As telecom deregulation has spread around the world over the past few decades we’ve watched telcos react to competition by salami slicing their tariffs. Then along came cable and wireless carriers which gave them another headache as they watched not just their market share diminish but their margins as well.

Once the Internet became mainstream, ways of carrying voice as well as data lead to the development of Voice over Internet Protocol. Not ones to dismiss a good opportunity when it comes along, the telcos began saving money by using it to route their traditional voice traffic.

But the goal posts keep moving. It wasn’t long before ways of carrying voice from one PC to another were developed. Along came Skype and, because Skype is useless unless your friends have it too, its viral nature guaranteed its rapid spread. These days there are about seven million Skype users online at anytime and its success has brought other players into the market including Google Talk, AOL’s AIM Phoneline, Microsoft’s Windows Live Call and Yahoo! Messenger.

If this wasn’t bad enough for traditional telcos, Skype and others started selling cheap land line connection almost anywhere world wide. And according to Yankee Group, the next big growth area for voice is in contextual applications where users discuss their interactions whilst doing something like gaming.

For years telcos got away with charging high prices and poor service. Now they are being challenged by players who operate over a larger footprint with much lower price points. Unless the traditional telcos can find a way into the VoIP market their future looks ever more vulnerable.

Author Michael Soliatis writes about telecom issues and offers essential virtual switchboard advice.

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