YOU CAN DITCH
THE PHONE COMPANY
by: STEPHEN H. WILDSTROM
We are going through a telecommunications revolution. Yet the way that the most basic communications technology—known as “plain old telephone service” —is delivered to most households and many offices has stayed largely the same for a century. That, however, is about to change dramatically, and the benefit could be better service at lower cost.
The disruptive technology —voice over Internet protocol (VOIP)simply uses datanetworks to deliver voice conversations. It has been around for about a decade, but until the big recent improvements in voice quality and ease of use, VOIP was attractive mostly to folks looking to reduce the often exorbitant cost of international calls, especially to Asia. Early systems required you to make “calls” over your PC through a microphone or headset, and you could call only another similarly equipped computer running the same software. Services such as Net2Phone emerged that let you make a call from a computer to a phone number, but while the price was low, so were the quality and reliability.
A free service called Skype provides an updated version of this computer-to-computer calling. Voice quality is vastly better than it used to be, and you can run Skype on Pocket PC5 equipped with Wi-Fi wireless as well as on desktops and laptops. But you can call only a fellow Skype user, making this a solution for people who want to talk cheap to a fixed group of chatters, not as a substitute for a real phone.
MOST PEOPLE WILL WANT SOMETHING that resembles standard phone service as closely as possible. This can be accomplished with a box that plugs into your broadband connection or home network and converts the voice signal for Internet transmission. You plug one or more phones into the converter box, and when you pick up the handset, you hear a dial tone and make a call. (The call travels over the Internet until the service provider eventually connects it to the wired telephone network.) Incoming calls ring, and voice quality is generally indistinguishable from regular phone service. Cable and long-distance companies are scrambling to get into the residential vow market, but for now, the leader is an Edison (N.J.)-based startup called Vonage, whose service I’ll describe in more detail in my next column. An account with unlimited local and domestic long-distance calling, voice mail, and other features costs $35 a month—$15 less than a similar plan from Verizon Communications, my local phone company. Some of that savings is due to taxes and lower regulatory costs, but much results from the use of more efficient technology.
Businesses are also adopting VOIP, replacing old phone systems that were based on a PBX from vendors such as Avaya or Nortel Networks. The older systems require companies to buy all their equipment from the PBX vendor, with limited choices and high prices. VOIP lets companies mix and match, using, say, Zultys Technologies desktop phone sets with a Cisco Systems switch. Businesses also can get advanced services—such as a full-featured office-extension phone in an employee’s home office or secure instant messaging—without paying a fortune either to an equipment maker or the phone company. Businesses usually connect their VOIP systems directly to local phone-company lines, although they may also use the technology to link branch offices over the Internet or private networks.
There are some drawbacks to VOIP. If either your power or your Internet connection goes down, you lose your phone service. (A cell phone is an adequate backup for most purposes.) And installation of residential VOIP is still a do-it-yourself project. But this is a technology with vast potential. After more than 100 years. the days of plain old telephone service may be numbered.
BusinessWeek, May 17, 2004, (pg.26)
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