ABSTRACT
This chapter presents a cost model of Internet service providers and Internet telephony and assesses its business and policy implications. 1 The term Internet telephony has been broadly applied to a family of applications that typically includes (real-time) voice communication, at least partially over a network using Internet protocols. This is in contrast to traditional telephony or plain old telephone service (POTS), which occurs solely over a circuit-switched telephone network. However, distinctions between Internet telephony and traditional telephony become less clear when one considers telephony services that bridge packet-switched and circuit-switched networks. In Chapter 9 of this volume, Clark classifies various types of telephony services that can be realized using these once disparate networks. The type of Internet telephony analyzed in this model is what Clark calls Class 3 Internet telephony: computer-to-computer Internet telephony in which two computers communicate over the Internet via a modem connection or a direct network connection. 2
