Why Is VoIP Cheaper than POTS?
The normal perception is that VoIP costs so little because most things are cheap on the net. There’s high competition, and a fraction of the overheads etc. However you need to acknowledge the history of the telcos and how they relate to computer networks, and the way data physically travels around the net. An appreciation of this is necessary to fully comprehend the riddle behind the VoIP vs. POTS pricing riddle.
Before computer networks were around telcos were using digital communication. At the start the original digital voice circuit was used in Chicago in 1962 however ARPANET, the forerunner to today’s Internet, wasn’t in operation until 1969. The telecommunication companies used these digital circuits to make lots of voice connections over great distances something that analogue circuits were unable to do and to this day still use them for this purpose.
Voice communication has a few special characteristics. For one thing, it’s inherently real-time. You’d get annoyed if conversations consisted of long periods of silence followed by a burst of fast conversation to catch up with the conversation on the other end. To stop this from occurring digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is provisioned, you will always get exactly the amount of bandwidth you need. It’s not just bandwidth though; latency is also taken care of by using small, fixed sized data packets. The point is these networks were specially designed to facilitate voice communication.
When computer networks began emerging in the 1980s companies wanted a part of it. They already had a lot of infrastructure there so they began looking at how they could send data over their existing trunk lines. They came up with a number of technologies with varying levels of success. But there was (and still is) an issue: data networks are essentially different from voice networks.
Data is transferred in packets, which can arrive in any order long after they have been 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 some trial and error Asynchronous Transfer Mode (ATM) was designed as a compromise technology that could carry both voice and data. However it’s much less efficient than a network intended purely for data. The costs for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.
