Digital Telephony Competition Causing VoIP Providers to Slash Prices

It is basic economics that a lack of supply yields a higher demand for a given product. If there is less of something that people want, then they will do more in order to get it. On the other side of the equation, if the supply exceeds the demand, then people don’t have to worry about doing anything in order to get that product.

When there is a surplus in supply, providers of a given product are forced to make changes that will make their product seem more attractive. The most common change for this scenario is lowering the price in order to attract business. This is exactly what we see happening in the digital telephony industry between numerous VoIP providers.

A Word About VoIP Service

Also referred to as digital phone service, VoIP (Voice over Internet Protocol) service is the latest addition to the broadband related communications services. VoIP service functions in a very similar manner to standard telephony, with the difference being that instead of calls being transferred across telephone wires, they are routed across the Internet or another IP network. Whereas phone calls are traditionally transmitted over a dedicated circuit-switched voice transmission line, VoIP calls are transmitted over a general purpose packet-switched network.

VoIP Provider Competition

Because VoIP service can be offered at a significantly lower price than standard telephony services and fact that it can be packaged with other broadband related services, there have been a large number of telecommunications companies entering into the VoIP fray.

Some of the larger VoIP providers include AT&T, Broadvox Direct, Vonage and Time Warner. Since there are a large number of VoIP providers throwing their hats into the ring, there is a large amount of competition to gain a stranglehold on this growing industry.

VoIP providers AT&T, Broadvox Direct and Vonage have recently been forced to slash their prices in an effort to entice customers to choose their service as opposed to that of the competition:

• Whereas AT&T’s CallVantage unlimited VoIP calling plan used to cost $34.99 / month, it is now available for a reduced cost of $29.99 / month.
• Broadvox Direct offered a VoIP plan for $29.95 / month but has been forced to reduce it down to $19.95 in order to attract customers.
• Vonage made numerous changes to their VoIP service, slashing the number of digital phone options to choose from down to 2 from 3, and reducing the cost of their Premium service by $5 / month.

As the competition continues to heat up, it can be expected that prices will again see a reduction as the larger companies take a short-term loss in order to gain a firm grip on one of the largest growing broadband related industries.