The usual perception is that VoIP costs hardly anything because everything’s cheaper on the internet. There’s high competition, and a fraction of the overheads etc. However you need to take into account the history of the telcos and their relationship with computer networks, and the way data actually travels around the Internet. An appreciation of this is needed to fully comprehend the mystery behind the VoIP vs. POTS pricing structure.
In the days before computer networks were pre-eminent 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 send lots of voice connections over great distances something that analogue circuits were unable to do and they continue to use them for this purpose today.
Voice communication have several special characteristics. For one thing, it’s inherently real-time. You’d get frustrated if phone calls consisted of long periods of silence followed by several seconds of high-speed playback 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 made, you will always get exactly the amount of bandwidth you need. It’s not just bandwidth though; latency is also carefully controlled by using small, fixed sized data packets. The point is the infrastructure was specially designed to facilitate voice communication.
When computer networks began popping up in the telecom companies wanted a part of it. They already had a lot of infrastructure there so they started looking at how they could send data over their existing phone lines. They came up with a number of technologies with different levels of success. But there was (and still is) an issue: data networks are fundamentally different than voice networks.
Data is sent in packets, which can arrive out of order long after they have been requested, without causing problems. Internet Protocol (IP) was created to provide best effort 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 created as a compromise technology that could carry both voice and data. But in reality it’s much less efficient than a pure data network. The overhead for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.
