Why Is VoIP Cheaper than POTS?
The normal perception is that VoIP is so cheap because everything costs less on the net. There’s high competition, and much lower costs etc. However you need to take into account the history of the telcos and how they relate to computer networks, and the way data physically gets around the Internet. An knowledge of this is needed to fully comprehend the mystery behind the VoIP vs. POTS pricing riddle.
Long before computer networks became important telephone companies were using digital communication. In the beginning the original digital voice circuit was used in Chicago in 1962 although 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 long distances something that analogue circuits did not have the capacity to do and they continue to use them for this purpose today.
Voice communication have several special characteristics. For one thing, it’s intrinsically real-time. You’d get frustrated 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 prevent this from happening digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is provisioned, you’ll always get exactly the amount of bandwidth you need. It’s not just bandwidth though; jitter is also taken care of by using small, fixed sized data packets. Essentially these networks were specially designed to facilitate voice communication.
When computer networks began emerging in the 1980s companies wanted in. 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 quite a few different technologies with varying levels of success. But there was (and still is) an issue: data networks are essentially different from voice networks.
Data is sent in packets, which can arrive randomly sometime after they have been requested, without causing problems. Internet Protocol (IP) was designed to provide best effort delivery. Telecoms companies had an expensive network in place, so there was a lot of incentive to use it. After a few misses 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 overhead for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.
