Free Long Distance

The rise of the internet phone has meant free long distance for web-savvy users. Because internet telephony makes the same use of e-mail's global reach, calls are essentially free. Some companies have found innovative ways to incorporate advertising into their product, so it could be argued that the system isn't totally free. There's always a cost associated with looking at ads.

How are traditional phone companies expected to compete? One way is by hoping for slow adoption. The model used to predict the penetration of new technologies posits various groups and pick-up times. There will always be innovators, who embrace even experimental technologies, early adopters, regular users, and laggards. The more laggards in the mix, the better it is for the old-economy titans.

Giving Away Free Long Distance
A few companies have resorted to free long distance minutes as an inducement to buy international calling plans. But once you use up your 50 or 100 free minutes, it's back to the same old rate. Younger upstart companies have challenged some of the dinosaurs by dropping their rates so low that there's no need to give away free long distance. When you're paying three or four cents a minute to call India, it's more expensive to call New York or Los Angeles.

Many of these new entrants have simply piggybacked their services on existing networks and found other ways to reduce costs. Others have built wireless networks from the ground up using satellites and other wireless hubs to route their calls. The upshot is, all this competition has depressed the market to such a degree that there's just no reason to pay 50 cents a minute for any international calls.