Huge cost benefits waiting to be tapped

: One of the biggest threats to dedicated national telecom networks and optic fibre networks carrying telecom traffic across continents is the emergence of voice over internet protocol (VoIP). A technology that enables transfer of voice calls over the internet. As a result, service over VoIP networks has also begun to be known as IP telephony or Internet telephony. Around 10% of all voice transfers across the world have already moved from the traditional time division multiplexing (TDM) networks used by telecom operators to VoIP since the technology was first introduced by the US-based VocalTec in 1995. The biggest advantage of moving to VoIP is the cost saving of nearly 70% for the end-user.

Clearly, global VoIP businesses are beginning to get some astounding valuations. Last month, Luxembourg-based Skype Technologies, the world leader in VoIP software and internet based communications, was acquired by eBay for $2.6 billion in cash and stock — a valuation that was 26 times Skype's current revenues. Skype which has 5.4 million users in 225 countries is currently adding approximately 1,50,000 users a day. Yahoo! Japan is the world's second largest VoIP player with 4.5 million users.

Experts believe that the rate at which the business is exploding, by 2007 around 75% of international long distance calls will be made on VoIP. While the world VoIP revenues were around $1 billion in 2004, they are expected to rise to $15 billion by 2008. In 2004, of the 12 million VoIP users in the world, around 7 million were in Japan and another 1.5 million in the US. By the end of March, 2005, the number of VoIP users had already crossed the 17.4 million mark.