|VOIP Me Tonight, Okay|
|Topic||Supply and Demand|
|Subject||Consumers are switching from standard land lines to internet phone lines.|
|Key Words||internet, VOIP, telephone, price.|
|News Story||In 2005, more than 5.5 million consumers subscribed to internet-based telephone lines-three times as many as subscribed the year before. By 2010, the industry projects that over ¼ of U.S. phone users will use the Internet to place phone calls. The downside? This year, landline usage fell by 150,000 calls per week.
While Internet companies make significant inroads into traditional telephone markets, the news isn't as bad for telephone companies as it may seem. While landline usage fell by 150,000 calls per week, some of those 150,000 calls simply moved over to cellular phones, which may well be owned by the telephone company. Further, telephone companies own some of those broadband Internet access providers-so despite the loss of landlines, the phone companies still reap subscription fees (which are typically higher than just phone bills).
Still, competition from cable TV companies and other high speed Internet access companies is enough to make the phone companies sweat: Verizon reduced the price of its unlimited phone service in New York from $60 per month to just $35. AT&T offered its Web site customers a drop from $50 to $40 over the course of last year.
Why are phone service prices falling? Clearly, competition enters into the picture-and competition was unheard of (pardoning the pun) during the Ma Bell monopoly days. Economists would draw graphs to show how prices today are approaching those in a perfectly competitive market with many sellers. It's also becoming increasingly cheap for firms to offer basic voice communication services along with Internet access, cellular technology, or other, more expensive services. Some analysts look for the day when phone calls are "free"--or at least basic phone service is free when bundled with other, more expensive, additional services.
|Source||Richtel, Matt and Ken Belson. "More Consumers Use the Internet to Place Calls." The New York Times. July 3, 2006.|
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