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New Jersey-The Innovative State Part XIV: TECHNOLOGY TRIUMPHS: Telecommunications: VOIP Gets Competitive in 2004

Posted on: Monday, 14 June 2004, 06:00 CDT

This year, a number of long distance and local telecommunications carriers have or will introduce new Voice over Internet Protocol (VoIP) services. For companies such as AT&T, Sprint, MCI and various competitive local exchange carriers (CLECs) that have been paying access fees to regional Bell operating companies (RBOCs), VoIP allows them to bypass the local providers and their fees since voice calls can now travel over the Internet. Access fees can either be eliminated entirely, if a call is made and completed through VoIP, or cut in half if the VoIP caller reaches out to someone who still has traditional local service.

RBOCs, such as Verizon and SBC Communications, are getting into the business because they must. They cannot remain stagnant and risk losing customers and income as more people request DSL and cable modems for high-bandwidth Internet service, which, in turn, enables them to use VoIP.

The real growth for VoIP service in business is currently for large enterprises that are using the technology for internal communications. According to Dr. Ibrahim Habib, a senior consultant at Tekmark Global Solutions, an Edison-based provider of information technology, telecommunications, business solutions and consulting services to Fortune 100 and 500 companies worldwide, "VoIP is being pursued by all enterprises. The fundamental benefit is that it allows companies to have voice service at much cheaper rates ... sometimes at zero cost."

As an example, Tekmark, with offices in India, Australia, the Philippines, England, Brazil, Canada, Argentina and Mexico, in addition to 11 locations in the U.S., uses VoIP by "piggybacking on our datanetwork," says David Donahue, vice president, telecom products. "By doing that, we don't pay for international long distance."

Habib says that all major carriers are vigorously pursuing WIF, even Verizon and SBC. If these traditional local exchange carriers do not offer the service, they will "see their business disappear from under them."

He explains that at this point, it may not appear to he a good capital expense decision for these companies to replace their current communications networks in preparation for VoIP but when considering the prospect of loosing business, the issue is then seen under a different light.

Verizon plans to offer consumer VoIP early this summer. In January, it selected Nortel Networks to accelerate building a nationwide wireline network to packet-switching technology using VoIP and is currently selling Nortel's enterprise IP Telephony portfolio to businesses nationwide.

Tekmark is assisting 40 telecommunications providers around the world upgrade their existing network technologies. According to Donahue, "We have about two to three telecom customers currently using VoIP networks on a service-trial basis. Another six to 10 companies are in 'lab' trials, putting their toes in the water. They are not enthused about spending the extra capital, but they want to be ready as a defensive measure to keep their corporate clients."

The cost for consumer VoIP service is in the $35 to $40 per month range. This past March, AT&T introduced CallVantage with a special six-month introductory rate of $19.99 per month for unlimited local/ regional toll calling and U.S. long distance. After the introductory period, the service is $39.99. Edisonbased Vonage, a fast-growing broadband phone company that has been offering VoIP for just over two years, offers a consumer calling plan for $34.99 per month. North Brunswickbased VoicePulse offers a rate of $34.99 and CableVision offers Optimum Voice for $34.95 per month.

The features that come with AT&T's CallVantage include: "Do Not Disturb" capabilities, which keeps certain calls from ringing, but let's important calls through; a "Locate Me" feature, which forwards incoming calls to as many as five phones numbers (office, home, cell, etc.), either all at the same time or in a chosen sequence; Voicemail + eFeatures that turns voicemail into talking e-mail; Personal Conferencing, which creates a personal meeting room with up to 10 callers on one line; caller ID, call forwarding, call waiting; threeway calling; and a secure Web page to select features, turn them on and off, and listen to voicemail.

Vonage features include: Voicemail/e-mail capabilities, a "Blast Me" feature, similar to AT&T's "Locate Me"; call waiting, call forwarding, caller ID, three-way calling, *69, SoftPhone (which turns a laptop into a telephone, enabling business travelers to receive calls while working on the road); and the Vonage Dashboard, enabling users to manage their accounts, change features, handle billing over the Internet and retrieve voicemail and monitor call activity online.

For businesses, Vonage offers a calling plan for $49.99 with unlimited calls in the U.S. and Canada. A 1,500-minute plan is available for $39.99.

Besides CallVantage for consumers, AT&T announced plans to accelerate expansion of its business VoIP service portfolio, a service it has been providing since 1997. It is also in trial stages for CallVantage for business.

According to Patricia "Pat" Traynor, vice president of network integration and sales at AT&T, businesses are placing VoIP on a high agenda because of the cost savings and a "very definitive return-on- investment threshold."

In its early days, VoIP was used to save money on international calls through bypassing international settlements, access and terminating rates. The technology has since become more mainstream with voice quality improving. AT&T began offering VoIP capabilities back in 1997 with a Japanese joint venture for international calling between the two countries.

For AT&T, the quality of service began improving because of "the fundamental performance improvement we have made in a common IP backbone and foundation," says Traynor. "In order to have high- quality, highly reliable voice service (over VoIP), it has to ride over a firm infrastructure."

She also says businesses are saving because, whereas before they had a separate data and voice network, VoIP introduces the conversion of voice and data over a common, single IP backbone.

VoIP is a major focus for AT&T. "David Dorman, our chairman and CEO, has identified VoIP as one of the most strategic initiatives that AT&T will undertake in the near term. The shift in focus will change marketplace thinking about AT&T as a traditional telecommunications provider to a new company with new technologies and feature sets," says Traynor.

Currently, VoIP is not regulated, but the Federal Communications Commission (FCC) is giving the issue serious consideration. One issue is the fact that 911 emergency services cannot be provided through the technology at present time. This is because unlike traditional phone lines where there is a clear connection path from caller to caller, VoIP turns voice into individual data packets that all take separate routes across a nebulous Internet. Habib at Tekmark says the technology for tracking 911 calls does not exist, but the industry is working on the issue.

Regulations can also limit the growth of VbIP implementation. "It is a difficult position for the FCC to be in because if they regulate VoIP immediately, it may stifle its innovation. If they leave it unregulated for too long a time, the existing large carriers that provide security and 911 services will suffer," says Habib. "So, we need some time for the innovations to take hold, then introduce regulations. The questions is: At what point?"

Though quality of service has increased tremendously for VoIP Donahue says there are still some "failure modes." He says that on a conference bridge, someone's voice may experience a "blackout" for a 30 second period. On average, this happens once per 20 calls. The reason, again, is that voice is digitally packetized and can take many separate routes across the Internet. Once they reach the destination, there may be a delay when they combine together again in the right order.

Jan Holder executive vice president of product developement at Vonage says there is no reason for the FCC to competitively regulate VoIP because "Vonage does not have proprietary access into the home (like traditional phone companies.) "If you don't want Vonage service, it is easy for the customer to switch. The traditional phone companies have all the physical lines into the home, which has to be regulated," he says.

This is the year, it seems, when VoIP will be strongly marketed to consumers and businesses. Traditional telecommunications companies are introducing new VoIP services and will be going head to head with each other and the smaller providers who have already established reputable names for themselves in the marketplace.

Copyright New Jersey Business & Industry Association Jun 01, 2004

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