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Chat should be wake-up call for phone industry

Tales of the Information Age, Part MMCCCXIV:

I called my brother Steve recently. I was in a hotel room in Copenhagen, Denmark. He was in South Carolina. Had I used my long-distance company's credit card (bypassing the hotel's extortionate direct-dial rates), I would have paid about $5 for the first minute and $1.50 for each additional minute, plus 40 cents a minute for the hotel connection.

In this case, though, the total cost was about 50 cents a minute: 40 cents for the hotel and 10 cents for an Internet-service provider's local number in Copenhagen. We used a product called Internet Phone, which digitizes voices and sends them on the Net, all but bypassing the entire long-distance system. I was using the same fundamental technology that let me dial the same local number in Denmark, connect to a computer in San Jose and check my e-mail.

Almost two years ago, when I first looked at these kinds of products, I was convinced the phone companies were facing a troubling (for them) new world where the Internet and its successor networks and standards would be the major media for all kinds of digitized communications, from text to voice to, ultimately, video. Users of digital information don't care how it gets from here to there, so long as it gets there quickly.

Consider last week's little phone test a confirmation of that future _ but a threat in the near and medium terms. The threat is to our ability to get much done on networks that we increasingly are filling with data that the networks never were designed to handle. Still, the experience was delicious.

Steve was in his home office, running a PC with a Pentium processor and a sound system to which he attached a telephone headset. I was using a notebook computer with a built-in sound system and microphone. We both were using Vocaltec's Internet Phone.

To be sure, the connection was fairly lousy. Due to limitations in my hardware, I had to shut up while Steve was talking. And the networks we were using to span the ocean were not as speedy as we would have liked; other people wanted to get things done, too, using the same data pipes.

But the major point is: We talked. We chatted about my trip. I said hello to Steve's wife, Tina, and asked them to give my niece a hug. Meanwhile, Steve and I had set up the entire conversation _ and figured out how to solve a mid-call problem _ using an online text chat program, which also was running in the background on both machines at the same time. The only reason I was paying anything for this call was that the hotel charges me when I use the phone and that the Internet provider (America Online in this case) has a surcharge for overseas connections. Had I done the same thing from my home in California, using my normal Internet provider, the per-minute cost would have been zero.

If all this doesn't at least worry the phone companies, which have exhibited few signs of life as the Internet has bubbled around them, then they deserve to fade into irrelevance. One of these days they'll have to acknowledge that the old pricing schemes _ where you pay minute by minute, more or less, depending on the distance _ make little sense in the emerging communications world.

Of course, they're probably hoping the Internet is nearing overload, if not the outright collapse some people have predicted. And products like Internet Phone, which take advantage of the Internet's structure _ essentially all you can eat for a flat rate _ are helping to create the bottlenecks.

These naysayers might well be correct in the short run. We simply can't keep loading the system with these kinds of communications unless we come up with a price mechanism that understands the difference between information that fills the pipes (such as voice and, soon, video) and has to be there immediately and information that barely uses the pipes and can be there anytime in the next hour or so (such as e-mail).

But the demand for bigger and bigger pipes inevitably will lead businesses to build them. And before today's so-called "common carriers" know it, they will have to decide just how commonly used _ and relevant _ they wish to be in the new era.

Steve also writes a computer column. For his take on all of this, check his column at http://www.sjmercury.com/

homepage/gillmor/steve.

Write Dan Gillmor at the Mercury News, 750 Ridder Park Drive, San Jose, CA 95190; (408) 920-5016; fax (408) 920-5917. Mercury Center/America Online: dgillmor; Internet: dgillmorsjmercury.com.

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