[Miami Herald article on Internet telephony, including AT&T plans]
Excerpt: "Analyst Kagan says the phone giants will have to make huge commitments to
building so-called gateways to the Internet to stay ahead of newcomers like Qwest
and IDT. ''As long as they can go through a transition over the next dozen years or
so, they'll be OK,'' he says.
Everyone agrees 1998 will be a key year. The first Internet gateways are being
installed now. ''Depending on how those commercial deployments go, I think we'll
see the beginning of that familiar ramp'' of sales growth, Parham says."
herald.com
Published Sunday, February 22, 1998, in the Miami Herald
Talk of the future: Calling via the Internet
By DAVID POPPE
Herald Business Writer
Motorola executive Sean Parham looks into the
future and sees a revolution in the way people use
the telephone.
He sees low-priced domestic long distance and
huge discounts on international calls. He sees
telephones that offer features that are unheard of
today, such as built-in video conferencing
capabilities.
In short, he sees a telephone network run over the
Internet. Just as the advent of the personal
computer 15 years ago put vastly more power in
offices and homes and changed an industry, the
ability to route telephone calls through the Internet
promises to create a far more powerful national
phone system -- and to turn the telephone industry
upside down.
''The same thing we saw happen with the computer
-- the explosion that created tons of new
opportunities, new services and new millionaires --
is happening here,'' says Parham, who is director of
Internet product operations for Motorola in Austin,
Tex.
Adds telephone industry analyst Jeffrey Kagan:
''The days of a simple phone call are quickly
coming to an end.''
That's because the nation's telephone system and
the Internet, the huge worldwide computer
network, are converging. And because the
Internet's capacity is much greater than the phone
network's, routing telephone calls through it means
businesses and consumers will be able to do more
things for less money.
Says Kagan: ''The way we communicate for
business and for pleasure is going to be totally
different from what we have now.''
Until now, so-called Internet telephony has been a
pursuit for hobbyists. To talk over the Internet,
both parties had to have a PC equipped with sound
cards and microphones. They had to arrange their
calling time in advance and put up with mediocre
voice quality.
But thanks to new software that makes it easier for
telephone voice signals to travel over the Internet,
major improvements are coming. This year, MCI
and AT&T will roll out Internet calling plans. A
crop of new Internet-oriented phone companies,
such as Qwest Corp. and IDT Communications,
are offering long-distance in some cities for as little
as 5 cents a minute.
Even these plans are a little primitive compared to
what lies ahead. AT&T's plan, for example, will
require a consumer to buy a prepaid phone card --
in denominations of $25, $50 or $100 -- that
comes with a 1-800 phone number and access
code.
The user dials the 1-800 number, which connects
to an Internet service provider. Then, the user
punches in the access code, gets a dial tone and
punches in the phone number.
The call itself travels most of its journey over the
Internet, before connecting to the telephone at the
other end. And there is a momentary delay
between the time one person speaks and the other
hears. ''Using the service is not exactly like a
regular telephone call,'' says Mark Siegel, an
AT&T spokesman. But as the technology
improves, that delay figures to disappear.
What users give up in convenience, they'll save in
cash. AT&T promises to charge between 7 1/2
cents and 9 cents a minute for domestic calling
time. Charges are deducted from the calling card's
face value.
The rates are so low because the Federal
Communications Commission exempted Internet
connections from the local access charges that
long-distance companies must pay to connect calls.
Perhaps the first major market for this kind of
calling will be among people who make a lot of
overseas calls. Many countries impose heavy tariffs
on international calls as a way of subsidizing
domestic calling. Using the Internet would let callers
bypass those charges and, as a result, slash their
calling rates.
''It is clearly targeted at international calling where
the price differentials and the savings are so
compelling that users are willing to sacrifice
quality,'' says Sanjay Mewada, a senior analyst at
the Yankee Group.
Raymond James & Associates Internet analyst Phil
Leigh also notes that half of the telephone traffic
between North America and Asia is facsimile
traffic. Sending an international fax over the Internet
would dramatically cut costs, with no worries about voice quality. International
faxing now is a $36 billion market, Raymond James reports.
However, these early markets only hint at the potential of using the Internet to route
telephone traffic. Longer-term, analysts foresee a new range of services that will
make today's public telephone network look antiquated.
Three small companies -- NetSpeak Corp. of Boca Raton, VocalTec
Communications and Inter-Tel Inc. -- have developed software that acts as a
gateway between the phone system and the Internet. That is, their software can
convert voice signals, which travel as analog waveforms, into the data packets that
move over the Internet. And they can convert ''packetized'' data into analog
waveforms.
That software could be the key to the future of the telephone. If it works well in
large-scale tests this year, it would permit phone companies to route voice traffic
straight onto computer networks and allow them to offer a new breed of
multimedia services, including clearer video transmission, faster fax services, and
broadcast capabilities.
It would let Internet service providers offer voice telephone calling in competition
with the Baby Bells, AT&T and MCI. It would mean consumers wouldn't have to
dial any access numbers; rather, they would make calls as they do now, but the
signal would be routed in a new way.
Big savings for businesses
What does that mean in the real world? Raymond James believes businesses might
save 90 percent on international faxes. It means that employees in the Fort
Lauderdale, Orlando and Tampa offices of one company could work on the same
spreadsheet program at a video conference.
It means a person looking at a catalog on the Internet could, with the click of a
mouse, call a sales representative at the web site without losing the Internet
connection.
The sales rep receiving the call would see on her computer monitor the web page
the customer is viewing. The sales person could close the sale and take the
customer's credit card number over the phone. One of the biggest obstacles to
electronic commerce has been the reluctance of many consumers to type their
credit card numbers into an anonymous web site.
''That, I think, is the real opportunity,'' says AT&T's Siegel.
Some of these applications are still a few years away and will require a new
generation of telephones and PCs. But telecom analyst Kagan predicts that one
day, perhaps a decade from now, people will routinely expect to see as well as
hear the person on the other end of the telephone line. ''When you can see your
parents on every phone call, it'll seem funny that we used to look out the window
[while talking],'' he says.
Big business is ready for that day to come. A Yankee Group survey of 300 large
U.S. corporations found 41 percent of them intend to move some of their voice
telephone services to the Internet. Slightly more, 44 percent, intend to put at least a
portion of their fax traffic over the Internet.
Raymond James, meanwhile, sees the demand for equipment made by NetSpeak,
the Boca Raton software startup, growing from $5.4 million in 1997 to $62.5
million in 1999 and $200 million in 2001.
That is why Sean Parham of Motorola is optimistic. Motorola has signed deals with
all three of the top Internet telephony software companies to use their products
inside computer networks it sells to large corporations.
A new era
Parham sees a new era in telecom services. ''It's the same thing that made
entrepreneurs think they could build an Apple Computer or a Microsoft,'' Parham
says.
Analyst Kagan says the phone giants will have to make huge commitments to
building so-called gateways to the Internet to stay ahead of newcomers like Qwest
and IDT. ''As long as they can go through a transition over the next dozen years or
so, they'll be OK,'' he says.
Everyone agrees 1998 will be a key year. The first Internet gateways are being
installed now. ''Depending on how those commercial deployments go, I think we'll
see the beginning of that familiar ramp'' of sales growth, Parham says.
John Staten, the chief financial officer of NetSpeak, is optimistic that that sales
ramp is going to look pretty steep.
''Back in '96, everyone was saying this is a fad, it's Ham radio,'' he says. ''Now,
they are saying this is for real, our customers are demanding this.''
Copyright c 1998 The Miami Herald
Getting in touch with HERALDlink
|
