The common perception is that VoIP costs hardly anything because everything costs less on the internet. There’s high competition, and much lower costs etc. However you need to acknowledge the history of the telcos and how they relate to computer networks, and the way data physically travels around the Internet. An appreciation of this is necessary to fully comprehend the mystery behind the VoIP vs. POTS pricing riddle.
Before computer networks were around telephone companies were using digital communication. At the start the very first digital voice circuit was used in Chicago in 1962 however ARPANET, the predecessor to today’s Internet, wasn’t up and running until 1969. The telecommunication companies used these digital circuits to make lots of voice connections over great distances something that analogue circuits were unable to do and to this day still use them for this purpose.
Voice communication has a few special characteristics. For one thing, it’s intrinsically real-time. You’d get annoyed if phone calls consisted of long periods of silence followed by a burst of fast conversation to catch up with the conversation on the other end. To prevent this from happening digital voice circuits provide guaranteed Quality of Service (QoS). Once a connection is provisioned, you will always get exactly the amount of bandwidth you need. It’s not just bandwidth though; jitter is also taken care of by using small, fixed sized data packets. The point is these networks were specially designed to facilitate voice communication.
When computer networks began popping up in the late 1980s) the {telecommunication companies wanted a part of it. They already had the infrastructure in place so they started looking at how they could send data over their existing phone lines. They came up with numerous technologies with different levels of success. But there was (and still is) a problem: data networks are fundamentally different than voice networks.
Data is transferred in packets, which can arrive out of order a long time after they’re requested, without causing any issues. Internet Protocol (IP) was designed to provide more efficient delivery. Telecoms companies had an expensive network in place, so there was a lot of incentive to use it. After a few misses Asynchronous Transfer Mode (ATM) was designed as a compromise technology that could carry both voice and data. But in reality it’s much less efficient than a network intended purely for data. The costs for data transfers on ATM is more than 10connection, compared to about one percent for an Ethernet running full-throttle.