(I) Puerto Rico/Net2Phone
CARIBBEAN BUSINESS
The Telephone Revolution
Local businesses and consumers start swapping wired phone lines for phone service over the Internet
By ROSSIE CORTES
June 17, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.
puertorico-herald.org
The end of the telecom industry as we know it?
Telecommunications services over the Internet are causing a shakedown in the industry, with cable companies entering the phone business and phone companies responding in kind
What do Florencio Berrios, Jeronimo Esteve-Abril, and Federal Communications Commission (FCC) Chairman Michael Powell have in common?
They are all gung-ho about Voice over Internet Protocol (VoIP).
"Over what?" you ask. Don’t worry if those funny letters aren’t familiar to you, they soon will be.
Mueblerias Berrios and Bella International are only two of the many businesses in Puerto Rico that already have traded their traditional phone systems, where the voice signal travels over copper wirelines, for VoIP, where voice is converted into a digital signal that travels via the Internet.
VoIP is poised to become the most economical mode of communication for businesses and consumers alike, leaving behind the traditional telephony systems.
VoIP is growing in acceptance, and it seems inevitable that this cheaper, more efficient technology will play an important role in the world’s telephone communications. It can also mean immediate cost-savings and improved efficiency for businesses that choose to implement it now.
One reason this new technology is going to be cheaper than regular phone service is the federal government’s policy to regulate the Internet as little as possible to foster its potential for economic development. "It is the policy of the U.S. to promote the continued development of the Internet and other interactive computer services and to preserve the vibrant and competitive free market for these services, unfettered by federal or state regulation," said Powell in a recent statement.
"Whether we are talking about Internet voice services…or Internet commerce, the broadband revolution is bringing tomorrow’s communication and commerce tools to more and more Americans everyday," he added. "These new opportunities for consumers are also providing new opportunities for our nation’s economy. The need to rip out and replace the nation’s infrastructure is stimulating previously moribund capital spending; it is opening new paths to growth and increasing our nation’s productivity; and it holds out the promise for new jobs as businesses and consumers increasingly unleash the power of broadband."
What is it?
Although VoIP is almost a decade old, many people are still in the dark about how it works, its benefits, and its consequences.
"VoIP is a just a new application of an existing technology, IP [Internet Protocol], which in the past few decades has turned into a commercially viable technology," said Tomas Perez Ducy, sales & marketing vice president of Puerto Rico Telephone (PRT), which is preparing to launch VoIP service in the next few weeks.
"VoIP began to gain visibility when people began to realize it was a new technological alternative to traditional telecommunications that might have a different regulatory treatment by federal agencies. That special treatment might allow for lower communication costs and for other companies to enter the telecommunications market," said Perez Ducy, referring to the U.S. Congress’ mandate that the FCC minimally regulate the Internet.
"This brings up a few questions, such as ‘Is this going to completely replace existing phone technology?’ ‘Is this going to complement what we already have?’ and ‘What will be the consumer’s acceptance of this technology?’" said Perez Ducy.
VoIP uncovered
VoIP, also known as IP telephony, allows users to make telephone calls using a high-speed Internet connection [aka broadband, such as via cable modem or digital subscriber line (DSL)] instead of a regular (analog) wired phone line, which lets consumers avoid toll charges from long-distance carriers.
Depending on the company providing the services, communication can be accomplished using a computer, an IP phone, or a traditional phone with an IP adapter.
VoIP technology first appeared in 1995 from a company that offered voice communication services using computers and an Internet connection. This service was very limited, however, since both parties needed the same special equipment to make the call and no calls could be made outside the system.
Since then, VoIP has become a tool that enables users to communicate with anybody in the world via local, long-distance, mobile, and international calls. It doesn’t matter if the person on the receiving end is using an analog or IP phone. Calls can be made anywhere in the world there is a wired phone, a wireless phone, or an Internet connection.
VoIP follows the same concept as email, whereby people can be connected worldwide through messages sent via Internet. When using e-mail, it doesn’t really matter where the message is being sent–it will cost the same whether sent to the next-door neighbor or to someone in Japan–as long as the connection is made completely over the Internet. The message is transformed into a digital signal that travels through the Internet until it reaches the intended recipient.
In VoIP, voice is also converted into a digital signal that travels over the Internet until it reaches the other party, where it is then converted back into voice. Today, this whole process occurs without any of the parties noticing any difference in call quality. The calls are made and received just as they would be using a traditional phone.
Although VoIP calls work just like regular phone calls, VoIP users have the advantage of being able to receive additional features and services such as video and data combined with voice in the same call. In the beginning, the quality of VoIP calls was inferior to that of traditional phone calls. People using IP telephony experienced fragmented conversations, for example.
"The delay...was caused by how voice was delivered through the Internet. Voice, when converted into a digital signal, travels in packets, each carrying a part of the conversation," said Javier Colon, director of information technology (IT) at Falcon Sanchez Consulting Group. Packets are chunks of information broken up into small portions for routing.
"As the packets entered the Internet, they were confronted with thousands of other packets that were being carried through the system, causing the packets to be divided or delayed," continued Colon. "In data communication, we wouldn’t notice this delay.
It is entirely different, however, when using voice. We don’t like our conversations to be fragmented, and we do notice when it happens."
"Today, there are systems to manage voice packets as distinctive digital signals that receive priority over data packets. This enables communication that isn’t fragmented but instead is virtually seamless," said Roberto de la Mora, IP director for Latin America at Cisco Systems Inc. "The quality of this kind of voice communication now equals and in some cases surpasses the quality using traditional systems."
How to place a VoIP call
Placing a call with VoIP is pretty much the same as placing a call using a traditional wired (analog) phone. The only difference lies in how and where the phone is connected.
Depending on the company providing the VoIP service, calls can be placed through a wired (analog) phone connected through an Internet adapter, an IP phone connected to a high-speed Internet connection, or a computer equipped with telephony software (a softphone), a microphone, and other audio devices to talk to and hear the person on the other end of the call.
According to industry experts, an average of 60% of all networks’ communication updates in Puerto Rico are related to VoIP. Based on that information, the majority of them expect to see more than half of all midsize and large businesses on the island working in IP-enabled environments within the next three years.
Even with this large number of businesses adopting VoIP technology, companies such as Cisco and Nortel advise managers to evaluate their existing network before deciding whether to rip out and replace any infrastructure.
"We advise businesses to analyze their network–what they have, bandwidth, and volume of data and volume of calls. Only after considering all this should they make any changes," said de la Mora. "VoIP is already in the mass-adoption phase, as the technology has matured and developed enough to eliminate bugs and adapt better to the communication needs of any business."
VoIP calls can travel through local or wide-area networks (LANs, WANs) and the Internet backbone until they reach their destination. If the person receiving the call isn’t within those systems, the call is directed to a public switched telephone network (PSTN) for routing to its destination through traditional phone lines.
"These connections and conversions of signals happen seamlessly, making it almost impossible in some cases to determine if the call is being made through traditional or IP telephony," said Pedro Valero, area manager for Puerto Rico at Nortel Networks Corp.
"This means you won’t incur long-distance charges if you call a number in your area code, regardless of geography. This is one of the technology’s major benefits for business users. It could dramatically reduce their intra-island and long-distance charges," said Victor Rivera, sales & marketing director of WorldNet.
The difference is evident on the phone bills, as calls that stay within the Internet system are less expensive. "Savings on phone bills for midsize and large businesses can be seen, especially when calls remain IP as they travel within the company’s WAN," said Valero.
"How much each business saves on communication costs depends on its calling volume," he added. "The higher the calling volume, the more cost-efficient VoIP becomes. In many cases, a business with high call volumes can easily justify any change to the communication infrastructure, since the return on investment can be seen in less than a year."
One of the main advantages of VoIP is that voice and data can travel together, lowering costs for businesses and increasing the opportunities for providers to offer their customers packages of bundled services.
"In the case of Liberty Voice Links, consumers using IP telephony will immediately see savings on their bills. They will be integrating several services under one bill, for which they can receive discounts," said Jose Alegria, president of Liberty Cablevision of Puerto Rico Inc.
Liberty recently introduced its IP telephony services to almost 300,000 homes with Liberty Cable service, becoming the first company in Puerto Rico to provide residential phone service through cable-TV lines.
Such savings may put telecommunications companies on the spot, since they threaten the traditional distance and even time-based pricing model used by all major voice-line telephone companies in Puerto Rico. Consequently, the future success of telecommunications companies could depend on their ability to integrate similar services into their roster of offerings.
"We have no doubt we will be taking away clients from Puerto Rico Telephone," said Alegria. "Our IP telephony service offers lower rates and includes 16 additional free services, such as call transfer and call waiting, for which PRT charges on a monthly basis. This type of service will increase competition in the telecommunications industry, which at the end of the day will benefit consumers."
"It isn’t easy to change services for offering through the Internet, especially for a company with traditional telecommunications services," said PRT’s Perez Ducy. "The companies offering traditional telecommunications services have a huge capital investment in older technologies, which they can’t ignore or abandon. That would have economic consequences for the company, for the user, and for calling rates.
"This change, if made without any consideration, would imply a rise in the [price of the] services we offer, because it would accelerate the equipment-depreciation process, a factor we use to determine how much to charge for our services," continued Perez Ducy. "Our challenge has been how to support this technology without throwing the industry out of equilibrium."
VoIP and the business world
The majority of companies offering to update networks for use with VoIP are prepared to work with a company’s existing equipment. One of the advantages of IP telephony is that much of the infrastructure is already in place in the form of data networks that connect users to Internet and intranet systems. Such infrastructure already understands the technology of VoIP.
"There is no need to completely replace network communication systems. In some cases, all that is needed is to adapt and convert what already exists," said Valero. "Replacing the whole network means the company would need to make a big investment. That investment can’t be made by many companies in Puerto Rico."
According to experts, most of the companies that choose to completely change their networks are those that have obsolete equipment or are setting up new offices elsewhere. Businesses have the option to only integrate IP telephony into parts of their network. They can determine which branches or departments would benefit more from the technology and implement it only there.
"This could be a progressive change, where the equipment is switched as older equipment needs to be replaced, or as companies benefit from the savings generated from the first of the new equipment installed," said Eduardo Rivera, sales manager Caribbean Region at Nortel Networks.
In an office, telephones might be connected to a switchboard or a private branch exchange (PBX), a device designed to patch a number of phones or extensions into an outside line. For those offices, network experts might add a gateway and a router to translate telephone (voice) signals into IP and send them over the data network.
A typical example of the transition to IP telephony in Puerto Rico can be seen in furniture chain Mueblerias Berrios.
"A few years back, Berrios moved its facilities to Cidra, which raised the issue of what to do with our obsolete switchboard. We started to look for something better, which led us to Cisco," said Claudio Argote, director of information systems management at Mueblerias Berrios. "Cisco offered us the option to include voice and data in one system. This meant we were going to have just one installation, a common place for data and voice. This resulted in lower maintenance costs, making things simple and efficient for us.
"Any company has the same need: the communication of data and voice," continued Argote. "Berrios is a furniture chain almost all of whose stores are showrooms. They depend heavily on direct communication with Berrios’ central offices to receive and deliver products. We make the commitment to deliver the furniture as soon as the buyer’s credit has been approved. This requires a system that is fast and accurate."
According to Frank Santiago, president of Netxar Technologies Inc., companies should also consider how much they are spending on maintenance for separate voice and systems, since each typically requires a unique set of maintenance professionals. "They also should take into account expenses from outsourcing those maintenance services. If they compare those numbers against what they might save with IP systems, they might be able to justify the switch," he said.
"Berrios saved up to 50% on the installation cost, as the network needed only one cable," said Argote. "In addition, we are now saving on what we used to spend on internal, store-to-warehouse communication."
"There are many businesses, like Mueblerias Berrios and Bella International, using VoIP. Government offices such as Hacienda [the Department of the Treasury] are also moving to VoIP," said Alvaro Pilar, general manager of Centennial Broadband in Puerto Rico. "Many of the main applications, besides long-distance calling, are for communication within internal networks. Bella International, for instance, has integrated voice, data, and video."
Although one of the main advantages of VoIP is savings on long-distance calls, there are other advantages to be had by incorporating other devices. |
