International VOIP traffic grew a whopping 80 percent in 2002 but has tailed off dramatically this year, according to the latest statistics from TeleGeography Inc., a division of PriMetrica Inc.

The study shows that VOIP providers carried only 150 million minutes of international telephone calls in 1998, less than 0.2 percent of the world's international traffic. By 2002, cross-border VOIP traffic had grown to just under 19 billion minutes, or more than 10 percent of the world's international traffic (see Global VOIP Traffic Grew 80% in 02).

But the picture changed radically this year, as VOIP traffic growth dropped down to 36 percent. “It’s the law of big numbers,” says Stephan Beckert, analyst with PriMetrica and author of the report. “You can’t increase big numbers as fast as small numbers -- it’s a fact of life.”

He points out that 36 percent growth in a stagnant global economy is pretty good. “Any industry would be happy with this,” he says, adding that this number is likely to remain about the same in 2004.

Table 1: International VOIP Traffic Explodes

International VOIP carriers have achieved this growth by carrying traffic on behalf of other long-distance service providers. Consequently, most end-users are unaware that many of their phone calls are traversing the Internet, rather than traditional long-distance networks. This is likely to change, reckons Beckert, as the incumbent carriers switch to VOIP. “It’s becoming a mainstream service now,” he says.

The two largest VOIP carriers, ITXC Corp. (Nasdaq: ITXC) and iBasis Inc. (OTC: IBAS), each carried more than 2.5 billion minutes of international traffic in 2002, placing them among the largest international operators in the world.

"The combination of aging regulations and new technology enabled startup carriers to capture significant market share in only a few years," Beckert says. But as the ILECs get in on the action next year, he notes, this picture could change (see RBOC VOIP Coming in 2004 and TeleGlobe Gobbles Up ITXC).

— Jo Maitland, Senior Editor, Boardwatch