet. But rather, a whole bunch of them. To us of course, it looks like one big Internet with all sorts of devices (computers, PDAs, smartphones, etc.) that can connect to it. But more and more, business interests are turning the old idea of the Internet (where you can get to anywhere from here as long as you and anywhere have an IP address) into a world where you can't get there from here.

RedMonk's James Governor and I touched on this issue during last week's MonkCast where one of the issues we discussed was how eBay buyers and sellers cannot transact over Google Checkout as an alternative to PayPal (a wholly owned subsidiary of eBay). One reason eBay users might have an interest in Checkout is that, until 2008, Google isn't charging any fees. But, if you're on eBay, you can't get there from here.

But even more notorious than that are the telecom carriers who are clamping down on a range of services when those services don't look good on the balance sheet. For example, there are plenty of cell phones on the market that are capable of using MP3s as their ringtones (MP3s that cell phone owners can acquire on their own). But that flies in the face of the ringtone business where carriers get to collect three or more dollars for an incomplete and often poorly rendered version of the song.

Another example has to do with VoIP-based to which any phone user can connect, but that (a) competes with a carrier's existing business and (b) eats heavily into the bottom line because of the termination fees those VoIP services charge to the carriers. When a call transfers from one carrier to another, termination fees are customarily paid by the originating network -- fees that help to support of the infrastructure of the receiving network.

But in the case of VoIP-based services, that infrastructure doesn't require nearly the financial support that say, a carrier's infrastructure requires. But some of the VoIP services are using termination fees as a profit center. In fact, the very reason they can offer their services (eg: a conference calling service) so inexpensively (in some cases, maybe even free) is that they make their money on the termination fees that must be paid by the inbound carriers.

Earlier this year, in March, I wrote about how AT&T was clamping down on the practice by cutting its customers off from access to certain voice conferencing services (AT&T cited a clause in their customer agreements that says calls are for person to person calls, not conference calls. Eeek!!!).

Now, via the Register, it's apparently T-Mobile's turn. According to Bill Ray:

T-Mobile has stopped connecting its customers when they call someone using Truphone, saying the VoIP operator is overcharging for interconnection....Instead, T-Mobile customers get a recorded announcement saying they must have misdialed....T-Mobile says its objection is that the termination rate Truphone is asking for is about the same as it pays the other mobile network operators, while Truphone has no mobile network to support.

Is the Net stuck just shy of a tipping point where some inherently non-scalable incumbents are staving off extinction at the hands of truly scalable competition by holding them hostage? And thanks to IP network-based scalability, the sky is pretty much the limit in terms of the sorts of services that we could have access to. How much longer will we put up with the deprivation?

Topics: Browser, E-Commerce, Mobility, Unified Comms

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  • Obvious answer.

    Very rarely (if ever) are you going to get "open and free" from "for profit" companies. There is a strong incentive to build closed, proprietary systems to lock users into thier product offerings.
    This is not exclusive to the internet.
    Givernment regulation is one tool to combat this, however increasingly our legislation is driven by for profit lobbying so the ability of government to provide what's best fot the people, not the bottom line of various interested parties, is diminishing yearly.

    I propose violent revolution and digital anarchy by the few aware activitsts as the only means left to the common man. Clearly we as a society are not disciplined enought to engage in any kind of meaningful boycott to express our will.
    shraven