Why Is VoIP so Cheap?
The common perception is that VoIP is so cheap because everything costs less on the net. There’s fierce competition, and very low overheads etc. However you need to understand the history of the telcos and their relationship with computer networks, and the way data actually gets around the web. An knowledge of this is necessary to fully comprehend the riddle behind the VoIP vs. POTS pricing structure.
Before computer networks were around telephone companies were using digital communication. In the beginning the original digital voice circuit was used in Chicago in 1962 however ARPANET, the predecessor to today’s Internet, wasn’t in operation until 1969. The telecommunication companies used these digital circuits to send lots of voice connections over long distances something that analogue circuits did not have the capacity to do and to this day still use them for this purpose.
Voice communication have several unique characteristics. For one thing, it’s inherently real-time. You’d get annoyed if phone calls 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; jitter is also carefully controlled by using small, fixed sized data packets. Essentially the infrastructure was specially designed for 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 phone lines. They came up with numerous technologies with different levels of success. But there was (and still is) an issue: data networks are essentially different than voice networks.
Data is transferred in packets, which can arrive out of order a long time after they have been requested, without causing any issues. Internet Protocol (IP) was created to provide best effort delivery. Telecoms 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 created as a compromise technology that could carry both voice and data. However it’s much less efficient than a pure data network. The costs for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.
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