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Voice over Internet Protocol Vexes Phone Companies

Posted on: Monday, 10 November 2003, 06:00 CST

Nov. 11--To a growing number of computer users, a phone call is simply a verbal e-mail. But to traditional phone companies, it sounds more like a threat.

The technology to make calls over the Internet has been available for several years. Sometimes known as Internet telephony--or Voice over Internet Protocol--it is poised to take off and traditional phone companies and government regulators are turning up the scrutiny.

Voice calls carried over computer networks can do things not possible on the networks operated by phone companies. Arranging a call-in conference among half a dozen people, for example, can be as easy as dragging the names of each person into a virtual conference room on a computer screen and pushing a button to connect everyone.

Voice mail messages can be identified and ranked on the screen and even answered by e-mail. And video can be added by attaching a small camera to the mix and activating some software.

While providing more features, VoIP technology usually costs less than traditional phone service because it rides on data networks and doesn't require the costly switches and other equipment necessary for a circuit-based voice network.

Internet telephony also is free of the numerous regulations, fees and charges applied to regular phone calls.

While traditional phone companies like SBC Communications Inc. and AT&T Corp. carry data on their networks, they make most of their money from voice traffic, said Paul Butcher, president of Mitel Networks, a company that provides integrated computer/phone systems.

VoIP undermines that revenue stream, he said.

"Phone companies would like to kill it, but they can't. It's like the music industry and Napster. Pirating music on the Internet is illegal, but even so the industry can't stop it," he said. "VoIP is legal, so it's even harder to stop."

Several state utility boards have looked at imposing charges and fees on VoIP, and earlier this year regulators in Minnesota tried doing it. The move was blocked by a federal judge who cited federal laws that exempted Internet technology from fees and regulation.

But it remains a gray area.

Meanwhile, a survey released last week by CompTIA, an information technology trade association based in Oakbrook Terrace, found that about half of small- to medium-sized businesses are looking at buying integrated computer/phone systems when they replace current equipment in the next two years.

Companies with multiple locations and a mobile work force are especially open to the new technology, said Edward Migut, a CompTIA executive.

"It's a matter of evolution," said Migut. "Everything in information technology is moving toward the IP platform. The Internet is much more stable now than it was just a few years ago. Smaller businesses are getting more comfortable with it."

Chicago attorney Thomas Stilp has embraced VoIP. Stilp, who has a law office, a real estate business and a manufacturing company, was looking to simplify his communication needs.

The integrated computer/phone system he got from Mitel Networks, based in Ottawa, Ontario, enables Stilp to get calls from his 312 area phone number whether he's in his Chicago Loop office, his Evanston factory or his North Shore home.

It also gives him the same computer screen regardless of location.

"I can work on a legal brief in my office, turn off the computer and go home," he said. "After dinner, I can go to my home computer and find the brief exactly as I left it at the office. People call my office phone number and I pick up no matter where I am.

"It's great because clients think I'm always working in my office."

A more striking example of Internet telephony's versatility unfolded earlier this year in the Arctic Circle.

Stephen Braham, of Vancouver, Canada's Simon Fraser University, was the chief field engineer on a NASA-supported project that tests equipment bound for Mars. This is done in a giant arctic crater that provides as close an approximation of Mars as can be found on Earth.

In past arctic trips, Braham and his colleagues used a satellite phone to talk to the outside world, but at toll rates topping $1 a minute, it wasn't ideal for an academic program with limited funds. "Also, with a satellite phone, you have to be outside and stay in position to catch your signal," he said.

This year the researchers added Internet telephony to a high-speed broadband satellite Internet connection.

"We got a dial tone that let us call anywhere," he said. "If we called others on our network, the call was free. Even if we dialed others outside our network, the calls were billed as if they originated from Southern Canada, which is way cheaper than sat-phone rates."

For more mundane pursuits, VoIP is catching on as well.

Mitel's Butcher said that at his firm VoIP units constituted 40 percent of his shipments in the last quarter. In the coming quarter, he expects they will comprise a majority of his sales.

Legal and other issues, however, remain to be determined.

One concern is how 911 emergency calls will be handled on VoIP while another is the ability of police authorities to wiretap Internet conversations. Those sticking points, among others, assure that the Federal Communications Commission will revisit its hands-off approach to the technology.

The FCC has scheduled a forum in December to discuss regulating VoIP and will seek public comment about what regulation, if any, would be appropriate for VoIP.

Still, the new technology won't really take off until major carriers use it to replace existing networks, said Blaik Kirby, a vice president with Adventis, a Boston consultancy.

"Sprint has been an early-adopter in using VoIP in its local service networks," said Kirby, "and it's had fair success with it."

Qwest Communications Inc., the dominant local carrier in the nation's Western states said last week it would introduce VoIP service in Minnesota.

And in Illinois, while Verizon is looking to protect its traditional voice phone business, the firm is also promoting VoIP. Verizon supplies it to business customers in Chicago in competition with SBC.

Dave Sherman, Verizon group marketing manager who oversees its Chicago Internet telephony business, said the firm is using Chicago and other markets to learn more about VoIP and how to market it. Because the new technology competes with traditional phone service, the company cannot ignore VoIP.

"It is analogous to wireless service," Sherman said. "When wireless started, people said that it would take business away from the wireline network. Our company had to decide, 'did we want to be in wireline or wireless?'

"We decided we had to be in both."

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(c) 2003, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News.

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