Telephony converging on net for 'triple play'

London Briefing: Most people will, by now, be aware that free telephony is available via broadband internet. Statistics are notoriously unreliable for VOIP (voice over internet) take-up, but it appears, surprisingly perhaps, that the UK is lagging France in terms of people switching to the new way of making phone calls.

Good old liberal, free-market Britain is being trumped by the enemy of freely competitive markets. And all because competition in French telephony is, bizarrely, much more effective than on these shores.

It looks more like accident rather than design - to the relief of defenders of Anglo-Saxon capitalism - but, as BusinessWeek has recently found to its surprise, the French are now making 8 per cent of their calls over the net, compared to 1 per cent in the UK and 3 per cent in the US. A company called Free launched a broadband service in 2002 and now has around 1.5 million subscribers, 90 per cent of whom are using VOIP. Competition is a wonderful, if not typically French, phenomenon: the old dinosaur, France Telecom (FT), had to respond with one of Europe's first national VOIP offerings about 18 months ago. Competition, by its very nature, is great for customers and lousy for companies: just look at FT's share price recently. The owner of Free, by the way, is now a billionaire.

Disruptive technology is making an obvious impact on phone companies. But it is now beginning to extend to media businesses. Rupert Murdoch's BSkyB recently bought a broadband supplier in a belated recognition that technology is moving us close to the point where TV over the internet (IPTV) is becoming feasible. It's all down to the speed of your broadband connection: few UK providers can yet deliver speeds necessary for IPTV. Advertisements for "8-meg" broadband are increasingly common but the experts reckon we need reliable service a touch in excess of these speeds to get IPTV.

Again, such speeds seem to be available in France. (In Japan, by the way, you can get 100-meg broadband for €50 a month).

Murdoch has noticed that the key demographic - 15-25 year olds - is spending more and more time in front of a PC and less time in front of a TV. Add in the possibility that our PC watchers can soon get all the TV they want delivered straight down their internet connection and it is no surprise that Mr Murdoch might be wondering what all that investment in satellite technology was for.

Advertising has started to migrate to the net - witness the rise of Google, with other companies like Microsoft, Yahoo and AOL reported to have sold out ad space on their respective portals months in advance. Something called Craigslist in the US is devastating traditional newspaper revenues from classified advertising.

The latest threat to BSkyB comes from Sir Richard Branson, who is reported to be about to swap his controlling stake in Virgin Mobile for a minority - but controlling - holding in NTL, the cable company. Cable, telephone and satellite broadcasters are rapidly converging on a single business model, based around "triple play" - the idea that consumers will take delivery of voice, internet and TV down a single pipe. And they won't care whether that pipe is a 3G wireless phone network, fibre-optic, copper cable, or a satellite signal. Just show me which is the cheapest.

Sceptics call all this the triple play fallacy: there are lots of potential competitors in this space, using technology that is rapidly evolving, further lowering barriers to entry that have already collapsed. Things are moving so swiftly that one or two questions are even being asked about the biggest gorilla of all, Vodafone. The wireless giant has, according to some, bet the farm on one product - wireless telephony - delivered in one way: 3G. It is possible, say the doubters, that 3G could be obsolete before it is even fully rolled out.

Where this all ends up is anybody's guess. But it is looking increasingly difficult for anybody to make any proper money out of any of this. This is seriously good news for consumers.

Chris Johns is an investment strategist with Collins Stewart. All opinions are personal.