Prospects for Internet Telephony: Toy for Multimedia Hobbyists or Next-Generation Technology?

The sustained rate of technological change in the telecommunications industry has opened up significant windows of opportunities for telecommunications networks operators to develop value-added services and multimedia applications. The growth of the Internet raises the issue of a possible migration from traditional circuit-switched networks designed for basic voice communication towards shared packet transport handling a mix of applications. In this context, telephony over the Internet Protocol (IP) network - the transmission of voice over the public Internet or over a private Intranet - has attracted considerable attention as an appealing alternative to traditional telephony. However, instead of being a tariff arbitrage mechanism for telephony, Internet telephony is likely to develop as a component within an integrated system of video, data and voice applications. The potential offered by IP networks for computer-telephony integration and the continuing technological development in this area suggest that this will not be a transient phenomenon. However, most uncertainties reside on the demand side and the diffusion of Internet telephony is still at an early stage. This paper analyses the current demand and market potential for Internet telephony. It examines users' attitudes and behaviour towards this service, and develops possible market scenarios for the future. The study investigates technical, economic and social factors supporting and hindering the adoption of Internet telephony. The results of the analysis show that a high penetration of voice services over the IP still has to be reached and that potential users have very heterogeneous perceptions towards new communication applications.