[3/2/98 Telepath article "Overseas voice and fax ripe for IP's picking -- New services are evolving rapidly to poach international carriers' market share"]
Very detailed article on IP telephony/fax plans by AT&T and others. I don't think it's been posted yet.
techweb.com
Excerpt: "Revenue for
transnational IP voice telephony will reach $4.3 billion worldwide by 2002,
up from only millions of dollars today, according to a study by Probe
Research Inc., a consultancy in Cedar Knolls, N.J. The majority of that
revenue will come from Europe, North America and the Pacific Rim (see
chart). IP fax also will grow substantially during the next five years, from
virtually zero minutes of use in 1997 to more than 5 billion minutes by 2006,
the study said.
That dramatic increase will mean a loss to the public switched network of up
to $1 billion by 2002, and it could reach $2 billion by 2006, according to the
Probe study."
March 02, 1998, Issue: 704
Section: Telepath
Overseas voice and fax ripe for IP's
picking -- New services are evolving
rapidly to poach international carriers' market share
Mark Rockwell
New international voice and fax services based on the Internet Protocol
represent either a blessing in disguise or a wolf in sheep's clothing. It all
depends on whether you're one of the dozens of new international service
providers looking to reap the benefits of voice-over-IP-or one of the big
international carriers that for years have enjoyed high profits from
conventional international telephone and fax services.
Dozens of players such as Latic Communications Co., Rockville, Md., and
USA Global Link Inc., Fairfield, Conn., are carving out niche markets, using
a combination of leased capacity and their own IP hardware and software to
provide low-cost international phone and fax services.
They are banking on rapid improvements in IP telephony, which had been
dismissed by many as a kind of ham radio for computer hobbyists equipped
with rudimentary software and PC add-ons. With Internet telephony
gateways installed between the Internet or IP backbones and the public
switched telephone network, an increasing number of the new service
providers can offer international phone-to-phone calling at discounts
estimated at 30 percent and higher.
The quality of IP-based calls is still not on par with the typical switched
telephone and fax services long-distance carriers offer. That's because IP
networks function differently than switched voice networks-disassembling,
routing and reassembling data packets over a variety of changing pathways
on worldwide data networks instead of setting up a dedicated circuit to the
called party.
Nevertheless, smaller carriers could gain multibillion-dollar returns by
undercutting the established international carriers' service prices. Revenue for
transnational IP voice telephony will reach $4.3 billion worldwide by 2002,
up from only millions of dollars today, according to a study by Probe
Research Inc., a consultancy in Cedar Knolls, N.J. The majority of that
revenue will come from Europe, North America and the Pacific Rim (see
chart). IP fax also will grow substantially during the next five years, from
virtually zero minutes of use in 1997 to more than 5 billion minutes by 2006,
the study said.
That dramatic increase will mean a loss to the public switched network of up
to $1 billion by 2002, and it could reach $2 billion by 2006, according to the
Probe study.
The new international IP telephony market is still a drop in the bucket
compared to the market for conventional international voice services. To put
things in perspective, the total minutes of use for outbound voice and fax calls
from one country to another reached about 70 billion in 1997, said Hilary
Mine, senior vice president at Probe Research. Total minutes of use for
IP-based voice and fax reached about 25 million minutes in 1997, she said.
Total revenue for established U.S. providers of international services will be
about $80 billion in 1998, according to TeleGeography Inc., a market
research company in Washington, D.C.
Still, large international carriers like AT&T, MCI Communications Corp. and
Sprint are studying and, in some cases, deploying IP telephony. AT&T Jens,
the long-distance company's Japanese subsidiary, is selling international IP
telephony service from Japan to 57 countries at prices it claims are as much
as 82 percent lower than established Japanese carriers' rates. AT&T also
plans a U.S. IP telephony service for later this year, although the service is
strictly domestic. AT&T is not alone in exploring the service. "Every major
carrier has had IP gateways in their labs for the past 18 months out of fear
and paranoia," Ms. Mine said.
Despite such explorations, U.S. long-distance companies say they are
constrained by marketing and regulatory issues from fully developing IP
telephony services. Access charges are one of the biggest obstacles for
long-distance companies. The charges are levied by local telephone
companies to complete calls through their local networks and long have been
a sore subject for long-distance carriers. They say that Internet service
providers hold a pricing advantage because they are excluded by the FCC
from paying access charges. Some industry observers, however, say that the
long-distance companies have been slower to implement IP services because
they don't want to undercut their existing higher-priced international services.
One of today's largest alternative international service providers is moving
aggressively into IP telephony. Global Link, a privately held company that
claims annual sales of $300 million, started business six years ago as a simple
operator of callback services, which effectively reverses the direction of an
international call to take advantage of lower rates in the country being called.
The company wants to convert its 100,000 worldwide call-back customers
to its IP services, a spokesman said, and expand its customer base among
consumers and small businesses in the United States and overseas. Global
Link's ultimate goal is to become an IP telephony provider worldwide in five
years, the spokesman said.
Bigger and better
To this end, Global Link last month announced a contract with 3Com Corp.
for carrier-class multiservice access platforms and voice-over-IP access
devices. The company plans to install more than 500 switches within the next
three years and have more than 1,000 switches installed internationally within
five years, the spokesman said. The first metropolitan areas in line for the
service are New York City and Dublin, Ireland, for installation by the end of
March. Global Link says its services will offer rates that are up to 80 percent
to 90 percent lower than conventional international calls.
Smaller players are also circling the market. LATIC Communications, formed
in 1996, offers Internet-based, phone-to-phone communications and is
focused on international voice and fax traffic. It also provides gateways for
other carriers, ISPs and corporate customers, as well as prepaid phone cards
to business and residential customers. "We've seen steady growth this past
year and we were profitable last year, which is unusual for a young start-up,"
said Debra Arrington, vice president of business development at privately
held LATIC.
Among the challenges facing the development of IP telephony is the scarcity
of systems designed to handle the quantity of calls inherent to a public voice
network. There is some progress here, though. Last month, VocalTec
Communications Ltd., a pioneer in the manufacturing of IP-telephony
technology, announced what it said is among the first carrier-class Internet
telephony products-including intelligent management and support for
third-party accounting, billing, security and provisioning systems-for handling
traffic among literally thousands of gateways and servers, and millions of
end-user devices.
Another technical challenge is that standard interfaces for equipment have yet
to be finalized-which means that the IP gateways that are installed or are
being installed around the world in the coming months may not necessarily
work with one another. But work proceeds apace on the H.323 standard for
Internet telephony, and VocalTec's announcement last month included one of
the first implementations of version 2 of the standard for so-called
"gatekeepers," a new category of devices that act as the chief control points
for wide-scale deployments of IP telephony services."
All told, technical issues will be overcome more easily than ephemeral
issues-like quality of service and a customer's perception of the provider if the
service isn't up to the level they've come to expect from established
long-distance carriers, an AT&T spokesman said.
But as IP telephony quality improves, a change is clearly in the wind. Analysts
generally agree that the old telecommunications model of transporting voice
over dedicated, separate switched-circuit networks already is giving way to a
new network that doesn't price based on location, like the international
switched-telephone network does, and that offers progressively lower rates
to customers.
Among large U.S.-based international carriers, AT&T has been the most
active in addressing this change. In addition to its activities in Japan, AT&T in
January said it would offer IP voice on a limited basis in
yet-to-be-determined U.S. markets at unspecified prices. An AT&T
spokesman said the service, called AT&T Worldnet, would be rolled out in
the second quarter of 1998 and initially would be offered in "a few cities."
Pricing for the service will be aggressive, he said, with the company shooting
for 7.5 cents to 9 cents per minute.
The service will be sold via prepaid cards, so customers will not receive a bill,
the AT&T spokesman said. In exchange for the low prices, though,
customers must be willing to take extra steps in calling and accept a little less
quality, the spokesman said. Callers will have to enter a local access number,
an authorization code and then their calling number, and only domestic calls
can be made. The AT&T spokesman declined to specify if the service would
be expanded internationally.
The plan allows AT&T to get around the most significant obstacle to IP
calling: Since the cards are prepaid, the company doesn't pay any access
charges on the call, allowing for the aggressive pricing,the spokesman said.
To date, smaller carriers have largely defined the IP voice and fax services
market. They will undoubtedly be followed by more of the larger carriers, a
development smaller carriers say they will welcome. "This is going to be a
huge market. Big company entry expands the market," a Global Link
spokesman said.
Mark Rockwell is senior editor at Telepath.
Copyright (c) 1998 CMP Media Inc.
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