August 1996

Internet Phone Calls are a Fraud

It's gotten a lot of coverage - on the Web, in Advertisements, on TV programs such as NextStep, and in the newspapers. Critics have been quick to point out the ridiculous flaws in the idea, and yet it seems to persist. What I'm talking about is "Free" Long Distance Phone Calls on the Internet. You talk into your computer, and your voice pops out of another computer, ANYWHERE IN THE WORLD! And you don't pay a penny for the "phone call"!!! Or then again, maybe you do.

What is the Internet Made Of?

We'd all like to believe that it is sugar and spice and everything nice, but in reality it seems to be snakes and snails and puppy dog tails. But the most relevant answer to the question here, is that the Internet is made of lots of expensive equipment hooked together with lots of expensive wires. It's the wires that I'm concerned with. Let me be blunt: They're PHONE LINES STUPID!

And just who owns these phone lines? Mostly MCI, Sprint, and other long distance telephone companies. And guess what? These companies get paid for every single one of these lines. I'd even be willing to bet that the profit margin on these dedicated point-to-point data lines is much higher than the profit margin they get out of the long distance phone lines. But so what? The phone companies don't charge per byte, or per message, do they? So it's still free, right? Maybe not.

What's This Stuff Called Bandwidth?

Each piece of wire can only carry so much data. Once that piece of wire fills up, things slow down. And it stays slow until you add another wire, to carry the overflow that didn't fit on the first wire.

So here's what happens when you make a long distance phone call on the Internet. Traffic (the amount of data on the wires) goes up, slightly. Fine, you've got your free phone call. But what happens when everyone starts making long distance phone calls on the Internet (for instance when Microsoft builds it into their software)? Traffic goes up A LOT. And the wires fill up. And everyone who pays for those wires has to buy more wires to keep their customers happy. But suddenly it takes three times as many wires to please the customer base as it did a year ago.

Well, we've arrived at my point. Your Internet Service Provider is going to jack up the price you pay, because they have to. And the amount your price goes up is going to be considerably more than what "saved" with "free" long distance phone calls. Why more? Because the phone companies probably get a higher profit margin, and because you've definitely added at least one extra layer of middle-businesses to take their cut (your Internet Service Provider). And did I mention that the quality sucks? So you're actually paying more, and getting less. The phone companies that you think you are screwing, are actually laughing all the way to the bank, while your Internet Service Providers are the ones really getting squeezed (which I'm sure the phone companies won't lose any sleep over, seeing as how they want into that business anyway).

"There ain't no such thing as a free lunch."

I'm just a guy trying to fill in the information void. There's (probably) nothing new written here, but there still seem to be a lot of clueless people out there.
Back to Tom's home page.

Oh, you're still here? Well, there's one last untidy little thread hanging out. Why would Microsoft build this service into their software if it is such a stupid idea? Is Bill Gates an idiot? Unlikely. Do they think their customers are idiots? Quite possibly. But there may be more to it than that. Well, I'll leave the corporate conspiracy theories up to you. Chow.