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Where to from here for big telcos?

Internet phone companies enjoying boom

From CNN's Phil O'Sullivan

VoIP is becoming big business on both a consumer and corporate scale.
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HONG KONG (CNN) -- Voice over Internet Protocol (VoIP) technology is transforming the telecommunications industry, translating into big savings on phone bills for individuals and companies.

VoIP involves the use of an Internet connection to make a phone call, instead of a conventional telephone line, turning phone calls into digital data.

Experts say the business of VoIP may soon dramatically change the business model of Internet Service Providers (ISPs) and begin to pose a serious threat to telecommunications companies.

VoIP services require a set-up cost, but after that, calls become virtually free.

Dominic D'Mello, from Hong Kong-based company Panwira Electronics, said his company decided to opt for a VoIP phone system because staff make hundreds of calls to China every day.

Using the company's broadband Internet connection to transfer its voice traffic, as well as data, is saving Panwira up to 40 percent of its conventional phone bill, D'Mello says.

The concept of sending voice traffic down broadband wires is still in its infancy, but the concept has the potential to dramatically change the business model of ISPs.

Tan Tong Hai, of Singapore-based company Pacific Supernet, said the company would prefer to be known as a CSP, a communications service provider, rather than an ISP.

"We are moving towards voice over IP, so VoIP is the future of our business."

Several big companies -- including Bank of America, Boeing and Ford in the United States -- have already moved to VoIP systems; now smaller companies are marketing the concept of VoIP to smaller users.

Hong Kong Broadband Network Limited (HKBN) targets densely populated housing estates in Hong Kong, which are cheap to wire with broadband fibre optic cable, and give great exposure to potential customers.

"Voice over IP can change the whole industry upside down because on the one hand the consumer can benefit by paying lower tariffs; on the other hand for the dominant player, I think its a big threat because they invest a lot in old technology," says HKBN chairman Ricky Wong.

Cherry Ho is one such resident who has recently signed up for the service for her local calls.

Her phone connects to a box, which in turn connects to a broadband line. But the line belongs to another large telco that is not happy that its conventional telephone business is being eaten into.

So while the concept of VoIP is cheaper for consumers, and provides a new business for broadband providers, no one is sure where that leaves the big telcos.

Dominant players all over the world are watching very closely.

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