Disrupting the US Telco Market: AT&T to Mobile Phones to Skype

As I travel around the world, I see the vast selection of Mobile Phone devices on the market. Most of the time, I know that these phones will never make it to the US Market. The chief reason is that the US Market has gotten use to the idea that a Mobile Phone is something that the Telephone Company produces. We were initially spoiled that way in how we would get a cool phone for practically free. Looking at other countries, people actually have to pay between $70-$800 for a mobile phone. This created condition in the market which drove up features and functionality. Everyone wanted the "coolest" phone.

Before the breakup of AT&T in the 1980's, we were used to the phone company owning the complete system: from the mouthpiece, to the cables, to the switches.. In the USA, we were used to playing nice with the big phone company which has provided us with our ability to connect to the outside world. If the phone broke, we waited for them to fix the phone. If we didn't pay our bills, the phone company would show up to take away the phone. (I never actually saw this, but I'm sure it happened.)

After the AT&T breakup, many of us were surprised to find that we actually "owned" that ancient looking rotary phone at Grandma's House. Telephone manufactors suddenly felt the opportunity, and the new consumer Telephone device market was born. The hard-wired telephone got cheaper and cheaper with more and more features.. People didn't replace their phones much, instead they would only buy to upgrade features. The situation got to a point were we got features we don't want. Last July, I was desperately running around Office Depot trying to buy a cordless phone without an answering machine (but with a mute button). In all, the landline telephone market is dried up. Leaving the shift in the market to cheaper and more efficient manufacturing from overseas. The big Bell is now many small Bells: PacBell, SBC, Ameritec, Alantic, Bell South, etc... Overtime, these baby Bells have consolidated into a few Exchange Carriers, but their customers are relatively stuck given the cable running into their homes and offices.

In the last two years, IP Telephony (Voice over IP) has appeared to start to cut "the cable" of the Exchange Carriers. The most effect of these are Skype and Vontage services. Now with the extensively deployed High-Speed Internet services available from either Cable TV, DSL, WiFi and Satellite, the single phone company telephone cable has competition. IP Telephony only requires a decent connection to the Internet, and you can make calls anywhere in the world and from anywhere in the world. (Last year, I made phone calls from my laptop on the White Sand beach of Boracay.)

Imagine what the effect of IP Telephony would be if AT&T still had a monopoly on the Telephone market? My guess is that AT&T would lobby lawmakers to outlaw the service. We are seeing this now in China. China has blocked Skype as reported by the Register.

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