Some good reading from the May 31, 1999 issue of Telephony Magazine.
internettelephony.com
Enjoy, Frank Coluccio
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VOIP: Dynamite in Your Hands
VOIP promises to blow a hole in traditional circuit-switched voice networks if
telcos ignore the new packet world.
By John Williamson
Traditional telephone companies are bracing themselves for an explosion.
Voice over Internet protocol (VOIP) started out as a very cheap but not very
cheerful novelty, allowing hobbyists to talk to each other using suitably
equipped personal computers in place of telephone terminals. More recently,
though, the focus of VOIP activity has shifted to higher-quality phone-to-phone
links using the Internet or other IP networks as a backbone.
If this isn't very, very big business yet, many industry soothsayers are confident
that it will soon be. According to soon be. According to a report published
earlier this year by United States-based marketing and research group
Feldman Communications Inc., 96% of the high-technology executives,
analysts, information technology managers and members of the media
surveyed anticipate high-quality voice could and would be placed over data
networks in the foreseeable future.
Percentage-wise, Internet telephony could take 36% of the market on key
international routes by the year 2003, says the United Kingdom's Analysys
consultancy in a 1998 report. And the U.K. arm of market research firm
Datamonitor in 1998 predicted that IP telephony would have revenues of more
than $3 billion by 2002 and that IP telephony gateway revenues would be worth
$2.5 billion in the same year.
"It's past the point of being theoretical. It's becoming mainstream," says Heidi
Bersin, vice president of marketing at Clarent Corp., a U.S.-based VOIP
equipment company.
There are several main VOIP market opportunities, although the demarcation
lines between some of them may not be hard and fast. In the public domain,
there is retail VOIP and wholesale VOIP.
Retail VOIP can be split into two. One is a "below the horizon" sector
populated by people who (still) use personal computer-based technology to call
across the public switched telephone network (PSTN) and the public Internet.
The other, from an operator's point of view, is an "above the horizon" business
using multimedia terminals to call into and across managed IP networks.
The wholesale business involves operators supplying capacity on their IP
networks to Internet service providers (ISPs) or other operators.
Then there is enterprise VOIP, in which corporations aim to fold voice into their
packet-based local and wide area networks (LANs and WANs) and intranets.
The dynamics of each sector differ somewhat in terms of what level of
importance is attached to the cost and quality of service (QOS) of VOIP. In
general, the "soft" economics of the Internet and the statistical nature of packet
networks mean that VOIP can be provided to users, be they retail, wholesale or
enterprise, at much lower cost than voice over the PSTN.
"You do gain benefit because it is a statistical environment and you're not
nailing up bandwidth," observes Tony Morris, U.K. vice president of marketing
at U.S.-based voice and data networking concern Netrix.
In this context, a recently licensed operator reported, by implementing a
packet-based telephony network, a cost base that is one-seventh of what it
would have had with an equivalent circuit-switched network, says Tony Martin,
U.K.-based sales and marketing director of U.S.-based interworking solutions
vendor Teltrend. "Even allowing for a certain amount of optimism, this illustrates
the advantage to be gained by carriers who implement packet-based
telephony," Martin notes.
Some markets -- notably the U.S. -- treat VOIP as data traffic and tariff it at a
lower level than voice. Also, general industry wisdom is that VOIP service
providers can improve QOS if they are prepared to make an added investment.
"It's a perennial question -- how good is the quality of service? And at the
moment it's as good as your network," says Matthew Finnie, marketing director
of Israeli VOIP pioneer VocalTec's U.K. subsidiary.
QOS is clearly not as important for the "below the horizon" retail customer. "If
you're calling a relative on another continent for 10% of the price, you might be
willing to have them sound like they're on the far side of the moon," says John
Shaw, vice president of marketing at NetCore Systems Inc., a U.S.-based
terabit IP/asynchronous transfer mode (ATM) switch developer.
Providing retail VOIP on a managed IP network clearly involves more attention
to QOS, particularly if professional or business users are concerned. "We're
talking about voice over a single end-to-end, managed IP-based network," says
Richard Jones, Europe, Middle East and Africa marketing manager of network
solutions at Equant. "[Having] end-to-end control of the network, we can
obviously tailor and manage the end-to-end quality of not just the voice but the
data and the other multiservice elements." Equant, with offices in Atlanta and
Amsterdam, provides managed services to multinational corporations on its
220-country global data network.
The QOS requirement is very high in the wholesale carrier market. "When
you're dealing in the carrier market, if they're not happy with the quality of what
you're giving them, it takes them somewhere between 10 and 20 minutes to
take you off the routing tables," says Gordon VanderBrug, executive vice
president of VIP Calling, a U.S.-based VOIP wholesaler.
QOS is one of several considerations in the VOIP enterprise space. "Rather
than just looking at VOIP as a means of getting cheaper phone calls, they're
also looking at it in terms of new forms of collaborative working," says Mark
Trought, IP telephony product manager at U.K.-headquartered Siemens
Communications Ltd.
Shaw reckons there is a three-step process for the adoption of VOIP. First off,
companies start to replace their PBXs by putting telephones on the corporate
LAN. Staying with VOIP across wider distances then becomes increasingly
attractive.
"Once they've done that, to go back to regular phones to communicate outside
doesn't make much sense," reasons Shaw. In a final phase, telephony and PC
functions merge. "Some voice you'd almost want on your PC so that you could
integrate your directories, your e-mail and voice mail, and all your callback lists
and personal directories," Shaw says.
Smoldering QOS issues
Price aside, Shaw has identified three variables affecting VOIP service: speed
of access; network bandwidth rights; and QOS and priority.
Several aspects play a part in improving VOIP QOS. VOIP suffers from echo,
noise and jitter. It is characterized by delay. There currently is no built-in
mechanism to prioritize time-sensitive traffic, such as voice, over
time-insensitive traffic such as IP e-mail.
At a basic level, digital signal processing (DSP) can repair some part of the
damage that packet techniques do to voice. DSP and echo cancellation
techniques can detect some of these effects and correct them, such as
removing echo and diminishing noise, says Michael Birck, president and chief
executive officer of U.S.-based Tellabs.
"What they can't do very well is make up for packets that arrive out of
sequence," he says.
Making packets smaller and routers faster may improve VOIP QOS some,
Bersin says. The scope of a service provider's network is relevant here.
"There's a case that the smaller the network, the better," says Geoff Bennett,
director of technology at U.S.-based multiservice networking concern Fore
Systems. "In the ultimate case, a private enterprise can offer almost
guaranteed VOIP quality because it has control over the provisioning ratio on
the backbone."
Siemens is considering using bandwidth to take enterprise VOIP beyond the
level of the PSTN into the realm of compact disc quality. "You start from the
PC rather than starting from the telephone," Trought says.
However, even with foreseeable developments such as dense wavelength
division multiplexing (DWDM), it's questionable whether WAN operators would
be willing or able to continue turning up unlimited bandwidth.
ÒIn locations where there is fiber in place, you may be able to do that now, but
no strategy I know of has successfully been based on the wasteful use of any
resource, whether it's bandwidth or anything else," Birck says. "I don't think
that's ultimately the answer."
Using traffic management to reserve and protect a certain amount of bandwidth
for each call will be one answer to the VOIP QOS conundrum, Shaw says.
Bandwidth alone is not an effective solution with applications more sensitive to
network congestion, he says.
"You need to start doing things with traffic engineering underneath it. And those
tools are just getting developed now," Shaw says. "In the circuit world, traffic
engineering is well understood, and there's a long heritage of techniques for
guaranteeing QOS. In the VOIP world, traffic engineering is a new concept."
As well as QOS, the VOIP community is starting to address wider network
management issues. Teltrend's Martin characterizes the VOIP operations
support systems (OSS) challenge as immense.
Billing is a focus of attention. "Nothing produces customer churn faster than
billing mistakes in the carrier's favor," says Scott Irons, president and CEO of
VOIP provider International Telecommunications Inc. of Boca Raton, Florida.
"Carrier-class billing is essential if IP telephony is to be perceived as a real
alternative to traditional voice networks."
VOIP billing is a more complex undertaking than billing for PSTN voice.
"With the PSTN, you are dealing with known connections between point A and
point B, and as a result you know the originator and the destination and the
network operator or service providers at the end of that link. This makes it far
more straightforward to carry out billing and management services," says
Stewart Anderton, manager of Ovum's Networks and Infrastructure Group in
London.
But taking VOIP to its full extent -- receiving traffic from one operator, then
routing it over any direction to another operator -- is a far more complex model
to manage, he cautions.
An added complication could arise from the fact that H.323, the International
Telecommunication Union's standard now widely used in IP gateways -- can
have side doors. "Given that H.323 allows a client to bypass the gatekeeper,
assuming the address translation can be made, then it's difficult to see how
accounting could be enforced without additional intelligence in the network,"
says Bennett. Fore, headquartered in Pittsburgh, Pennsylvania, plans to
implement such a feature in its H.323 agent, he says.
Whether today's billing systems are up to scratch for large-scale multiservice
traffic is debatable. At the risk of simplification, VanderBrug reckons two types
of systems are presently available: systems that work in the large scale but
aren't very flexible, and highly flexible ones that aren't particularly good at large
scale.
All these issues beg the question of how public network voice and VOIP will
co-exist in the new century. Will the former disappear? There is quite a spread
of opinion on this.
You might see packets at the center of the network, and circuits at the edge,
Netrix's Morris says, but the requirement may be for bandwidth-on-demand.
"And to do that you really have to have a packet infrastructure," he says.
Martin predicts that "operators will evolve their infrastructure to packet-based
technology, with IP as the universal service delivery mechanism. When this
happens, the PSTN and Internet will be two of the services that are delivered by
this packet-based infrastructure."
"How much is IP, how much is ATM, how much is circuit in 1999 is open for
debate. In 2010 it's open for debate. In 2050 I think everyone assumes it's going
to be VOIP everywhere," Shaw says. "From a technology point of view, I think
circuit switching has begun an irreversible decline."
"Given the number of uncertainties, it's hard even to make a guess," says
Bennett. "The law of supply and demand dictates that the market will decide."
John Williamson (101741.2671@compuserve.com) is Global Telephony's
Senior Technology Editor.
RETURN TO TOP
GlobalXtra
Read about two more pieces of the VOIP puzzle:
a look at quality of service issues
An exploration of the implications associated with falling
transport costs
Click here!
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Peering Into the VOIP Void
Telcos take a second look
Initially, incumbent telephone company engineering departments regarded the
advent of voice over Internet protocol (VOIP) with a mixture of antagonism and
disbelief that it could challenge the public switched telephone network (PSTN).
But it definitely represented a potential threat to a core telco revenue stream,
says Heidi Bersin, vice president of marketing at Clarent Corp., a U.S.-based
VOIP equipment company.
More recently, telco attitudes have shifted, although not always to the same
degree or in the same direction in each case. "The shift is from, 'This is crazy'
to 'OK, let's try it in the technical departments,' " says Geoff Bennett, director
of technology at Fore Systems, a United States-based multiservice networking
company. "The marketing departments have always been gung-ho."
Even so, you will still encounter reservations about public VOIP economics and
quality of service (QOS). For example, following a BT Syncordia Solutions trial
that ended earlier this year involving 50 users and more than 10,000 calls, Alex
Markham, solutions development manager of the United Kingdom-based
company, reported that, at present, certainly in the U.K., the cost savings and
business benefits do not warrant VOIP's implementation, although the
company expects that to change as dedicated applications become available.
"Although VOIP has been heralded as the technology that will enable people to
make telephone calls for free, the reality is that nothing, even a call using
VOIP, is for free. In many markets VOIP may not even compete on price with
traditional voice telephony."
The actual cost equation depends on several factors, such as the cost of a call
to the local point of presence, the cost of the equipment required, the effective
cost of bandwidth over the network and the cost of the equivalent public
network call, he says.
"In the U.K., for example, PSTN rates are exceedingly competitive, and VOIP
may not be worthwhile in the short term," he says, "but the equation is
completely different in markets where the tariff structure is different."
BT Syncordia, Apsley, U.K., also says the lack of quality when using VOIP
over the public Internet was too great for most users and predicted that virtual
private networks (VPNs) or intranets would prove to be the only means of
offering required QOS levels.
Some telcos -- those in Scandinavia seem to be in the vanguard -- see VOIP as
a major new business opportunity, although sometimes as part of a managed
multimedia scenario rather than as a big business in its own right. Deutsche
Telekom is also keen on the VOIP deal, buying into Israeli vendor VocalTec to
keep tabs on the technology.
Other telcos' public stance, though, may in part be due to a desire to not
appear unfashionable.
"Old phone companies decided it was not a good marketing position to take
that VOIP was bad. They've been giving it good lip service while continuing to
sell traditional voice services," says John Shaw, vice president of marketing at
NetCore Systems Inc., a U.S.-based terabit Internet protocol (IP)/asynchronous
transfer mode (ATM) switch developer.
"Traditional companies have stopped fighting it because they accept it's a
clearer picture for the future. But when they say they support it, it doesn't mean
they support it aggressively or quickly."
Gordon VanderBrug, executive vice president of U.S.-based VOIP wholesaler
VIP Calling, agrees. "It's gotten to the point where it's not acceptable for a PTT
to say, 'This IP telephony is garbage.' They might say, 'It's not ready yet,' " he
says.
An element of stealth may be involved in the international arena. For major
carriers to offer VOIP service to another country where it isn't yet officially
sanctioned risks forcing the local telecommunications regulator's hand one way
or the other and upsetting the local PTT, which is probably the carrier's public
network voice correspondent too, VanderBrug says.
That's one reason why firms such as VIP Calling, Burlington, Massachusetts,
provide VOIP services to carriers that also have their own VOIP capabilities.
"A carrier such as VIP Calling is at the size and stature where we can go into
countries that have not yet decided that Internet telephony is either legal or
illegal," VanderBrug says. "We are not of the size that is going to force the
regulator in that country to make a decision."
Some incumbent telcos may face an identity crisis of sorts because of VOIP
ramifications. Experts argue that a radically altered Internet business model for
voice as well as other services will replace the traditional telco business model.
The traditional model assumes that telcos are responsible for calls and
transactions end-to-end, and that operators integrate the network with the
services provided over it. The second shifts the focus toward federations of
network owners, service management companies, content leverage enterprises
and end users. "A lot of the telcos have to work out what they are," concludes
Matthew Finnie, marketing director of VocalTec's U.K. subsidiary.
But, leaving aside any present-day identity confusion, there are some
compelling reasons to believe incumbent telcos that aim to prosper in the next
century will take the packet path for service offerings, including voice.
One is the assumption that IP will eventually predominate, and if everything
else is packet, it doesn't make economic or logistic sense to have voice run on
its discrete network.
Related to this is the not inconsiderable benefit of amalgamating different
networks -- including the public switched telephone network, Systems Network
Architecture, X.25 and X.400 -- on one managed IP platform.
"An AT&T is stuck with six or seven different networks that they have to
upgrade and maintain," says Hitesh Shah, director of marketing for Centigram,
a U.S.-based VOIP and integrated messaging vendor.
Not all telcos have an abiding or religious belief in circuit technology. "They are
focusing on added value and are less interested in the technology behind it,"
says Michel Levy, director of marketing development at Paris-based Alcatel, a
company that has recently made a series of high-profile moves in the IP
business.
"If VOIP gives them the services they want to offer their customers, then they
will use it. They are not wedded to one type of technology or platform vs.
another -- it's what it does for their customers that interests them."
Last, but definitely not least, new market entrants that build packet networks
are going to have a cost advantage over incumbents.
"I think any new market entrant is going to look for the lowest cost
infrastructure, and packet infrastructure for voice has now become more
cost-effective then circuit infrastructure," says Shaw. "As that sets a new cost
point in the marketplace, the incumbent carriers are going to have to react."
--John Williamson
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Why Not Wireless?
As voice over Internet protocol (VOIP) starts to make waves in the wireline
network, work is starting on introducing wireless versions of the technology.
In the fixed-wireless arena, for example, United States-based Ascend
Communications and WebTel Wireless inked a deal earlier this year that
involved bridging the former's MultiVoice gateway with the latter's wireless
network to produce what the duo claims is the industry's first wireless VOIP
(WVOIP) service.
Several companies, including Ericsson, Lucent and VocalTec, are known to be
looking at mobile WVOIP. In February, U.S.-based interWAVE
Communications demonstrated networking capabilities that provided
interoperability between GSM wireless and Internet protocol (IP) networks. The
demonstration, held at Nortel Networks' booth at the GSM World Congress
earlier this year in Cannes, France, was claimed to deliver voice quality
comparable to that of today's GSM mobile calls.
"Using this platform to deliver GSM voice communications over an IP network is
the first step in interWAVE's evolutionary strategy of combining wireless
access with packet transport media to provide flexibility and gateway
functionality," says Dr. Priscilla Lu, chairman, president and CEO of the
Redwood, California-based company.
Mobile WVOIP has several drivers. One is the Internet's popularity and the
growing importance of packet technology in general. A second is the move
toward fixed/mobile convergence and the appeal of unified messaging. A third is
the advent of mobile packet services such as GSM's general packet radio
service (GPRS): If data, why not voice?
"It seems to me very logical that the next evolution will be to say, "Hey, this is
compressed voice. I have a packet infrastructure, why don't I run GSM over IP?'
" says Tony Morris, U.K. vice president of marketing for Netrix, a U.S.-based
voice and data networking concern.
But this may not happen for some time. "We do not see the same urgency in
the cellular market at this time, for radio access at least," says Michel Levy,
director of marketing development at Paris-headquartered Alcatel. "I think we
see IP technology coming to play first in the core transport network of mobile
operators." --John Williamson
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Future Talk
Despite current limitations of voice over Internet protocol (VOIP) in the quality of
service (QOS) arena, you'd be hard-pressed to find many people who believe
that Internet protocol (IP) in general and VOIP in particular don't have a major
commercial future.
For example, Stewart Anderton, manager of Ovum's Networks and
Infrastructure Group in London, envisages wide-area IP "PBXs" that users can
log onto from anywhere and become a member of a PBX community.
Perhaps understandably, U.S.-based pay phone and calling card specialist
Intellicall thinks there's a big future in VOIP calling cards.
"It is estimated that, by the year 2010, 25% of all calls will be carried on IP
networks. Most of that traffic is expected to take place internationally, since
many countries' telecom infrastructures are not adequately developed to handle
traditional calls," says John J. McDonald, Jr., Intellicall president and CEO.
"Prepaid cards offer an expedient way to work around limited infrastructures.
Demand will only increase as VOIP becomes more entrenched in the future."
U.S. start-up RocketTalk already offers an IP voice messaging solution. "With
the lowering of tariffs on international telephone traffic, much of the price
advantage of VOIP has eroded," says Evelyn Miller, director of marketing for
RocketTalk, Fullerton, California.
"We feel that the next step in VOIP will be added features such as messaging,
and others will be developed. Because we use a client/server model along with
compression, RocketTalk messages are not subject to the vagaries of Internet
traffic."
Meantime, Jos Gerrese, director of Internet Transit Services at
Netherlands-headquartered AT&T Unisource Communications Services, notes
that "transmitting voice over the Internet will support new, real-time applications
such as click-to-call directory services, real-time document collaboration and
desk-to-desk videoconferencing." --John Williamson |
