Telecom companies and VOIP

Just the other day during a TV program,the noted investor Ramesh Damani said that he is not bullish on telecom companies as Google Voice(read VOIP) is going to dominate the voice communication market resulting in reduction of tariffs for the telecom companies.This in a way is ironic as VOIP also happens to use the same telecom network but using a different type of connection i.e packet switching as opposed to circuit switching.Since data transfer rates are happening at such a fast rate there is practically no difference in quality between a circuit switched normal telephone call or a packet switched VOIP call.So,people will not be ready to pay the extra premium for a normal telephone call.This will increasingly be the case as improved terminal devices to make VOIP calls come to the market.

Now,the telecom companies are making most of their revenues through voice services and if there is a reduction in voice services usage either they will have to increase the revenues from data services with higher rates or reduce the voice services tariffs to comparable rates as data services to increase volumes.I think they will have to do both to maintain viability of their businesses.As of now VOIP is more or less a free ride for most users.At the end of the day there is nothing called a free lunch.And,I am still bullish on telecom companies as the good ones will innovate to find new revenue streams.