[Web Special] Why Phone Rates Are So High

An insider's story

Thursday, September 03, 2009 - 02:22 PM

For approximately eight years, I financed my multi-threaded geek-powered, politico-comedy lifestyle by working as a strategy consultant to the communications and media industries. I worked for a small firm out of Boston called Altman Vilandrie & Company. While it wasn't the long term life for me, I've yet to work at a place with smarter people, and I have some great memories like going to Barcelona to learn about the convergence of landlines and mobile phones or to Washington D.C for a conference dedicated to hashing out bilateral international termination rates. ...(continue reading)

"The D.C. conference I attended was literally a bunch of people in little rooms with binders negotiating what the rate from country A to country B should be."



Yes. I know. It sounds too sexy to be true. Say it slowly to yourself. Imagine Barry White in the background. International. Termination. Rates.

See, in order to route your call from the United States to, say, Sri Lanka, the call's got to exit the U.S., traverse international cables and "terminate" on a domestic provider in Sri Lanka. Your international per minute charge is actually a combination of origination, transport and termination rates. Transport is cheap thanks to abundant fiber optic cables and highly efficient IP (as in voice over IP technology). However, termination rates can be exorbitant depending on the country, the telecom operator there and whether you're calling a mobile or not. This recent article in Telecoms Europe shows that the world of international termination is still a mess.

The D.C. conference I attended was literally a bunch of people in little rooms with binders negotiating what the rate from country A to country B should be. This happened in the 21st century. Also present at the conference were companies like Arbinet, who tried to bring some modern technology to this ever-more-complex world of international voice communications.

I'm looking forward to a time when this isn't how technology-based businesses are run, and we're headed in that direction. All applications are converging onto an Internet-based platform. By applications I mean almost anything that involves information: video viewing, photo editing, music streaming, financial software, and yes, talking. We'll find it silly that we had dedicated devices (phones) designed just for talking and an addressing scheme (phone number) that could only support one app on one type of network.

As freelance reporter Cliff Kuang said in our segment this morning, "there's no reason voice shouldn't be embedded in Facebook," and I'd add "or Twitter, or your car or portable-device-thats-not-just-a-phone-but-rather-a-gateway-to-all-information."

Until then, we can rest uncomfortably knowing that old school business models often die hard. Ultimately, they can delay but not prevent the future.


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