Company behind magicJack to banish calling costs
NEW YORK — The company behind the magicJack, the Internet phone gadget heavily advertised on television, has another trick up its sleeve: free phone calls from computers, smart phones and iPads. — The cost of phone calls routed over the Internet has been on a long slide.
Context & Ripple Effects
VoIP pricing has been ratcheting down for years in this corpus's own arc: Yahoo was readying online calling back in December 2005, hybrid internet-and-landline phones arrived by mid-2006, and by April 2008 Skype was selling unlimited international calling for $9.95/month — itself a collapse from per-minute rates. The magicJack maker's announcement is the next rung: not cheaper minutes, but a zero-price service spanning computers, smartphones and iPads.
The move also lands in a market where the carrier-bypass play has just been proven on Apple's hardware: in March 2010, Line2 let iPhone users route calls around AT&T, while AT&T/Cingular's 2007 blocking of customers from free conference-call services previewed how incumbents defend voice revenue when a cheap alternative spreads.
First-order effects
- Skype's paid unlimited-calling model now competes against a free cross-device rival from the magicJack camp, pressuring the price floor it set in 2008.
- Users of computers, iPhones and iPads gain another way to place calls without paying carrier voice minutes, following the path Line2 opened earlier in 2010.
Second-order effects
- Carriers such as AT&T face accelerating erosion of voice revenue and may reach for the defensive toolkit they used in 2007 against free conference services — throttling or blocking competing call traffic.
- App makers and device platforms capture value that used to sit with phone companies, making voice an app-store distribution game rather than a minutes business.
Third-order effects
- If the slide toward free holds, voice becomes a bundled feature attached to devices and data plans, shifting the industry's battleground from per-minute billing to who controls the pipe and the platform.
- Regulators and carriers would then be pushed into conflicts over access and net neutrality for real-time communication, a fight the 2007 AT&T blocking episode foreshadowed.
The trend: Internet-routed voice is repricing relentlessly toward zero across every device class, transferring the economics of telephony from carriers to software platforms.