Two developments this week presage dramatic changes in the business plans of domestic and international telecommunications providers. Many of them don't recognize it, and even those that do will deny it publicly. They have to, or their share prices will tumble.
These developments are not seismic by themselves, but you can think of them as the venting gases that signal a tremendous volcanic eruption to come. The first was Skype's announcement that it is offering Skype users free calling to PSTN phone numbers in the U.S. for the rest of this year. This will naturally accelerate the adoption of VOIP technology and the migration away from narrowband wireline voice. I suspect it will also lead to heavy incumbent lobbying at the FCC and before Congress to impose more regulation and costs on VOIP providers, lest they take too much of the market. Those results are easy to predict.
Less obvious is the crucial effect Skype's move may have on the net neutrality debate. This will bring the into sharper focus much earlier. It may also make some of the incumbents regret those TV ads they've been running in the DC market promising they would never block consumers' access to the web (although I don't think they promised not to block applications). The temptation to block Skype calls may grow if Skype and the almost certain copycat services simply melt away large voice revenues the incumbents were counting on to fund the transition to broadband networks.
The second development was Cablevision's offer of a flat-rate service that allows some of its VoIP customers to make unlimited international calls for just $19.95 per month extra. This is reminiscent of the first flat rate long distance and wireless plans. If this becomes the industry standard - as seems likely - it will wreak havoc with the complex ecosystem of long distance resellers, phone card distributors and satellite bypassers that has sprung up to take advantage of the innumerable arbitrage opportunities in the international voice market. If alternative termination providers are available in the called countries, flat rate U.S. plans will expedite the already steep decline in foreign incumbents' settlement payments and provide more revenue for competing termination providers.