Jerry,
Maybe stupidity is contagious!!
For a longer-term view of IP telephony, check out the following from the NTIA Internet Telephony Forum:
IP Telephony: It's About New Revenue
by Steve Pastorkovich
The raging fight about Internet telephony is a whole lot calmer now. Not long ago, Internet telephony was nearly seen as an act of war by IXCs, threatened by the upstart technology that digitized voice signals into packets for transport over the Internet, bypassing long distance charges. That view was challenged in September at a forum conducted by the Commerce Department's National Telecommunications and Information Administration (NTIA).
The battle lines appeared to have been drawn. VocalTec, the company that spawned Internet telephony, announced development and marketing arrangements with giants like AT&T, Motorola, Dialogic, and Lucent. A number of other companies with competing products also announced launches and partnerships. Open warfare appeared all but certain. However, all was not as it seemed.
NTIA's forum debunked the notion that packet switching was poised to render circuit switching and IXCs obsolete. True, IP telephony is evolving to the point where a regular handset can be used without a computer (the digitizing and packet switching will be handled by voice boards), but it's no longer seen as a case of "Us versus Them." Internet telephony represents the opportunity to offer additional enhanced services &emdash and new services generate new revenues.
Both Jeff Pulver of the Voice Over the Net Coalition and Joseph Rinde of MCI (a VON supporter despite being an IXC) agreed on this point at the forum. Rather than representing a threat to incumbents, IP telephony brings new opportunities to provide additional services, mostly in the collaborative and multimedia categories. The low barriers to entry into this market will permit both incumbents and competitors to innovate, thereby driving the introduction of new products and services to the market. This means new income sources for carriers.
New applications will be developed as the technology matures. In the more immediate future, Internet telephony will be most useful for conference calls and multimedia collaboration, where several people can work at once on a document or layout display. Some voice signals might go over the PSTN, others may travel via IP, and some may switch between the two (hopefully seamlessly) depending on network congestion.
Another application that has received a great deal of attention is interactive call centers. As more marketing is performed via the Internet, call centers are adapting to include it in customer service efforts. For instance, if a potential customer sees something on a web page they want to learn more about, they could click on a "Speak to Sales Rep" button to have a live conversation, possibly including video, with an employee in a call center.
Is Packet Switching Really Much Cheaper Than Circuit Switching?
VocalTec and Dialogic representatives used the forum to emphasize how much less expensive packet switching is compared to circuit switching. This factor adds to the impression that packet switching will supplant circuit switching at some point.
However, Joseph Rinde of MCI vigorously disputed the extent of packet switching's cost advantages, especially in the short term. The gateways (hardware that connects an IP network to the PSTN) necessary for IP telephony packet switching are currently so expensive, according to Rinde, that gateway costs alone wipe out most (if not quite all) of packet switching's price advantage. He said gateway costs would have to come down "a great deal" to allow packet switching's total cost to be significantly lower.
On the other hand, these gateways are only now starting to be developed, and more companies are entering the gateway manufacturing business every month. Such strong competition could allow prices to eventually reach very low levels. However, no one can say for certain how long this might take.
Bumps in the road
IP telephony also faces other problems, at least in the short term. Quality of service remains unreliable, although most seem to think this will be solved as technology progresses. Another unresolved issue is billing. How should IP telephony services be measured, what should the charges be, and how will accurate billing be implemented? These hurdles will have to be overcome for IP services to become widespread.
International regulation is a major obstacle to IP telephony, according to Diane Cornell of the Federal Communications Commission. Because of high costs, those who make many international calls are often early adopters of IP telephony. Instead of lowering inflated rates to make international calls less daunting, some governments are trying to prohibit or restrict voice over IP.
Michael Spencer of Technology Solutions Co. felt that packet switching and the normal PSTN will eventually evolve to co-exist and complement one another, at least for the next few decades. Several participants agreed that predictions of packet switching taking over the world in just a few years are overblown. The consensus also sees movement towards different tiers of service, where higher quality and reliability will be available for higher prices.
What is the role of Universal Service?
The role of universal service (as far as it concerns IP telephony) is currently undefined, but the forum heard no calls to totally exempt IP telephony from the mechanism. Still, Robert McDowell of America's Carriers Telecommunication Association (ACTA) called Universal Service "the crazy aunt in the basement no one ever talks about." Sooner or later, IP telephony will have to be factored into universal service one way or another. It is such a touchy issue that one panelist specifically declined to address the topic.
Another participant, Dr. Nicholas Economides (an Economics professor at NY's Stern School of Business) ventured further than others did on the subject. He feels that since IP telephony will survive in a competitive environment, it should be subject to USF payments just like other carriers, but only when it becomes a viable industry. He estimates it will take about two years for IP telephony to become viable on its own. In the interim, he thinks IP telephony should not have to make USF contributions while it is forming into a "real" industry.
The Less Regulation, The Better
Dr. Economides' sentiments may be at odds with those of outgoing FCC Chairman Reed Hundt. "Data networks," according to Hundt, "should be free from subsidy. They shouldn't pay into any subsidy pool and they shouldn't take out. Let the markets build them." Speaking before the Institute of Electrical and Electronics Engineers in Palo Alto, California a few weeks before NTIA's forum, Hundt was endorsing a proposed Internet Promotion Act. Among other provisions, Hundt called for the federal government to prevent state legislatures and utilities commissions from regulating digital packet networks.
Back at the NTIA forum, Larry Irving, Assistant Secretary for Communications and Information at the Department of Commerce, said that current regulatory practices are not appropriate to new technologies. "The current model does not work," declared Irving. He emphasized how hard he has been trying to keep regulators out the way of developing technologies and applications.
Jeff Pulver of VON issued a strong warning to companies that fail to take advantage of the new revenue sources these new applications can bring: "You will fall behind." Companies that miss the IP telephony boat may miss opportunities to enhance both customer service and their bottom line.
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For more details on the NTIA Internet Telephony Forum, see NTIA's web page at: ntia.doc.gov.
The VON Coalition's web page, von.org, provides updated news reports on technological, regulatory and marketing developments related to Internet telephony. |
