Chris Kranky

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How low can pricing go? Future predictions

Chris KoehnckeChris Koehncke

Commodity voice prices, particularly in wholesale, have continued to decline. But how much further down can they go? I’m betting a lot further. A 10 minute phone call using today’s inexpensive retail rates might cost perhaps $0.20 ($0.02 a minute). However, in terms of Internet IP usage, the cost would only be $0.001.

This means a traditional telephone call today is still costing 200x more than what it would cost to send it over the Internet. Clearly there is continued room for prices to slide. However, one might argue that as a consumer is $0.02 a minute low enough. Time will ultimately answer that question.

Witness Intelliquent (NASDAQ:IQNT) is a little known company whose primary job has been to provide tandem voice services to various other service providers. Effectively they’re the modern equal to what we previously understand was a long distance provider (only Intelliquent only sells to other operators). Their selling message to the operator is that it’s cheaper to just let them handle the call than for the sending carrier to bother

Last quarter, Intelliquent handled over 33 billion minutes of voice traffic and their average revenue per minute was, get ready, $0.00158. Intelliquent is well on it’s way to achieving Internet telephony rates but unfortunately, they lost money last quarter and the stock got clobbered.

My predictions for the industry are as follows:

It’s going to be an interested next few years and the emergence of new technologies, like WebRTC, will enlighten businesses and consumers to new capabilities and put increased pressure on traditional service providers to re-mold themselves to this opportunities.