Word: ips
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...digital and IP technologies isn't the only reason why Internet phone companies have a price advantage over their competitors. More important is the matter of access fees. Traditional long-distance providers have to pay access fees to local phone companies to reimburse them for the use of their customers' phones to "reach" the PSTN. For instance, a call from Boston to Orlando requires MCI to pay access fees to both Bell Atlantic and BellSouth--fees which are, in turn, passed on to consumers...
...however, has exempted IP telephony companies from these access fees, allowing them to charge much lower prices for long-distance service...
...there are disadvantages as well. One downside to IP telephony is voice quality. Because packets can arrive out of order, there can be delays and "stutters" in the conversation. Quality is improving over time, however, and IP telephone quality should soon be virtually indistinguishable from that of regular long-distance service...
Another downside lies in the dependence of IP telephone companies upon the existing phone system. If local direct-dial and touch-tone phone service were not available nationwide, none of these firms could even offer their services...
Plus, there is not even the assurance that IP telephone rates will always stay so low. By being exempt from access fees and other taxes, these IP phone companies are essentially being allowed by the government to steal a slice of the telephone pie without being subject to the same taxes and fees their competitors pay. Beyond giving them a somewhat unfair competitive advantage, this goes against the FCC's long-standing tradition of funding itself and wide-spread telephony access through taxes on long-distance phone service...