Rick J's, NEWS ARTICLE Why IP Telephony Is Shaking Up
the Telecom Marketplace
Popular opinion suggests that the carriers are being dragged into IP telephony
by the upstarts and the threat of "cheap" telephone service. But carriers and
their key suppliers appear to recognize the opportunities that await them and
are moving quickly to translate new ideas and business models into successful
commercial ventures.
Lenore V. Tracey
VOICE OVER IP IS CAUSING A SEA change in the way we view telephony
services and nowhere more than in the carrier world. Significant issues
remain to be addressed, such as interoperability standards (not yet fully
developed) and voice quality (e.g., delay, echo), but the opportunities are
enormous. IP telephony adds Web technology to the carrier's armamentarium
for provisioning, administration, operations, maintenance, and service. As
carriers learn to think differently than they do for their traditional wireline
businesses, they will begin to break away from legacy systems. But important
questions remain: Where and how will this happen?
As the carriers research and debate approaches to integrating IP telephony
into their service offerings, companies such as Siemens, Lucent, Nortel, and
other major telco suppliers are one step ahead, designing and manufacturing
products and components to meet the carriers' needs when they take the
plunge. Embracing both the circuit-switched public network and IP
technology allows a cadre of new businesses and services to emerge.
Not everyone agrees that voice over the net is the wave of the future,
however. Amidst the cacophony of voices promoting the role of IP in
telephony are a host of well-respected naysayers, such as A. Michael Noll,
professor at the Annenberg School of Communication at the University of
Southern California. A skeptic of technology for technology's sake, Noll cites
a number of problems. For one, according to Noll, the quality of
packet-switched voice is a conversation stopper. Packet networks were
invented for short bursty traffic-not interactive constant bit rate (CBR)
connections. "With long packets, delay is the killer; with shortened packet
lengths, we approach the current circuit-switched technology-but the
overhead kills it, and packet-switching requires that overhead. The tail is
wagging the dog." comments Noll. "The body of the dog is voice; data is the
tail."
Furthermore, Noll suggests that anyone who views Internet telephony as free
should look closely at the infrastructure supporting it. Noll remarks that "for
some reason the government has blessed the Internet and cursed the telephone
system."
To Noll and others, we seem to have forgotten that the PSTN was developed
precisely for high-quality voice transmission. And, as NetSpeak's Executive
Vice President Harvey Kaufman notes, the circuit-switched telephone network
is "not broken." He suggests that those who think that Internet telephony will
replace the PSTN are being unrealistic. Kaufman sees the real opportunity of
voice over IP in solving some traditional telephony problems with new
approaches and offering new and expanded services.
Free Telephone Service?
The notion that the threat of cheap long-distance calling is driving the carriers
to embrace IP telephony may be a naive one. Low-cost calling may provide an
initial lure for the consumer, but creative carriers and their suppliers are
tuned to a different vision. While strident and opposing voices contend either
that the PSTN as we now know it is dead or that IP telephony will never be
able to compete, many understand that the truth, of course, is somewhere in
between. In the long term, IP telephony may not end up being a cheap
long-distance alternative.
Jim Wood, manager of Product Line Management, Siemens Internet
Solutions, Siemens Stromberg-Carlson, suggests that ultimately there will be a
blending of the technologies associated with the PSTN and evolving IP-based
networks: "There will also be some pricing convergence, where some
traditional pricing will start to deteriorate and Internet pricing will start to
increase." The potential for IP telephony is rooted in more efficient use of the
network. Like Wood, Kaufman thinks that a hybrid system will develop
where each technology will serve the purpose for which it is best suited. "It's
like the discussion that the mainframe is dead. The mainframe didn't die at all,
it found it's own place. Circuit switching is a highly reliable, available,
cost-effective technology designed for delivery of voice."
Although predictions of where it will all shake out are diverse and
contradictory, most analysts seem to agree that the trend toward voice on the
net is already irreversible. A Forrester research report (Internet Telephony
Grows Up, March 1997) predicts that by 2004, more than 4 percent of U.S.
telco revenue-more than $3 billion-will migrate to IP telephony.
Two-thirds of that revenue represents user spending and one-third is savings.
Palo Alto-based Killen & Associates predicts that the IP telephony business
will reach $63 billion by 2002. At the recent Pulver.com Voice on the Net
(VON) conference in Boston, Fran‡ois-Eric de Repentigny of Frost &
Sullivan summarized the primary market drivers (and restraints) for this
growth (see Table 1).
Table 1:
Drivers and Restraints for the IP Telephony Market
Market Drivers
Toll bypass or reduction;
Rapid product quality improvement;
Spreading interoperability;
Growth of Internet and intranets;
Carriers' need to offer value-added services;
Desire to integrate voice and data networks.
Market Restraints
Lower voice quality;
Lagging infrastructure upgrade by corporations;
Increasing Internet access charges;
Decreasing PSTN prices;
Lack of global structure for ITSPs;
Source: Frost & Sullivan
In addition to pricing factors, infrastructure plays a big role at all levels. The
end point is still distant and indiscernible; however, the issues are becoming
clearer. What we see developing is the global placement of POPs, intranets
and extranets, and gateways-an extensive data network complementing the
telephone circuit-switched network, with all varieties of overlap and contact
throughout, lots of on and off ramps. The technology leaders are likely to be
upstarts who need large traditional partners to provide market reach while
they deliver agility and a technological edge. As Forrester analyst Chris Mines
comments, "The battle looms between the traditional telco equipment
suppliers and IP suppliers."
Some Potential Applications
Today, some industry experts, such as Jim Wood at Siemens, see three
emerging areas where IP telephony services are most likely to be
implemented:
Franchise model;
Call center model;
Internet telephony service provider (ITSP) model.
In the franchise model, franchisees have compatible gateways located around
the world. Together they form a global long-distance company where there
are communities of interest. For example, says Wood, a large Pakistani
population in Florida could organize to establish a gateway in their area so
that callers could dial a local number for access to the IP network. A
corresponding group sets up a similar gateway in Pakistan. The calls then hop
from Florida to the local gateway, travel the Internet to a gateway across the
Atlantic Ocean, and are received through the local gateway in Pakistan. As
additional gateways are established, a network develops for the community of
interest. Compatibility is assured, and the toll settlements are the only issue to
be worked out. The gateways are transparent to the users.
In an example of the call center model, the telco might offer a "yellow pages"
service on the Internet and sell businesses the yellow pages plus home pages.
A telephone icon on the home page allows customers to talk to sales or service
people whenever they choose. Clicking on the telephone icon signals the ISP
to locate the closest gateway to the business and enables the user to have a
telephone conversation right from the Web page. This model has huge
commercial potential and may be the first value-added service to be added
large-scale to carriers' offerings as a customer service option. Using this
model, businesses capture customers when their interest and attention is at a
peak. Again, this changes the way telephone lines are used and essentially
provides multiline service over a single line.
At Nortel, Glenn Falcao, general manager and vice president of Public Data
Networks, is less "bullish" on the carriers' role in offering value-added
services such as call centers and multimedia services. According to Falcao, the
carriers are more likely to play a greater role in implementing and offering
the services and transporting voice to the end users; the private network
providers and telco suppliers (traditional and new) will develop the new
technologies and designs. "What the carriers have going for them is their
complex, reliable, and extensive networks. For someone else to replicate these
networks and provide the mass market services that are required and the mass
market network that's scaleable and robust is not trivial," comments Falcao.
But Falcao thinks that the carriers need to start looking at their businesses
more as wholesale/retail enterprises. The wholesale arm can then view the
ISPs-even their own-as customers. Falcao sees this as a "new revenue
opportunity for the carriers and an opportunity for the ISPs to improve their
business cases because they can reduce their capital costs and get some
network control and management that they didn't have before."
For ISPs that are expanding their services, the wholesale model allows
carriers to offer them the "entire breadth of the network." Instead of having
to build multiple POPs in multiple cities, carriers can provide gateway
services which represent almost "instantaneous" service without the ISP
having to invest up front in the POP, a view shared by Siemens
Stromberg-Carlson.
One of the most interesting applications of IP telephony involves the use of
extranets. In this model, extranets offer guaranteed quality-of-service (QoS)
IP networks for PSTN-like quality voice. These services can be made
available to a variety of businesses and residential subscribers for alternative
services with acceptable voice quality. Furthermore, Kaufman of NetSpeak
comments that, in his view, "Voice quality will always be 'iffy' on the
Internet, because, by definition, nobody owns it or controls it." Using
extranets in this way, carriers can enter or optimize their positions in the
Internet market-not as ISPs offering Internet access for $20 per month-but
as carriers offering extranets with value-added products where they can
guarantee QoS. Using an extranet, the carrier can control delay and packet
loss-guaranteeing QoS.
Where will it end? The picture is still fuzzy, but it's beginning to come into
focus. Notwithstanding the carriers' characteristic big company lethargy and
cultural disadvantage in a fast-moving, rapidly changing technological
environment, they do not appear to be burying their heads in the sand.
Suppliers are moving to develop new products and carriers are staking out
territory tentatively or boldly. The emerging scene evidences the development
of strategic partnerships and adventurous decisions that will bear out over the
coming decade. Stay tuned.
Lenore Tracey is a consulting editor with Telecommunicationsr.
The IP Telephony Mix
IP telephony, voice over the Internet, Internet telephony: They all refer to the
use of Internet protocol (IP) to deliver voice over a data network. As long as
the network can carry IP-whether it is over ATM, frame relay, or
Ethernet-it is included in this category. The current models include a
mixture of possibilities:
Telephone-to-telephone;
Telephone-to-PC and PC-to-telephone;
PC-to-PC.
The technologies that are enabling these communications are rapidly evolving
and incorporating industry standards.
IP and SS7 Hybrid Technology in Action
Building on its substantial Internet experience, MCI announced its Internet
2000 initiative in 1996. It included plans to increase the capacity of MCI's
Internet backbone network, expand consumer Internet offerings, and enhance
its business offerings in the area. In January 1997, MCI announced a further
development of the Internet 2000 initiative with the unveiling of VAULT, an
architecture designed to eliminate the need for two separate lines and allow
simultaneous communications over the voice network and the Internet's data
network.
MCI's VAULT network architecture makes use of SS7 to control and run
both IP and circuit-switched voice networks, taking advantage of them both.
They have demonstrated VAULT for use in call centers where a customer
representative can make use of voice connections and simultaneously push
URLs to the customer to view products. What do you get? A live video of the
agent, a conversation with the agent, and relevant Web pages that the agent
can provide to help the customer-all through a single connection. This type
of enhanced 800 service saves the carrier money by taking the voice over the
IP network and saving the access charges that would be due to the LECs. (Of
course, the LECs are also looking to get into the business.)
Regardless of who you think will provide new IP-based, multimedia services,
there is general agreement that the combination of the intelligent network and
IP offers new ways to package and deliver voice, messaging, data, video,
collaboration and conferencing, and other as yet unimagined services.
Consider this example of how SS7 and voice over IP can make the carrier and
the use of the network more efficient and effective: Prior to SS7, conventional
telephone calling required a connection or pathway to be established between
the caller and the called. That pathway was set up when the call was placed. If
the receiving party was on the line, a busy signal was sent back over the
pathway to the caller. The caller knows that the phone is busy and tries again
(and again and again). However, carriers only get paid for completed calls. A
system that requires them to use network resources to set up the call and then
wait to see if it can be completed is not an efficient or profitable one. If you
are not getting paid for uncompleted calls, you want to keep that kind of
traffic off the circuit network.
With SS7, the intelligent network checks to see if the receiving party is busy
and then instructs the local switch to send the caller a busy signal-already an
improvement in efficiency. Adding IP to the picture suggests new
possibilities. If a carrier offers an alternative IP-based "virtual second-line
service," the SS7 network can identify the fact that a call cannot be completed,
identify the party to which the called is connected, and be aware that the
called party subscribes to virtual second-line service. The call can be sent
through an Internet gateway and deliver a message into the called party's
Internet session either as a text message, a voice message, or as a live voice
call. The Australian carrier TELSTRA recently announced such a service to
be trialed this autumn. In Europe, this type of service is already available in
"friendly customer trials" through Ericsson's Inc.'s Phone Doubler. The
product is used at either the Internet or telco provider's switch and uses the
call-forwarding function. Carriers can offer the service to their subscribers
who have PCs running Windows. The ability to transmit voice over an IP
packet stream and offer multiline function over one connection is a significant
value-added feature.
Lucent Technologies: A Snapshot
As early as September 1996, Lucent Technologies announced an IP telephony
product scheduled to be commercially available by Fall 1997. On September
15, their service provider gateway product, the Internet Telephony Server SP
(service provider) came on the market. It is designed to route voice or fax
calls over an IP network such as the Internet or an intranet or extranet. Trial
partners have included service providers such as GTE, France Telecom, MCI,
and AimQuest.
Based on market research, the initial product offering supports
phone-to-phone and fax-to-fax transport to ease it into the mainstream. Future
releases will support PC-to-phone calling. At this time, the service provider
selects a primary network through which calls are routed. Future releases will
support an option to select another network to take the call if quality
degrades.
According to Carletta Glaspy, district manager, Network Systems Global
Marketing, Lucent recognizes that in this market, carriers need to be able to
differentiate their services. To that end, Lucent plans to include a suite of
APIs in their IP telephony servers to develop additional applications such as
other directory services, audio/video conferencing, or collaborative work. |
