"IP telephony stands poised for broader use "
I think this article says it all...
GCN SHOPPER, May 1998
IP telephony stands poised for broader use
By Charles Waltner
Even in the mile-a-minute world of high technology, the evolution of IP telephony has been startling.
A techno-geek hobby a year ago, IP telephony is now what some industry observers consider the future for telecommunications.
Organizations save money with IP telephony by sending phone calls over Internet lines. But the real power of IP telephony is in its ability to handle voice and data signals equally well, providing transport technology for sophisticated multimedia communications.
The long-term promise of IP telephony has prompted some of the major telecommunications companies, including MCI Communications Corp., AT&T Corp. and Deutsche Telecom, to enter the market.
"You can do a lot more with IP telephony than with circuit-switch phone lines," said Francois de Repentigny, a telecommunications industry analyst for Frost & Sullivan of Mountain View, Calif. "If it was just a pure replacement only because of pricing, IP telephony wouldn't last."
The advantages of IP telephony are not going unnoticed. Mark Winther, group vice president of worldwide telecommunications for International Data Corp. of Framingham, Mass., estimates the IP telephony market will reach $3 billion in three years, while de Repentigny expects IP telephony will grow to 10 percent of global voice traffic by 2001. He estimates IP telephony currently accounts for only 0.2 percent of all voice traffic.
Go gateways
As the market grows, the technology is changing. Early entrants into the Internet telephony market, such as VocalTech Communications Ltd. of Israel, concentrated on selling client software. But now the market is clearly focused on gateways, which let users initiate IP calls from standard phones. Gateway computers translate the circuit-switch analog
signals of conventional phones to digital IP packets that can travel on the Internet.
In IP telephony, one gateway translates an analog phone call to digital packets for Internet travel; another gateway reconverts the signal to analog on the receiver's end.
Any IP network can carry telephone signals. IP telephony is an economic way for organizations to make an inordinate number of long-distance calls, say between branch offices. Network managers can install the new gateways at each office and run phone calls over the Internet or an intranet.
By some estimates, IP telephony services save, on average, 50 percent to 75 percent over the international calling charges levied by foreign telephone companies. IP telephony service provider IDT Corp. of Hackensack, N.J., for example, charges 20 cents per minute for calls from Australia to the United States.
According to Sarah Hofstetter, spokeswoman for IDT, in 1995 VocalTech unveiled the first software that enabled voice communication over the Internet. Within a couple of months, more than a dozen companies, including Intel Corp., Netscape Communications Inc. and Microsoft Corp., began offering similar technologies.
And no telemarketers
Problems with the technology quickly became apparent. Both parties participating in a call had to have a multimedia PC with identical telephony software, and both users had to be online simultaneously.
Aside from the practical problems inherent in such arrangements, the sound quality of Internet telephone exchanges was choppy, delayed and poor. Only hard-core Internet aficionados bothered with the technology.
But thanks to new gateway technology, the problems have been minimized. Now anyone can make a call from a regular phone using IP technology.
As a result, the bulk of the revenues for IP telephony services these days is from phone-to-phone communications. And roughly 15 percent comes from PC-to-phone calls.
PC-to-phone calls are particularly handy for employees traveling in places that don't have a local gateway. With the PC, a traveler dials directly into the Internet to call, avoiding the need for a gateway connection at the originating point of the call.
The original PC-to-PC concept of Internet telephony now plays only a small role in the market, because handset telephones are so much easier for voice communications than PCs.
The biggest players in IP telephony services include IDT, Delta Three Inc. of New York, ITXC Corp. of North Brunswick, N.J.; and GlobalExchange Carrier (GXC) Inc. of Manassas, Va.
Some companies, such as GXC and ITXC, rely on partnerships with Internet service providers, cell phone providers and individuals with Internet infrastructures to build their networks. GXC and ITXC own little of their own infrastructure.
Others, including IDT and Delta Three, focus on building an infrastructure to improve quality control and build a network for future value-added services.
IDT, for example, owns its T3 backbone and is speeding to extend private lines into other countries.
IP telephony companies use such tools as voice prioritization routers and monitoring systems to move IP voice packets more efficiently past the traffic jams of the Internet.
Rusty Cline, co-founder of GXC, said much of the rapidly growing interest in IP telephony is thanks to better compression technology for packetizing voice signals, which has boosted sound quality.
Pins dropping?
"When we started in 1996, voice over the Internet sounded like you were speaking on a walkie-talkie," Cline said. "Now, we're at least 85 percent the quality of toll calls."
Cline and others are quick to note, however, that call quality is not guaranteed when IP signals run on the public Internet. Quality is at its best over private lines.
With the improvements in quality, IP telephony can make sense for organizations needing to save money on long-distance calls.
Cost savings aren't as compelling for many government agencies that have only domestic offices, de Repentigny said. U.S. long-distance rates are relatively low. The cost benefits from IP telephony come from international calls to countries with monopolistic telecommunications organizations and high rates, such as those in Asia and South America.
But even with international calling, each organization needs to work out the finances of buying gateways and determine the payback period for an investment in gateways, de Repentigny said.
Agencies must ask at least two questions:
How many calls do you make between offices?
What is the cost of those calls, balanced against the cost of buying, setting up and managing the gateways?
The last factor is a particularly important consideration, because the care and feeding of an IP telephony network can be onerous, de Repentigny said.
Also, gateways throw network managers into the world of telecommunications, an uncomfortable fit at best. Many
issues of telephony are unfamiliar to computer networking staffs and could lead to a rough initiation into IP telephony for both systems managers and users. De Repentigny recommended that organizations interested in saving money with IP gateways turn to service providers for help. Some providers, can install and manage gateways, eliminating the learning curve.
There is a catch. Because the industry is so new, there are only a few IP telephony service providers and most focus on selling services to consumers, de Repentigny said.
Seller's market
Unless an organization is bleeding money from international telephone costs, de Repentigny recommended waiting a little while. New IP telephony products and services are hitting the street daily. Gear for running IP calls over virtual private networks is just one of the latest technologies.
Prices of IP gateways are falling rapidly, which will make IP telephony more cost-effective for government agencies. Cline estimates that gateway prices will fall drastically by the end of this year. In four to six months, the gateways will be more scalable and better able to handle about 200 calls simultaneously vs. current gateways' limit of 24 simultaneous conversations.
IP telephony's future looks bright, although analysts say its pricing advantage will be short-lived. In as little as two years or as much as five years, prices will equalize, through competitive and regulatory action. But the changes will occur country by country.
A new breed of integrated network routers with gateway capabilities is harnessing IP telephony for multimedia communications applications. The routers help combine the quality of IP telephony voice signals with networked multimedia applications, such as Web call centers. With such an integrated router, you can create buttons for Web
sites. Users need only click to call for help.
More to come
Cisco Systems Inc. of San Jose, Calif., VocalTech Communications Ltd. of Northvale, N.J., and 3Com Corp. of Santa Clara, Calif., are among the few offering integrated gateways today, but more are in the offing.
Integrated gateways are the future of IP telephony, especially for large organizations. The devices will let organizations use computers as unified communications devices, blending voice communications with the graphics and data now available on the Web.
Such products will let a user use one telecommunications line to talk on the PC while simultaneously surfing the Web.
Applications using IP telephony and the Web will include videoconferencing, click-to-talk help desks, global toll-free
numbers, and combination voice and text chat sites, IDC's Winther predicts.
The flexibility of the technology will help IP networks continue to thrive long after they lose their pricing advantage over standard phone services. With such capabilities, IP telephony is likely to become the backbone for all communications.
end
Now after reading that go back and reread the DGIV press release and the newsletter...I hope you get the warm fuzzies
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