Firms Clamor For A Slice
Of Internet Voice Market
Date: 11/17/98
Author: Michele Hostetler
Networking- gear makers are fighting to be
heard in the emerging market to move voice
traffic over the Internet.
In an initial step toward merging voice and data
networks, key players are vying for a toehold in
this nascent market dubbed ''Voice over IP.'' IP
stands for Internet Protocol, the language used to
transmit data online. Voice over IP traffic travels
over any type of internal or external network.
''This is no longer the Internet telephony toy that
you heard about in '97 and '98,'' said Ross
Manire, consultant and former 3Com Corp.
senior vice president for sales to telephone
carriers. ''This is for real. I would describe this as
no less than a revolution.''
Products are beginning to hit the market in force
to prepare for a major push in '99. While there
still are quality and reliability hurdles to cross,
new nationwide networks include both voice and
data capabilities.
The Voice over IP services market could hit
$24.4 billion in '02, according to Framingham,
Mass.-based International Data Corp. That's up
from $700 million in '97.
''I think we're in the real early-adopter phase of
the market,'' said Al Bender, general manager of
the Voice over IP product line at Nortel
Networks, which was formerly Bay Networks
and now is the data-networking arm of Northern
Telecom Ltd. ''Ninety-nine will be the knee of the
curve.''
The market is so new that no single company has
a huge advantage over another, says Brett
Azuma, analyst at Dataquest Inc. in San Jose,
Calif. Even big voice equipment players such as
Nortel and Lucent Technologies Inc. are starting
on new ground with the converged networks, he
says.
''These companies need . . . to develop
experience,'' he said. ''They're on the very
beginning pieces of a learning curve.''
But data-networking firms may have a leg up,
says Larry Lang, a Cisco Systems Inc. marketing
vice president. Voice over IP works like a mirror
image of modems, Lang says. While modems put
data over voice networks, these products use
new technology to run voice over data networks,
he says.
''In many ways, the voice network is coming to
us,'' Lang said.
There are three different markets for Voice over
IP. One of the first opportunities will be sales to
Internet service providers that want a piece of the
voice market, says Kurt Bauer, marketing vice
president and manager of Ascend
Communications Inc.'s access-switching group.
''It's a very large opportunity for the service
providers that have traditionally been
data-oriented to get into the voice market,''
Bauer said.
Dollar signs are guiding Internet service providers
to voice. Voice traffic brings in eight to 10 times
the revenue of data traffic, says Dataquest's
Azuma.
These new networks also are expected to give
relief to data-clogged voice networks, Cisco's
Lang says. Voice networks weren't designed to
handle lengthy log-in times on data calls.
''I'm particularly obnoxious about that,'' Lang
said. ''I dial in with my laptop (at home) and
leave it on until I go to work.''
The second market is wide-area-network
access. Corporations can combine their separate
voice and data networks to save money, says
Ron Sege, 3Com's senior vice president for its
large computer systems unit. The average
company can save 30% on operating costs by
combining the two networks, he says.
Third, local-area networks also could overhaul
their systems so workers can receive voice mail
on personal computers, he says. That market's
worth $30 billion worldwide, he says. Products
will begin appearing in early '99.
But local-area-network telephony is the most
uncertain market because companies worry
about reliability, Sege says.
''(Customers say,) 'Dial tone is a God-given right
. . . and my network's not reliable enough,' '' he
said. Data networkers are addressing that
concern with new products due out early next
year, Sege says.
Another hurdle to Voice over IP is developing a
standard for gatekeepers that enables voice
networks to talk to each other, Nortel's Bender
says. Without a standard gatekeeper technology,
voice calls could stop at a network's edge.
''Unfortunately, the networks are just islands in
themselves,'' Bender said.
Even if the networks can talk to each other, it
won't do much good if the quality's not there.
New products will address quality-of-service
issues, Bender says.
Products that handle simple tasks such as busy
signals and announcements of numbers no longer
being in service will hit the market in December,
Bender says.
More services can be created because Voice
over IP is more flexible than circuit-based voice
networks, 3Com's Manire says. 3Com is
working on a test program with a Swiss carrier,
SwissCom, to give customers more options.
SwissCom's customers can have a screen pop up
on their PC when they're on the Web that tells
them a call is coming in and asks if they want to
take it.
That type of service will become commonplace
by '00 and beyond, Manire says.
There's more to come. Ultimately, today's
conventional phones will go away, Bender says.
But that'll take 20 years.
Some companies will fade away or struggle when
that happens, Bender adds. Others will rise when
the Voice over IP network becomes widespread.
The last time such a big transition happened, Dell
Computer Corp., Microsoft Corp. and Cisco
came out of nowhere, he says.
That's why Nortel spent $7 billion to buy Bay
Networks, he says.
''The Internet will cease to exist as we know it
today,'' Bender said. ''Internet service providers
will cease to exist. Telephone carriers will cease
to exist. They'll be replaced by Internet telephony
service providers.''
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