The common perception is that VoIP costs so little because everything costs less on the World Wide Web. There’s fierce competition, and very low overheads etc. However you need to take into account the history of the telcos and their relationship with computer networks, and the way data physically travels around the web. An appreciation of this is necessary to fully comprehend the mystery behind the VoIP vs. POTS pricing structure.
Long before computer networks became important telephone companies were using digital communication. At the start the very first digital voice circuit was used in Chicago in 1962 although ARPANET, the predecessor to today’s Internet, wasn’t up and running until 1969. The telecommunication companies used these digital circuits to make lots of voice connections over great distances something that analogue circuits were unable to do and they continue to use them for this purpose today.
Voice communication has a few special characteristics. For one thing, it’s inherently real-time. You’d get frustrated if conversations consisted of long periods of silence followed by a burst of fast conversation to catch up with the conversation on the other end. To stop this from occurring digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is provisioned, you’ll always get exactly the amount of bandwidth you need. It’s not just bandwidth though; latency is also carefully controlled by using small, fixed sized data packets. The point is these networks were specially designed for voice communication.
When computer networks began emerging in the 1980s companies wanted a part of it. They already had a lot of infrastructure there so they began looking at how they could send data over their existing trunk lines. They came up with a number of technologies with varying levels of success. But there was (and still is) a problem: data networks are essentially different than voice networks.
Data is transferred in packets, which can arrive randomly a long time after they have been requested, without causing any issues. Internet Protocol (IP) was designed to provide more efficient delivery. Telecommunication companies had an expensive network in place, so there was a lot of incentive to use it. After a few misses Asynchronous Transfer Mode (ATM) was designed as a compromise technology that could carry both voice and data. However it’s much less efficient than a network intended purely for data. The costs for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.