Columbia International Affairs Online: Working Papers

CIAO DATE: 12/2008

When Innovators and Not Implementers: The Political Economies of VoIP in Japan and the United States

Kenji Erik Kushida, Masayuki Ogata

October 2007

Berkeley Roundtable on the International Economy


The spread of Two puzzles immediately present themselves when one examines the spread of "Voice over IP" (VoIP, or IP telephony), a technology that sends voice signals as data, which can travel across the Internet.

The first is that, despite the technology's widely hailed potential to undermine the core businesses of incumbent telephone operators by circumventing their traditional telephone networks, incumbent operators do not seem to be in imminent danger. When VoIP made headlines in the late 1990s and early 2000s as a dramatically cheaper alternative to conventional telephones, many predicted that new VoIP service providers would seriously threaten, if not cause the sudden demise of, incumbents. Yet, instead of telephone-replacement VoIP services, it was Skype, the online-based service more reliant on one party calling from a computer, which grew rapidly to take center stage. Why did VoIP as a substitute for conventional telephony, despite being hailed as a potentially "disruptive" technology, not have a catastrophic and relatively immediate disruptive effect on incumbent carriers' business models?