Old telecom companies forced to cannibalize selves?

by Andy Oram

Related link: http://news.com.com/2100-1033-982606.html

We know that upstart companies around the world are eating into long-distance company profits by offering Voice over IP (where legal). But this is a new twist: a monopoly local phone company, BellSouth, is offering VoIP.

Even though local phone companies in the United States are separate from long-distance ones, the local companies benefit from long-distance calls in many ways. They get access charges from the long-distance companies for the use of local lines. Many also have won the right to offer long-distance service in their local regions, or offer it in other regions--and of course, don't forget cellular phones.

So BellSouth is cannibalizing its profits to enter a new industry, VoIP. This is consistent with what many business analysts say--that an established business cannot survive a major change in its environment without risking its old business model and throwing away the cash cows it's already built up. What's interesting is that one of the oldest and most conservative companies--a Bell operating company--can take the risk, and what it says about the success of the Internet.

Is this the sign of a major change for the telephone industry?