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3/08/99 - Voice Over IP: The Battle Heats Up
Mar. 07, 1999 (Network Computing - CMP via COMTEX) -- A packet is a packet is a packet. But if you want your IP packets
to carry voice as well as data, you have to look long and hard to find true business-class voice-over-IP services. Still,
businesses are seriously considering VoIP services as a way to integrate their voice and data networks-adding voice to the
growing IP data network just makes sense.
Most VoIP services today consist of low-cost long-distance calling cards and bypass services aimed at frugal consumers
who are willing to put up with choppy or distorted-sounding calls if it means reducing the size of their phone bills. But this is
just the beginning; for service providers, corporate VoIP services eventually will be the big-ticket item. The handful of
business VoIP services available now are limited to PBX-to-PBX links within an organization, such as PSINet's PSIVoice, or
to international calling, such as Infonet Services Corp.'s VoiceWise. Meanwhile, the Big Three-AT&T, MCI WorldCom and
Sprint-are scrambling to master a tricky balancing act: All plan business VoIP services, but they must take care not to
cannibalize their lucrative circuit-switched voice services.
The carriers haven't been sitting on the sidelines as the new generation of IP telephony companies, such as IDT Corp.,
USATalks and USA Global Link, showered consumers with IP voice rates as low as 3.5 cents a minute if they dial a few
extra digits. AT&T has a calling-card offering of its own, and MCI WorldCom sells a click-and-talk Web-based voice service
for businesses with e-commerce sites that lets buyers talk over the IP connection to customer-service reps while they shop
online. But as you'd expect, the carriers aren't pushing VoIP as a replacement for the PSTN (public switched telephone
network).
"There is no voice-over-IP service that can beat the prices of a circuit-switched service," says Jim Kwock, general manager
for IP telephony at AT&T. "We want to make sure voice-over-IP adds value to what the customer is already buying from us."
The Big Three simply can't afford to ignore VoIP. San Francisco-based Frost & Sullivan expects the overall VoIP market to
grow at a rate of 149 percent annually through 2001, to about $1.89 billion. Killen & Associates, Palo Alto, Calif., has an
even rosier estimate for the VoIP services market: $9.4 billion by 2002, a huge jump from Killen's estimate of $123 million
in 1997.
Still, it's no cakewalk to crack the big corporate market, where negotiated long-term voice service contracts already can be
as low as four cents a minute. The carriers are counting on low rates to maintain their lock on those enterprises as they
meld their PSTN services with IP. Most of today's VoIP gateways, routers and software that pass voice packets among
different IP providers' networks aren't interoperable, and can't scale to the size and traffic volume to which the Big Three
are accustomed. A typical central office switch comes with about 100,000 ports; a VoIP gateway has about 120. "Vendors
can't make the equipment scale fast enough [for these providers]," says Hillary Mine, executive vice president of Probe
Research in Cedar Knolls, N.J. "The VoIP products shipping are lower-scale solutions."
Mine says she expects VoIP vendors to roll out larger-scale gateways later this year, but the big service providers first must
bulk up their IP and PSTN infrastructures so their new IP voice solutions match their existing voice services.
That means bulking up their network management systems to handle VoIP gateways and traffic, and QoS (Quality of
Service) protocols, which would ensure that the quality of the voice, data or video connection doesn't waffle as it travels
from carrier to carrier over the Internet. Emerging IP QoS protocols-Diff-Serv and MPLS (Multi-Protocol Layer
Switching)-are not yet widely shipping with router and switch software.
"The bottom line is that if you want to serve the business segment, you have to pay a lot of attention to quality-in latency,
packet loss and speech degradation," says Ike Elliott, senior director of voice access and engineering for Level 3
Communications in Omaha, Neb. Level 3 has built an IP-ATM backbone for what it considers the emerging multimedia IP
services space.
And latency is a sore spot for VoIP, which expends an average of 40 to 60 milliseconds of delay per gateway. That kind of
overhead gets noticed fast, especially when you're traversing multiple gateways. Most service providers get around the
latency problem today by overprovisioning their bandwidth.
Interoperability is another big issue. The best hope so far for ensuring that VoIP traffic can travel between IP networks and
traditional circuit-switched nets is the IETF's Media Gateway Control (Megaco) protocol, which will be based in part on
Bellcore and Level 3's Media Gateway Control Protocol (MGCP). This type of protocol lets a service provider's switch server
or other controller device manage and control SS7 (Signalling System 7) switches on a PSTN, and VoIP gateways on an
IP network. Equipment running this protocol is interchangeable in a service provider's own network. "If you have a service
that uses a [VoIP] media gateway in a certain way, you ought to be able to replace it with another one and it will still work,"
says Level 3's Elliott.
Meanwhile, the Packet Multimedia Carrier Coalition, a group of service providers including GTE, ICG Netcom, Level 3 and
Sprint, is defining just how it will implement Megaco and another IETF protocol, SIP (Session Initiation Protocol), for
exchanging traffic between the PSTN and IP networks. And AT&T is running an IP telephony interoperability lab of its own,
where service providers can test among one another the interoperability of their VoIP hardware and services such as billing
and network management.
Le Menu
Providers rolling out VoIP services for the enterprise fall into four main groups: traditional carriers (namely, AT&T, MCI
WorldCom and Sprint); ISPs (such as PSINet); IP telephony providers (IDT); and IP-based service providers (Level 3
Communications and Qwest Communications International), which have built massive IP infrastructures from the ground
up.
Most of the early VoIP services from these providers target consumers, though many plan to offer some type of business
service. "Prepaid calling cards are an easier way to get into the market-it's more economical with a non-subscriber
approach," says Kathy Back, director of IP telephony for Sprint, which last year tested a consumer VoIP calling-card
service.
Sprint, which has been tight-lipped about its business VoIP plans, will run its future consumer and business VoIP services
atop its Integrated OnDemand Network (ION), the multimedia IP and ATM-based backbone it is building. Officials at Sprint
wouldn't discuss details about the timing or types of VoIP business services the company will offer.
MCI WorldCom also is keeping its VoIP plans close to the vest, save for its existing Click and Connect service for Web sites.
Click and Connect is a way for businesses to offer voice on their Web sites, over their customers' IP connections to the site.
The voice call, which is at no charge to the user, originates on the Web connection and is then split off to MCI WorldCom's
PSTN voice network using VoIP gateways. So the voice connection from the Web user actually terminates on the PSTN, at
the call-center site.
AT&T has been more eager to talk about VoIP. The carrier is running a trial VoIP VPN service at a large financial services
company, which it won't disclose. But the trial reflects AT&T's strategy for VoIP-to use IP's ability to blend voice and data
over one pipe to supplement its bread-and-butter PSTN services. Off-network calls still will go over the PSTN for the
foreseeable future, according to AT&T officials.
"If you think IP is only about cheaper long distance, you might as well stop now," says AT&T's Kwock. "I think the reason for
VoIP is to enable new [integrated] service types like e-mail and directory services." Kwock says AT&T envisions IP as
another way to offer its Software Defined Network (SDN) features, such as toll-free calling.
Aside from AT&T's Connect 'N Save calling card VoIP service, perhaps the biggest VoIP focus for AT&T right now is its
Global Clearinghouse service for PTTs, ISPs and competitive local exchange carriers. Global Clearinghouse is just what
you'd expect it to be-a market for IP service providers to exchange traffic and interconnect with others to expand the scope
of their VoIP networks. About 25 service providers, including Poptel in Germany and TimeNet in Denver, have joined this
service.
"We do the management, settlements and make sure the exchange of traffic occurs," Kwock says. "The service providers
pay a transaction fee and AT&T gets a piece of the rates."
Not everyone believes the carriers are truly serious about VoIP just yet. "When IP telephony worldwide is about $36 million
in revenue and traditional telephony is $92 billion, [VoIP] is just not on their radar screens yet," says Bennet Bayer, director
of product marketing and multimedia services for Infonet, El Segundo, Calif. "When it makes a serious impact on their
business, they could then drop prices" for business PSTN.
Incumbent local exchange carriers, such as US West and Bell Atlantic, also are working on VoIP services for businesses.
But any long-distance calling services for now would be restricted to their own calling territories by FCC regulations until
the regional Bells can prove they have local competition. Still, US West will add two services in the second quarter. Push
to Talk Web is a click-and-talk service, while Team Browse will let customer service reps "push" Web pages to customers
buying from their Web sites, so that the online buyer can see pictures of a sweater he or she is considering, for example.
US West also is planning a service within its LATAs (local access and transport areas) for calling over IP via a PC,
PBX-to-PBX integration over IP, IP desktop video and, if it gets the green light, IP long distance. "When and if the LATA
boundaries allow us, we would be able to turn on this capability immediately for IP voice over our network and then reach
agreements with other networks to do the same," says Jim Taylor, director of IP services for US West !nterprise, Denver. He
adds that US West !nterprise will design latency-reducing techniques into its IP network services.
Bell Atlantic will offer IP voice services within its own LATAs sometime in the third or fourth quarter, says Kamran
Sistanizadeh, chief technology officer for Bell Atlantic global networks, who adds that the timing just isn't right yet. "It's
going to be nine to 12 months before you can claim voice-over-IP is a business product." Sistanizadeh says Bell Atlantic
will offer a PBX interconnection service over its IP-ATM backbone, as well as a video service sometime later.
ISP Action
While the long-distance carriers weigh their interests and LECs their regulatory baggage, the door has been left wide open
for aggressive independent service providers such as ISPs. For now, they are free from paying access charges to the local
loop, but that's expected to be a short-lived advantage. "It's reasonable to assume that access fees for VoIP services will
become mandatory sooner rather than later-US West, Bell Atlantic and Southwestern Bell have provided for tariffing and
will tax a VoIP call the same as any other call," says Infonet's Bayer. "We will see them and others tax all voice and data,
charging by the packet, in about two years."
PSINet is the first ISP to roll out a VoIP service for business. Its PSIVoice, a PBX-to-PBX interconnection service that
basically piggybacks off PSINet's private international backbone, requires PSINet's IntraNet service. PSINet can guarantee
the quality of the voice call because it's within its own network.
"We see voice as just another IP app," says Charlie Cary, vice president of product management for PSINet in Herndon, Va.
"When you've got a data network designed to handle an IP packet, it doesn't matter what's in it." PSINet compresses the
voice call, and provides the necessary VoIP gateways for packetizing the voice traffic as part of the service-the customer
provides its own interface cards for the PBXes.
Pricing depends on the customer, but there is a flat-rate charge for bandwidth to each location. According to PSINet and
analyst estimates, you can expect a 40 percent to 60 percent savings overall in monthly long-distance and data-traffic
charges. The service is aimed at midsized companies rather than the Fortune 1,000.
Look for PSINet to add a few more PSIVoice VoIP services to its portfolio later this year-an extranet for calling business
partners over PSINet's network and a remote one for road warriors. In 2000, PSINet also will add a consumer IP
long-distance offering, possibly through carriers and other ISPs on a wholesale basis.
The next step for its extranet voice and data offering will be calling outside the PSINet backbone, which would entail
gatewaying from PSINet to the PSTN. That will be a function of QoS and additional agreements among other VoIP service
providers.
"In the near future, we are looking into terminating the PBX call to the PSTN," says Mohammed Abdallah, product
manager for PSINet. "Most traffic is riding IP and the last leg hits the PSTN."
Infonet also is offering a business-class VoIP service, called VoiceWise, that is available only for overseas calling, outside
an organization. "VoiceWise is for you if most of your calling is off-network and changes every month, say, to your export,
shipping and finance operations," says Infonet's Bayer.
VoiceWise is available in the United States, United Kingdom, Belgium and Germany, and includes the necessary T1/E1
and ISDN BRI cards, as well as a VoIP gateway with an acceleration feature that compresses the voice traffic. Bayer says
the service, which is priced per minute depending on the country, will offer businesses about 30 percent to 40 percent
monthly savings in overseas calls.
Future features for VoiceWise include conference-bridging, caller ID and calling cards, as well as a PC-to-phone calling
function that will become available later this month.
IP Telephony Providers
ICG Netcom is a hybrid IP telephony provider and ISP with its subsidiary, Netcom. It sells an IP long-distance service for
consumers, and in the first half of this year it will add a VoIP termination service that will let enterprises cut some of their
domestic long-distance charges outside their network with VoIP.
"There's not much more to the first generation of IP telephony than lowering someone's costs," says Jon Lowry, director and
general manager of data services for Englewood, Colo.-based Netcom, which hasn't released pricing for the upcoming
service. Netcom also plans to sell termination services to other ISPs on a wholesale basis.
Next up for ICG Netcom is an integrated voice, data and video service, says Lowry.
Meanwhile, pure IP telephony players include IDT of Hackensack, N.J., which today sells three services. Its VoIP
PC-to-phone service, Net2Phone, offers long distance at 4.9 cents a minute; Net2Phone Direct provides calling-card
service for 5 cents per minute; and Click2Talk is a click-and-talk Web service used by Lands' End, 1-800-FLOWERS and
other retailers, who represent IDT's main business clientele.
IDT's proprietary Net2Phone software is its strategy for voice-enabling the Web. "It lets us handle customer profiles,
credit-card authorization and close the sale," says Morty Rothberg, executive vice president of IDT. "Our vision is to build
out our network and sell minutes to carriers."
IDT took part in Network Computing's Real-World Labs(R) LIVE VoIP technology demo at January's ComNet show in
Washington (see page 38).
USA Global Link, Fairfield, Iowa, began as a discounter of international telco services, and is now building out its network
by integrating SS7 and IP to support small and medium-sized businesses. Its Global InterNetwork infrastructure will support
voice and fax over IP in the second quarter, with plans for an overall business VPN offering. Today, the company offers
InstantCall, a click-and-talk Web service for businesses.
Pure VoIP
A new breed of service provider is also in the mix, banking on an advanced, high-speed IP backbone with VoIP as its hot
new service. All eyes are on these IP-based providers-namely, Level 3 and Qwest-which have poured billions of dollars into
cutting-edge IP backbones for offering enterprises IP-based integrated voice, data and video services.
Level 3 won't yet discuss its plans for the business sector it targets-the Fortune 1,000, retailers and wholesale. But the
company stresses that to play in the business world, you have to deliver voice-call quality. "We're not going to announce a
'me too' because this market really needs a single-stage dialing solution, not a calling card or double-stage calling
solution," says Level 3's Elliott. "You need to do SS7 interconnection with incumbent LECs, which is something we are
focused on."
Level 3 doesn't use compression in its backbone for voice calls, Elliott says. "A packet can travel from one end of the
country to another on Level 3's network in less than 90 milliseconds," he says. "That allows us to truly match PSTN quality."
The service provider's network is an ATM core with IP routers. Level 3 uses ATM to manage the QoS elements, and is
looking at MPLS as a way to guarantee QoS across a VPN in the future.
Qwest's OC-48, IP-over-Sonet backbone, which spans 130 countries, is nearly complete. The Denver-based company will
offer an IP-based PBX integration service for businesses next quarter. "They can then take out multiple private lines and do
multiple applications over a single IP service pipe," says Guy Cook, vice president of data products for Qwest, which also
sells a mass-market IP voice service called Q.talk.
Cook says Qwest cushioned its investments in the backbone by selling segments of its dark fiber and leasing networks to
other carriers-the service provider recovered about 95 percent of its costs.
In the Driver's Seat
Some big corporations are starting to test-drive VoIP with an eye to cutting their domestic and international calling costs,
as well as uniting their growing IP data traffic with voice-over one big fat pipe. Most are only making calls within their
organizations over a single service provider's private network.
Wang Global in Billerica, Mass., is testing PSINet's PSIVoice over its existing intranet service, also from PSINet.
Technicians at Wang Global programmed their PBXes to determine which voice calls go over the IP backbone, and which
go over Wang's existing PSTN-based service. So far, Wang Global is making fewer than 100 voice calls a day within the
company over PSIVoice, but is ramping up the call volume. "We'd like to eventually have our outside calls also go over
IP," says Judy Mathys, senior program manager for Wang Global.
VoIP business services won't just be for reducing the cost of long distance calls. The next phase of VoIP services will be
applications such as wireless unified messaging, which will let users retrieve their voice and e-mail messages via their cell
phones while on the road, and directory services that enable conference calls to be set up from Web-based directories. All
this is in addition to the evolving click-and-talk services that work with other call-center applications.
"Value-added services that use IP are the differentiator," says Jeff Pulver, president and CEO of online consultancy
Pulver.com.
Send your comments on this article to Kelly Jackson Higgins at kjhiggins@aol.com.
SIDEBAR: Executive Summary: Voice-over-IP Services
It's tough to find VoIP services for businesses. Big-name carriers-such as AT&T, MCI WorldCom and Sprint-are struggling to
determine how best to balance this new form of voice transport with their lucrative circuit-switched services. Newbie IP
telephony providers so far have sold mostly bargain-basement consumer calling-card services. To date, only PSINet and
Infonet Services Corp. sell true IP voice services for corporate customers. But look for some of the big players and other IP
service providers to roll out VoIP services later this year, initially for intraorganization calling.
The biggest stumbling blocks keeping VoIP from becoming the mainstream voice transport service are maintaining the
quality of a call across different service providers' networks, interoperability among VoIP gateways and managing
everything. On top of that, today's tariffed circuit-switched services are difficult to beat for their price and quality.
SIDEBAR: IDT's Net2Phone Direct Survives Real-World Labs(R) Live Tests
IDT's Net2Phone Direct service illustrates the state of IP telephony services, with respectable but not perfect quality.
Net2Phone Direct provides phone-to-phone calling-no IP packets actually pass into customer sites. The service converts
audio into packets at the nearest IDT POP (point of presence), and then uses IDT's private IP backbone to route calls, much
like a traditional long-distance interexchange carrier uses its own circuit switches. With 75 POPs worldwide, IDT has a
larger footprint than most IP telephony providers. The service offers dramatically reduced rates, often around 10 cents a
minute for calls anywhere in the world.
At the ComNet show in Washington this past January, Network Computing unveiled Real-World Labs(R) Live, where we
conducted voice-over-IP demonstrations and tested IDT's international long-distance calling service. In the tests,
participants ranked the quality of Net2Phone Direct compared with a standard AT&T toll call. We followed guidelines for
ranking comparative speech quality as detailed in the ITU-T P.800 specification, using a five-point scale and generating
mean opinion scores (MOSC in P.800 terminology).
In the first test, 34 participants held conversations with the London offices of Network Week using the IDT service. Testers
also placed a call using AT&T's long-distance service, which served as a quality reference. Participants in Washington
ranked each call as "bad," "poor," "fair," "good" or "excellent," to which we later assigned the numbers 1 through 5,
respectively.
As expected, the AT&T scores were quite high, with 62 percent of responses favoring the more expensive service. But it's
nonetheless surprising that Net2Phone Direct was rated the same or better by 38 percent of the respondents. AT&T's
average, on a five-point scale, was 4.40, relative to IDT's 3.70, a gap that is not as wide as AT&T would like you to believe.
(See chart at left.)
Another group of participants ranked the audio quality of calls to labs located at the Straslund Academy in Straslund,
Germany, a partner to our sister publication, Network Computing in Germany. Fifty-nine testers listened to live audio
samples played during calls via IDT and AT&T, using the same ranking system as the U.K. conversation test. This time,
IDT's ranking was even closer to AT&T's: It achieved a 3.69 rating compared with AT&T's 4.10. (See the chart on page 40.)
The closer ranking in the listening-only test illustrates an important point about voice-over-IP quality. In an actual call, long
delays impede the ability to converse. Callers may notice a gap between the time they stop speaking and when they start to
hear the other party's response. But delays aren't noticed upon listening to an audio sample. Instead, packet loss is the most
important factor, where "choppiness" and unnatural tone quality can annoy the listener. The good ranking indicates that
IDT's backbone isn't dropping packets, but the lower scores in conversation tests point to latency as an occasional problem.
Although the quality is close to a traditional carrier's-but not quite as good-the toll savings are phenomenal. All our calls
ran only 10 cents per minute, compared with AT&T's peak business rates of $1.90 a minute to Germany and $1.58 to the
United Kingdom. And even though IDT had to route traffic for the German calls to its London POP (a German location was
not yet available), there was no additional surcharge for the U.K.-to-Germany link.
About IDT's Services
IDT is best known for its Net2Phone Internet-to-phone calling service, but has been rolling out services aimed at businesses
since late 1997. The Net2Phone Direct offering tested here is a prepaid calling service that uses two-stage dialing. The
user first dials a toll-free "800" number, connecting to an IDT POP. After entering an account number, the user then dials
the ultimate destination.
Two-stage dialing is obviously cumbersome, and will prevent most businesses from adopting Net2Phone Direct, regardless
of the savings. In response, IDT now offers a service, called Project David, in which it places gateways at customer
locations with dedicated connections to the IDT backbone. This approach allows users to dial normally. Like Net2Phone
Direct, Project David calls are typically prepaid by the customer, with an additional charge incurred for the equipment.
Per-minute pricing is some of the lowest you'll find anywhere, running 3.5 cents per minute domestically and at a 60
percent discount internationally relative to traditional overseas long distance.
-David Willis
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By: Kelly Jackson Higgins
Copyright 1999 CMP Media Inc.
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