The catch, however, is that free telephone service requires a broadband, or high-speed, connection to the Internet. Local telephone companies turn out to be the chief providers of broadband, which means that they can profit from a consumer’s switch to Internet telephony. The calls may be free, but the bandwidth isn’t.
By manipulating bandwidth prices, Big Telecom can make Internet telephony seem attractive — or a prime source of profits. That’s because fans of Internet telephony still won’t be able to cancel their local service; they’ll still need it for the bandwidth.
In managing the pace of adoption of Internet telephony, telcos can expect assistance from regulatory bodies. To be sure, Michael Powell, the FCC’s chairman, has been campaigning for Internet telephony to receive an exemption from taxes and other incentives for it to gain ground. But states rely on telcos for a nice chunk of tax revenue and some are eager to impose on providers of Internet telephony the same “responsibilities” that traditional telcos carry. Among these are contributions to a fund for the 911 emergency calling system; emergency service in the event of an electricity blackout; and subsidies to low-income telephone customers.
[…] For these proponents, of course, the battle with Big Telecom is one front in a wider war on the oligarchies that dominate the world economy. But to the oligarchs themselves that war is a mere sideshow. The real fight is between Big Telecom and Big Cable, with both sides using Internet telephony as a weapon.