Making telephone calls over the Internet is getting cheaper and easier, and will soon provide profit-threatening competition to established big operators, a report published on Tuesday said.

According to the report from Cambridge-based telecommunications strategy consultancy, Analysis, telephone business across the Internet will take 36 per cent of the international call market by 2003.

Other conclusions from the report are: [SBX]

Internet telephone traffic will overtake fixed network traffic by 2000.

Prices of Internet and fixed networks should converge within three to five years.

Low costs and an unregulated market are attracting new entrants.

Core revenues and profits of big telephone operators are at risk.

But according to Mr Philip Lakelin of Analysis, big operators like AT&T of the US, Deutsche Telekom AG, British Telecommunications Plc and France Telecom SA are not standing idly by as their traditional markets are attacked.

The first reaction of big operators in the US to upstart Internet telephone providers was to seek to ban them.

The US Federal Communications Commission wouldn't go along with that, so they are gearing up the technology to fire back at the appropriate moment, according to Mr Lakelin, a co-author of the report.

"Companies like Deutsche Telekom, France Telecom and BT won't be rolling out Internet telephony technology in their domestic markets until they have to. Currently they're trailing, keeping up with technological developments, then they will rollout to face the competition," he said.