VoIP taking 6 percent of international calls volume

About 6 percent of international voice call volume travels over the Internet instead of traditional telephone networks, sidestepping some of the more expensive aspects of cross-border telecommunication, according to a report from TeleGeography Inc.

Two things drive the use of VoIP (Voice over Internet Protocol): the cost to carriers for sending a call across a border, and the cost to consumers for long distance calls, said Jason Kowal, president of TeleGeography.

In areas of the world with high settlement rates -- charges one carrier passes to another for accepting a transnational phone call -- carriers can use the Internet to lower the cost, he said.

"The biggest route (for VoIP) is U.S. to Mexico," Kowal said, citing the lack of meaningful competition between Teléfonos de México SA de CV (Telmex) and other Mexican telecom operators to drive settlement costs down. International carriers with a domestic monopoly may see VoIP as a threat to their revenue streams, by whittling away at their settlement payments or long-distance revenue.

Some VoIP wholesalers can take advantage of the price difference in charges for IP traffic and voice traffic in a system of arbitrage -- by selling voice traffic conversion services to the big U.S carriers, and then buying IP access at the lower price charged for IP traffic by the terminating carrier.

The U.S. to Mexico route carried about 12 percent of transnational VoIP traffic charted by the Washington, D.C.-based research group. U.S. to China accounted for 6.6 percent, with Russia, Brazil, Poland and Israel in the top group of VoIP destinations. Most VoIP calls are originating in the U.S., Kowal said, but its use is increasing in Britain and China, he said.

Call quality remains an issue with VoIP use, Kowal said, but less so in countries with poor phone quality to start. The difference in voice quality between a VoIP call to China and a regular publicly switched telephone network phone call is less important than lowering the price of the call, he said.

TeleGeography's study largely tracked business calls, leaving out PC-to-PC Internet phone calls at the retail level. The addition of SIP (Session Initiation Protocol) to Microsoft Corp.'s Windows XP operating system may become the basis for a broad expansion of retail VoIP calls.

SIP permits real-time communication like instant messaging, videoconferencing, voice calls or application sharing over an Internet Protocol network. SIP works with any IP-capable device, including newer mobile phones and personal digital assistants as well as PCs.

SIP may make it more convenient to make long distance calls routinely from a PC, but broad adoption of the technology at the consumer level will depend on improvements to call quality and network infrastructure, he said.

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