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IP Telephony: Ready or Not?
Having an ISP in your stable is not just a way to make some money in the fast-growing Internet access game -- it's also an investment in IP resources, equipment and expertise that could pay off in the future. If a few years ago you sat through a hideously garbled demonstration of an Internet phone, you may have had a hard time keeping a straight face when the marketing guy insisted Internet telephony would take over the world. At your next demo, you may not be able to hear a pin drop, but chances are you won't be laughing. It's now unanimous: IP-based telephony is going to take over the world, and at a much faster pace than previously anticipated.
Compared to traditional circuit-switched telephony where an entire line is reserved for the length of a phone call, a digital packet-switched based system based on the Internet Protocol is far more efficient. That translates into cheaper rates and trouble for traditional carriers still hobbled by older circuit-switched equipment.
According to IDC, international-call voice-over-IP will grow from a $600 million oddity in 1997 to a $20.5 billion business in 2002. The domestic market, where traditional telephony is far more competitive, will grow from $100 million in 1997 to a modest $3.9 billion in 2002. By that year 11 percent of worldwide voice traffic (measured in minutes) will travel over IP networks.
The new IP phone services that are beginning to appear in the business market don't require that you use a PC or even the public Internet, both of which impede quality. Instead you dial-up a special IP telephony ISP, which routes your voice across the country or around the world primarily on high-quality private IP networks. These 'converged' networks are similar to the virtual private networks and extranets that businesses are building between branch offices and among business partners to create guaranteed bandwidth and security.
The biggest growth area for IP may not be voice calls, but fax, where perfect transmission quality is not a requisite. About a third of all circuit-switched international calls (and over half of all Trans-Pacific calls) are fax transmissions.
The impact of IP telephony goes far beyond a change in phone rates. The technology should be a boon for electronic commerce, allowing Web-surfing customers to transform their Web transactions into voice calls with customer support. More significantly, because IP networks are digital, you can packetize video as well as audio, easing the delivery of integrated audio- and videoconferencing services. Running over a converged network, a videoconferencing session would be free of the glitches and slowdowns that will continue plague the public Internet. In addition, the Internet would be freed from the potential nightmare of videoconferencing traffic.
So far, the major players in this fledgling industry are companies like Qwest, IXC, PSINet and Intermedia, which are building their own IP backbones for telephony. While these private networks promise high quality, you will initially be limited to calling people in other major metropolitan areas, one reason why these services are targeted at businesses. Other companies, primarily existing ISPs, are simply routing the calls over the Internet, with the assumption that users will put up with the poorer quality in exchange for dirt-cheap service and world-wide reach. The solution may be to improve the connections between Internet POPs, dial-up networks and the new converged networks to improve quality. This spring, ITXC Corporation, a company backed by AT&T and Internet telephone pioneer VocalTec, introduced a key piece of the puzzle with WWeXchange, an IP switching center that routes callers worldwide and negotiates account billing transactions.
While the telcos rushed to build fiber optic backbones and high speed switches to handle all this coming IP traffic, other projects were placed on the backburner. While expanding the build-up in fiber optic service will eventually speed the hoped for transition to switched digital video and fiber-to-the-curb service for broadband access to the home, the current emphasis is all on the backbone. SDV is too expensive for now, and perhaps unnecessary with the advent of commercially feasible DSL services that can be rolled out two modems at a time. Most of the Baby Bells started selling various flavors of high-bandwidth DSL Internet access this year, though theyOre still far behind the over 200,000 cable modems in commercial use. |
