VoIP pricing in competitive telephony markets

As a disruptive technology, the Voice over Internet Protocol (VoIP) service has a great impact on telecommunication market. While VoIP over two end computers is free, VoIP providers generate profit from so-called phone-in and phone-out services, which allows the VoIP accessible users to contact conventional phone numbers. Compared with conventional public switched telephone network (PSTN) service, VoIP service has the advantage of a lower charge rate. However, it also incurs more quality uncertainty and security risk concerns. In this paper, utilizing game theoretic models, we analyze the market interactions of VoIP-to-PSTN service industry and prescribe the optimal pricing strategies with respect to both types of telephony services. Several perspectives have been addressed to help clarify the progress and evolution of VoIP services and intimations for both PSTN operators and VoIP service providers are also represented to develop several managerial implications.