It’s The End Of The World As We Know It

by Stuart Zipper

By now most folk following the telecommunications industry closely are buzzing (or blogging, or tweeting, or whatever) about AT&T chairman Randall Stephenson’s revelation, at an analyst conference in New York, that the one-time all-powerful AT&T is planning on ditching its traditional telephone service. Instead it’s planning to shell out an extra $14 billion over the next four years beefing up its digital and wireless IP networks.

Put another way, it’s betting its future on VoIP, as far as voice communications go. In my opinion, that’s not a bad bet.

Now there were still an estimated 112 million switched circuit lines, the traditional phone lines, in service in the middle of last year. But that’s down from 192 a decade ago. So old-fashioned telephony hasn’t quite died yet, but it’s clearly on a downward spiral.

It’s also not the first time I’ve seen such a radical change in the phone industry. I remember when the first electronic switch handled the first phone call, replacing old mechanical frame switches. In fact I was in the room when that switch went live. Interestingly, though, it was decades later until even the last of the old plug-board operator-operated switches (remember Ernestine the operator? One ringy dingy?) went out of service.

I also remember when the first digital cellular phones debuted – there were six of them in existence at the time – not six models, six phones, all test units from Qualcomm. I got to play with one at a trade show. But it took years after that until the last of the old analog mobile phones went out of service.

As for VoIP, it was perhaps two decades ago that I got my first VoIP phone, which I dutifully plugged into the back of my desktop computer. Then I sat and waited for someone to call. After six months, during which nobody called (at that time VoIP and the switched phone network were not interconnected) I unplugged the test unit and trashed it. It was simply too early in the life of the technology.

So here we are, a couple of decades down the road. Thus based on history the timing is right for AT&T’s move. It’s clearly betting on VoIP carried over broadband, over fiber and over LTE, which AT&T expects to reach 99% of the U.S. population in short order.

For subscribers to VoIP carriers such as Phone.com, the AT&T news should be good. That’s because it transforms AT&T into a broadband pipeline provider first and foremost, which means the company’s primary concern has got to be the quality of that service. And of the course the higher the quality of the broadband service, the higher the quality of the VoIP service running over that broadband.

For sure AT&T is going to try to sell its own VoIP services, over both terrestrial and wireless broadband. As long as it’s fair competition, in which AT&T does not take advantage of its position as the broadband provider to favor its own service, that’s fine. Clearly it will be up to the FCC and other regulators to ensure that. And until now AT&T and the other regional Bell carriers have been little threat to top-tier business VoIP carriers such as Phone.com, whose offerings are typically more comprehensive and economical.