IP Telephony Needs Convenience To Take Off, Panelists Say
October 16, 1998 TORONTO, ONTARIO, CANADA, Newsbytes
via NewsEdge Corporation : Ron Close
believes Internet Protocol (IP) telephony has
an inherent cost advantage over the
circuit-switched public telephone network.
So why is Netcom Canada Inc., the Internet
service provider of which Close is president,
reselling the service of a conventional phone
company rather than offering IP- based
service like its US parent?
In a word, convenience. While it costs less
to carry phone conversations as packets of
data than to dedicate a certain amount of
bandwidth to each conversation from the
time the phone is picked up until it is hung
up, at the moment, the service is less
convenient for customers, Close said in a
panel discussion at The Canadian Institute's
IP Telephony and Voice/Data Convergence
conference Wednesday.
A principal reason is that an IP-telephony
service still requires customers to dial 17
digits to make a long-distance call. Assuming
the provider has a gateway that is a local
call for the customer, he or she dials seven
digits to reach the gateway via the local
phone network. The IP network then asks for
the 10- digit long-distance number. Of
course if the call is overseas, even more
digits may be involved.
IP telephony is cheaper, Close said, but not
sufficiently cheaper that many customers will
bother with the inconvenience. This is why,
while Netcom in the US offers IP telephony
services to its Internet- access customers,
Netcom Canada has chosen to offer its
customers domestic long-distance service at
10 cents a minute (any time of day, which
Close said is hard to find especially for small-
business customers) by reselling conventional
phone service.
According to Curt Ahart, vice-president of
sales at Lucent Network Systems of Murray
Hill, N.J., it is also why the service providers
making money on IP telephony today are
those that are experts in selling cheap
long-distance minutes.
"Where we're seeing the success right now is
in calling card companies -- the prepaid
calling card companies -- and also we're
seeing the success in people who are doing
call-back services," Ahart said. "There are
some people that are looking for inexpensive
minutes. Those companies that specialize in
marketing to those people are successful in
IP telephony today. "
Close said IP telephony has a noticeable cost
advantage in North American long- distance
service, and a large one for overseas calling
-- the actual cost of providing a one-minute
long-distance connection from Canada to
Japan is about 28 Canadian cents using the
circuit- switched network and six or seven
cents over IP, he said -- but "it's not going
to be a big winner as long as there's 17- digit
dialing."
Ahart agreed, saying IP telephony will take
off when customers cannot tell the
difference between a circuit-switched and an
IP service.
That day will come in time. The general
sense of the conference, held Wednesday
and today in Toronto, is that IP telephony
will grow strongly in the next few years. In
the opening panel discussion Steve Guiton,
vice-president of telecommunications and
multimedia at the Canadian Cable Television
Association (CCTA), cited International Data
Corp.'s projection that it will account for
about 11 percent of all long-distance minutes
in 2002, and Jupiter Communications'
forecast that IP telephony will exceed three
percent of toll revenues by that same year.
Reported By Newsbytes News Network,
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