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Saturday, June 19, 2004

Telecom investments -Into Thin Air via Forbes

Phone calls now flit over Wi-Fi networks at little or no cost to the callers. It is the story of the telecom industry--hundreds of billions of dollars are evaporating into the ether.
The new technology of wi-fi heralds a telecom future that is both brilliant and bleak: fantastic devices and free services for consumers, disappearing dollars for telecom companies and their long-suffering investors. In 2000, after fiber-optic cables whittled the price of carrying a call to just about zero and new competitors flooded the market, the long-distance industry had peaked and begun a steep slide. It has since seen a third of its annual revenue vanish in four years--$35 billion, poof!--and the future is grim.Now the same kind of destruction, courtesy of the omnivorous Internet, is engulfing the local phone monopolies and even threatens the cell phone industry. It promises to transform the phone system with new competition, plunging prices and a passel of new features. This next wave begins with "Voice over IP," which means zapping phone calls over the Internet (or private networks built like the Internet). It continues with "Voice over Wi-Fi," Wi-Fi being a free wireless on-ramp to the Net.This, of course, will speed the demise of their mainstay business of voice traffic In a world of Net phones, local monopolies and duopolies will no longer exist; Internet consumers will have every telco in the country competing to win their business. You can now deliver service without owning the connection to the customer, and that is probably in the end the most important change.

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