VOICE over IP
is one of those nifty new technologies that
has been nifty and new for an awfully long time.
VOIP has been heralded as the next big thing in telecommunications phone calls that leverage the efficiencies of Internet protocol (IF), the language of data networks. Until recently that’s pretty much where things stood, however: a lot of talk about a new way to talk. Users were skeptical—and for good reason. Call quality didn’t match what traditional phone lines offered, reliability could be shaky, and building the infrastructure to adopt VOIP on an enterprise level was costly. But here’s the good news: Improvements in VOIP and in the way it’s now being marketed are helping the technology shake off the skepticism and draw customers in rapidly increasing numbers.
“Eventually the entire infrastructure is going over to IF,” says Lindsay Schroth, senior analyst for broadband access technologies at the Yankee Group, a Boston- based market research firm . “It’s just a question of when.” For the first time, however, “when” is looking like soon.
Global Crossing, for example, reports that VOIP now accounts for 40% of its total voice traffic, or 2.4 billion minutes per month—up from 15% in 2002. The company expects fully half of its voice traffic to be VOIP by January. “VOIF means cost savings and productivity gains to start with, then leads to new, enhanced services like presence, conferencing, and converged services like audio with video,” says Dennis Morton, vice president for product commercialization at Global Crossing. “You start by getting more for less, and you gradually change the whole way you do enterprise communications.” The cost savings are substantial: Nemertes Research, a research firm based in New York, estimates that for a company with 1,200 users, VOIP can reduce network costs and toll expenses by 20%.
What is seemingly a no-brainer business case for VOIP begs the question: If the technology is so great, why wasn’t it embraced in the late ‘90s, when it first appeared? The answer gets a little complicated. For a long time, VOIP was great in theory. Traditional telephone calls are notoriously inefficient. When a call is placed between two parties, a connection is maintained in both directions for the entire length of the call. This is known as circuit switching. The quality of the call is good because the connection—or circuit—is reserved for that call. But in a typical call, only one party is speaking at a time. Because an entire circuit has been reserved, much of the space—or bandwidth—is wasted.
VOIP uses a technique called packet switching. Instead of keeping the connection open for the entire length of the call, VOIP opens it just long enough to send small chunks—or packets—of voice data. Only the words you speak are transmitted, and dead air time is ignored. This means that many calls can be squeezed into the space used by one traditional phone call.
Since packet switching is how data is sent over the Internet, that’s where the first VOIP services went. The only problem was that voice calls traveling over the public Internet had to share bandwidth with all the e-mail and webpages also passing across the network. Inevitably there were traffic delays, which took a toll on call quality. Early VOIP calls often sounded as if they were being placed on walkie- talkies in the middle of a busy intersection.
Still, VOIP had a lot going for it: Calls were cheaper, and because they ran over the same networks used for data, they could be linked to all sorts of other information. For example, when a customer called into a call center, operators would not only receive the call but also have that customer’s information appear automatically on their screen. Mobility was enhanced as well. Since your phone number mapped not to a specific location but to a specific phone, which could be plugged into any broadband Internet connection, you could be reached at the same number whether you were working at home, the office, or a hotel room. But until the quality of VOIP calls came closer to that of their circuit-switched counterparts, enterprises were wary of VOIP.
The good news is that the quality of VOIP has markedly improved, so much so that you’re often hardpressed to tell how the call is traveling. The key has been to keep calls off the public Internet and use private networks engineered to prioritize VOIP over other types of traffic—like e-mail and MP3s. This is the strategy Global Crossing has taken. “Our network gives VOIF the highest priority, so that multiple IF applications can share bandwidth,” says Kevin Courteau, Global Crossing’s director of product marketing management.
Global Crossing has built its service so that multiple enterprise locations can ex-change VOIF and other data without ever touching the public Internet, insuring good call quality, enhancing security, and enabling new applications. Facilities can be linked “virtually” using Global Crossing’s IF VFN service, which transports high-priority VOIF and other data from one location to another, eliminating toll charges. One “converged” connection per location also gives access to a host of affordable Global Crossing Enterprise VOIP services, including the ability to exchange VOIP calls directly with the worldwide phone network. “This can eliminate the need for separate voice and data networks,” says Courteau.
Yet even if it’s the big, multiple-office enterprises that have the most to gain by adopting VOIF, smaller companies can also achieve savings. VOIF technology allows employees to work half the week in the office and the other half at home using the same phone number in both locations . It allows a software company to provide domestic telephone support numbers but locate its call center overseas, where staffing costs may be lower. Customers dial a Dallas number, and the phone rings in New Delhi. “In the IF world, a call can be passed anywhere—location is unimportant,” says Courteau.
With the technical kinks ironed out, providers are focusing on making the tran-sition to VOIP easier on the budget. Businesses have already invested vast sums in time division multiplexing (TDM) equipment. Even with tech budgets starting to increase again, companies are not keen on scrapping equipment that still has life in it and buying new VOIP-enabled equipment like Internet protocol PBXs (private branch exchanges), the private switches that connect phones in an office . But the sticker shock of a complete conversion doesn’t have to scare people away. “Businesses can move to VOIP gradually if they partner with the right providers,” says Courteau. Global Crossing, for example, has designed its VOIP network to work with both TDM and VOIP equipment. So VOIP can be added office by office, at an enterprise’s own pace.
Systems integrators like NEC Unified Solutions, launched in April by NEC Amer-ica, are also becoming adept at offering customers a choice.. “Our goal is to help customers move to next-generation convergence in ways that minimize risk and optimize performance,” says Tom Burger, president and CEO of NEC Unified Solutions. “Our strategy is to offer customers the choice of traditional lines, IP lines, or any combination of the two based upon their business needs.”
The company’s NEAX 2000 PS is a PBX that supports both traditional TDM telephony and IP telephony. “Businesses may want to try IP in a branch or may have TDM applications like fax machines that they still want to use,” says Kevin Beatty, assistant general manager for marketing at NEC Unified Solutions. But since some other enterprises want to embrace VOIP more aggressively, NEC has developed products, applications, and services built around its pure IP architecture, called Univerge.
With NEC’s SV7000 telephony. server, an enterprise can eliminate the need for a PBX entirely. as all PBX features—call forwarding, routing, voicemail— are handled by computer . The Univerge architecture will also support vertical market applications for health care, finance, manufacturing, call centers, and retail. “Business-es adapt technology at different rates, based upon their needs,” says Beatty. “That is why the Univerge IP solutions will actively coexist with our NEAX family of converged solutions.”
Having a Major Presence
Convergence is a concept that VOIP providers tend to discuss with an almost evangelical zeal. The idea is that by using a common infrastructure to provide a variety of applications, including data, voice, and video, companies can work smarter and more efficiently while cutting costs. “There are advantages to having just one piece of wire running to your desktop,” says lain Mimes, president of Zultys Technologies in Sunnyvale, Calif. His company’s MX250 enterprise media exchange is an example of how pure IF systems can integrate a host of applications in new and beneficial ways. Standing just 3.5 inches high, the MX250 works in place of a PBX to provide VOIP telephony and voicemail, but it also provides fax-ing capabilities, an Internet gateway, instant messaging, and—to use another buzz-word in the VOIP industry—a feature called presence.
“Going forward, presence is going to be one of the big features of IF networks,” says Philip Solis, a senior analyst at ABI Research, a market research firm in Oyster Bay, N.Y. “It lets you see if someone’s home, or in a meeting, or on the phone.” By upgrading the software that runs the MX250—which starts at $3,000 for five users and a basic set of features—Zultys can continually update its box with all new features. A February upgrade, for example, enabled enterprises to now connect MX25Os that were in different locations, allowing users in different buildings to call, message, and get presence in-formation on anyone else in the organization.
As VOIP spreads throughout the workplace, look for the residential market to grow with it. On first glance, consumer VOIP wouldn’t seem to need the help. According to the Yankee Group, by the end of this year the number of subscribers will have soared from 131,000 in 2003 to a projected 979,500—and that figure is expected to pass 17 million by 2008.
So far VOIP in the home has largely been about cost savings. But residential VOIP’s real potential, analysts say, lies in its features. Now people are interested in price over features, but that’s going to change, especially when you see all the things possible with an IF network,” says Solis.
Already advanced features are hitting the market. AT&T’s new VOIF-based pro-duct, CallVantage Service, offers a host of capabilities not found on traditional phones. CallVantage, which it launched in March in seven markets in Texas and New Jersey, is now available in 170 markets in 39 states . It includes features like “Do Not Disturb,” which allows users to block calls during specific times while letting vital calls through, and “Locate Me,” which enables an incoming call to be forwarded to up to five other numbers. “Telephone calls become like e-mail,” says Cathy Martine, senior vice president for Internet telephony at AT&T. “They find you no matter where you are.
VOIF also makes phone calls easier to manage. AT&T CallVantage Call Logs let you see inbound and outbound calls and messages going back months; Fersonal Conferencing enables you to set up calls for up to ten participants. All of these features can be accessed via the web, and the data/voice integration even lets you have your voicemail sent to you as e-mail.
Right now these souped-up applications may seem like overkill. “People are going for the really basic features, like being able to take their phone numbers with them,” says Schroth of the Yankee Group. But look for that to change as users get used to all the bells and whistles of their office VOIP phones . “They’ll get hooked on the features at work and want to take them home,” says Schroth. At long last, VOIP’s reality looks as bright as its promise—and sounds better than ever.
FORTUNE Magazine - Special Edition
Special Advertising Section. S2 - S6.
Church of the Science of God
La Jolla, California 92038-3131
© Church of the Science of GOD, 1993