Voice over IP technology is poised to shake up the telecommunications industry.
By: Gwen McNamara
Talking over the Internet is nothing new. For years, the technology-savvy have been using Voice over Internet Protocol, or VoIP, to communicate with people around the world.
But now many in the telecommunications industry believe VoIP is poised to move into the mainstream.
"VoIP is the future of voice communication," said John S. Rego, chief financial officer of Vonage, a 3-year-old Internet phone company in Edison, which now has more than 110,000 residential and business lines in service. "We’re at a real critical point where interest in VoIP and the corresponding technology have aligned."
The prevalence of broadband, or high-speed, Internet access and improved voice quality have made VoIP a viable communications option for both businesses and consumers, he says.
Traditional telephone companies, like AT&T and Verizon, agree. Recently, both companies announced plans to roll out expanded VoIP services for businesses and test residential options.
Even cable companies are staking their claims. Cablevision and Time Warner both introduced VoIP services in 2003, with each company gaining about 10,000 customers.
Industry analysts also predict an explosion of demand for VoIP in 2004. Forrester Research, a technology research firm in Cambridge, Mass., estimates the demand for VoIP services will jump from about 150,000 customers or so now, to roughly a million by the end of 2004.
"VoIP is in a real adoptive stage for the core of the market right now," said John Landau, executive vice president of product management for ITXC, a Plainsboro-based Internet telephony company that uses VoIP to transfer calls between traditional telephone carriers. "Depending on the statistics you read, between 25 and 50 percent of the new phones businesses bought last year were VoIP phones."
"I’ve seen a 200-percent increase in the amount of interest (in VoIP) in the past year," added Bill Blum, chairman of the IT Council of the Business Partnership of Somerset County. "A year ago, I had a VoIP question once a month; now I’m getting at least one a week."
So, what exactly is VoIP?
Unlike regular telephone calls, which are sent out over an uninterrupted circuit on the public switched telephone network, VoIP calls are transferred over the data network of the Internet.
The voice, or audio, communications are digitized into information "packets" that get routed over the Internet to their intended destination and reassembled to form the conversation.
What often makes VoIP complex is that there’s no one standard way to use it.
"VoIP is not like a Model T you get it and it’s black," said Caroline Lewis, Verizon spokeswoman. "You can configure and pick what you want for your needs. The flexibility is part of the technology’s beauty, but can also be confusing."
"There really are several forms of VoIP," said Guy Yasika, the head of sales and marketing for Atinav, a VoIP software company in Somerset.
Some people use software to turn their computer into a phone, dialing out over the modem and using a headset to talk. Others like Vonage customers buy a hardware device to connect their traditional phone to the computer, while still others purchase IP-ready telephones that don’t need to interface with a computer at all, he explained.
Some businesses even use what is called point-to-point VoIP, he said.
"Say I have an office in Princeton and another in New York," said Mr. Yasika. "I can set up VoIP gateways at each office so that when I call from Princeton, my traditional phone call gets converted to VoIP at one gateway, travels over the IP network to New York and then is converted back at the other gateway to be received."
So why would a business or consumer be interested in such technology?
According to industry professionals, VoIP has a number of benefits chief among them savings on the cost of phone calls.
Vonage, for instance, offers a number of service plans that can give users unlimited local and long-distance calls for as low as $15.99 to $34.99 a month, including voicemail and caller ID.
"For most of our customers we’re cutting their regular phone bill in half," Mr. Rego said. "On average, a business can save around $150 a month."
Vonage is able to offer such low-cost plans because the company does not have to pay telecom taxes, since its phone calls are routed over the public Internet and not the private telephone networks.
With the convergence of voice and data, companies can also save on network maintenance and administration.
"Most businesses have two different lines one for voice and one for data," says Brion Feinberg, of Lemur Networks in Eatontown. "VoIP combines everything into one big pipe, making things easier to run."
"The administrative cost is lower with this type of system," added Chuck Rutlidge, of Quintum Technologies, Inc., an Eatontown-based company designing a number of VoIP tools. "With one big data network you no longer need separate telecom and data people."
Plus, if an employee has to change locations or leaves the company, with VoIP there’s no need to physically remove and attach wires as with a traditional phone network. Instead everything could potentially be done via software, making the IT department’s job much simpler.
"VoIP can offer a lot of other interesting features," added Mr. Feinberg. "Such as integrated messaging getting your e-mails, voicemail, faxes all in one place on your computer or being able to view real-time logs of all your phone calls."
VoIP could be particularly attractive to businesses with a large traveling sales force or companies with call centers.
Jagger Kaye, an actor who lives in Weehawken, got a New York City phone number from Vonage to cut down on his long distance charges both at home and when on the road.
"Ninety percent of my calls were for business in New York," he said. "And even though I was right across the river I was getting slammed with long distance.
"Now I pay just $25 a month," he continued. "And when I travel, like I did a few weeks ago to California, as long as I bring the small device from Vonage that connects a phone with the computer, I can just plug in (to the Internet) and make calls as if I’m still in New York."
"Call centers have been using VoIP for some time already," added Mr. Blum. "It’s a benefit for catalog companies, for instance, because once a customer calls in, with the data and voice network connected, the call rep can automatically bring up the calling customer’s purchase record, improving customer service and saving time on each transaction."
Still, despite such benefits, some experts point out there can be drawbacks in setting up VoIP.
"VoIP may not be cost effective for everyone," said Mr. Blum. "You have to have a very good data network to have it work effectively. When you digitize a voice data packet, it is more susceptible to interference, so you need better infrastructure to support it."
The quality of Internet phone service, like cell phone service, can vary as well, Mr. Yasika said.
"Typically people complain about VoIP clipping, or someone’s voice sounding choppy, popping or dropping off," he said. "This is really more of a historical problem though, as delivery is constantly improving."
"There’s also the concern of interoperability," added Mr. Blum. "Right now there are a lot of companies working on different VoIP technology and not everything can be interchanged.
"Once VoIP becomes standardized, I see it becoming a ubiquitous product," he continued.
In order for VoIP to be successful, companies are going to have to think hard about what will drive someone to talk on their PC rather than the phone, Mr. Yasika pointed out.
"The phone is a hard habit to break," he said. "Our whole culture is built around how it operates."
"VoIP won’t replace traditional phone systems overnight," added Kathryn Zawacke, AT&T business public relations. "As more and more people become interested, it will happen little by little. Just like with the transition from rotary to Touch Tone phones some people still use rotary phones today."
By some estimates, nearly one million rotary phones are still in use in the United States, nearly 40 years after Touch Tone service was introduced.
"When the Internet first surfaced, not everyone ran out and got hooked up, but when they saw that the tools available were not just bells and whistles, people began to migrate to the new technology," added Ms. Lewis. "VoIP will experience the same natural evolution."
In addition to technical concerns, questions on regulation could slow VoIP’s progress.
The Federal Communications Commission is currently trying to figure out how to regulate calls made via high-speed Internet connections, which bypass at least part of the conventional phone network.
Among the issues to be discussed is whether VoIP companies should have to pay the same fees or taxes as regular telephone companies to implement a number of social objectives, such as providing 911 emergency services or bringing telephone services to poor and rural areas, schools and libraries.
The FCC also plans on deciding whether these new services need to pay fees to local telephone companies to complete calls to conventional phones.
Later, the FCC said it would develop rules for law enforcement, specifically for things like making sure the technology that allows Internet calls also allows investigators to tap and trace them.
Historically, the FCC has not regulated the Internet or the services provided over it.
"There’s no doubt that the future of voice is IP," said Deborah Jones, consumer VoIP spokeswoman at AT&T. "But the transition to VoIP is an evolution … most likely taking at least 10 or more years."