Future of Telecommunications Essay

3881 Words Apr 18th, 2012 16 Pages
| WORK CASE 15 | Case Study 15 | Bus5480 Strategic Management Professor: Dr. Uchenna Nwabueze | Skype versus AT&T and the Future of Telecommunications | 4/8/2012 | Prepared by: James Whetsel

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Executive Summary
This report was written to analyze the competition among the Voice-over Internet Protocol (VoIP) industry segment, especially as it relates to the relationship between Skype and AT&T and the competition between the VoIP market and the land line market. In analyzing this segment we found that VoIP is a growing industry in what has historically been predominately a land line telecommunication company such as AT&T.
The industry segment is faced with a rivalry type competitive market that is
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Skype offers its customers VoIP, which, defined simply, was the transmission of voice traffic over IP-based networks and primarily free on Skype-to-Skype communications. In other words, it was telephone via an Internet connection.
The reason VoIP has become so popular is that it offers cost advantages compared with traditional telephone networks. Most telephone user pays a flat monthly fee for local telephone calls and a per-minute charge for long-distance calls. In contrast, Skype users can communicate for free with other Skype users and pays only a small fee for long-distance calls to landlines.
Unlike telecommunications carriers such as AT&T, VoIP providers were not required to invest substantial sums of capital in equipment and infrastructure, given that they utilized what was already in place. VoIP providers were classified as information service providers and therefore fell outside the Telecommunications Act of 1996, which heavily regulated telecommunications carriers. The lack of regulation made it easier for companies to enter the VoIP market than to enter the telecommunications market.
VoIP is expected to show constantly increasing growth rates in the near future. According to a report by Infonetics Research, the global VoIP services market had reached $15.8 billion in 2006, an increase of 66 percent over 2005, and was on track to triple to $48.9 billion by the end of 2010. Projected growth for the decade was in the area of 145-150 percent.

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