VoIP Revolution

VoIP: Talking About A Revolution

July 13, 2004

By Zack Medicoff

Guy Vales makes his living online. His Ottawa-based company, Business Interactive, employs 25 people and creates Web-based applications and IT solutions for government, retail and tourism businesses.

Until recently, though, this online entrepreneur was still using old technology — telephone wires buried in the ground — for his business communications. But he has now jumped to an Internet-based telephone service offered by Vonage, a three-year-old New Jersey-based firm which launched its Canadian service in April of this year.

The technology, called Voice over Internet Protocol (VoIP), piggybacks voice transmissions over a broadband Internet connection.

Users simply plug an adapter into their existing broadband modem or router, and then into a PC. A standard telephone then plugs into the adapter and calls can be placed. This system delivers a range of advantages, according to proponents, such as unlimited long distance in North America, dirt cheap overseas rates, virtual numbers which give you a local exchange no matter where in the world you actually are, and Web applications to manage voice mail and phone features.

According to The Yankee Group, a research firm based in Boston, Internet telephone use in the United States will grow to 980,000 by year’s end from 130,000 subscribers at the end of 2003. Yankee predicts this will mushroom to seven million by 2006.

Kate Griffin, a senior analyst at The Yankee Group, said Internet telephone companies are gearing the service to the small office/home office environment. “We’re in a true building growth stage. But the growth will be pushed by the Internet telephone companies’ market strategies. However, (VoIP telephone) benefits the teleworker, small/home office and helps them bridge all their worlds. That’s definitely a sweet spot.” She said big businesses may still shy away from such technology. “[Larger enterprises] are evaluating the service based on the return of investment.

I think they’re being careful and money conscious. They’re not going to change around their existing investment right now, but when it’s the right time to change their infrastructure and make a new purchase is when they’ll be thinking about Internet telephony.”

For now, she said the service is a boon for smaller organizations, something that made immediate sense to Business Interactive’s Vales. “We have two other offices in Florida and Montreal, so we now have virtual lines in those cities.

We’re able to have a local number with its area code, but it rings back to the Ottawa office. “It’s the combination of voice quality and great pricing, and extras like Web applications, that I find really useful.”

These applications let Vales check call logs, forward calls and listen to voice mail.

Louis Holder, executive vice-president of product development at broadband phone company Vonage, based in Edison, N.J., said the concept of Internet phones appeared in the early 1990s, but since most businesses had dial-up connections, transmissions were of poor quality. Moreover, clunky and unprofessional headset microphones were needed to communicate. The draw, even then, was free overseas calling. Today, Holder said voice quality is close to excellent, although it’s still not up to landline standards. But his company and its competitors are working on it.

Vonage offers Canadians unlimited calling to the U.S. and Canada for $45.99 per month. That includes the fee for the telephone line and add-ons such as caller ID, call forwarding, three-way calling, 911 and more. For an additional $7.99 per month callers can also have virtual numbers within North America, which allow them to receive calls through a 416 Toronto number from a Voip connection in, say, Winnipeg.

“You can still check your messages online and you can get e-mail notifications when you get a message. You can even attach that message to the e-mail as a WAV file,” Holder said.

The Voip connection, either at home or on the road, is essentially plug and play.

“It’s as easy as 1-2-3. The set-up and configuration is all on our side, so there’s nothing you have to do but plug it in. Each adapter has two lines so you can put two people on the same unit. We use our land line phones for local calls, but our Internet phones for long distance.”

There are also companies that provide peer-to-peer (P2P) networking software, which, in effect, turns a computer or wireless handheld into a phone. Luxembourg-based Skype Technologies is now offering free access to what it claims is the world’s first Internet conference calling. Skype will establish a multi-way connection for users free of charge.

Skype offers its service in 15 languages and boasts nearly three million users from more than 165 countries. The calls are unmetered and unlimited.

NO LACK OF COMPETITION

Some large businesses may be hesitant to rely on such a service, but many companies are vying for a slice of the small and medium business ( SMB) telephone pie.

Charles Zwebner, president and chief executive officer of Toronto-based Yak Communications, said his company will introduce Internet broadband telephone service to Canadians in September.

Yak is targeting both consumers and SMBs, and Zwebner said there are great opportunities in international markets. For example, businesses from South America, Europe and Asia can request North American local lines and vice versa. Zwebner hopes to capture more than a million international customers by 2006.

“We intend to service our customers with an all-in-one package that includes a DSL connection and telephone card. I truly believe this is the future of telephone.”

Primus Telecommunications Canada introduced a business and residential TalkBroadband service in early January. Robert Thompson, senior director of commercial marketing, said Primus is rolling out additional calling services and features in the near future, and said today businesses can save up to 25 per cent in long-distance charges by going to VoIP.

Businesses which use Voip will see dollar savings throughout their communications chain — from vendors to customers and suppliers to branch employees — if they all use the system, as there will be no long-distance charges within the group, Thompson said from his Toronto office. “The reduction of costs, added possibilities and market presence in other cities will make it a very attractive offering.”

So attractive even the cable companies want to cash in. Although they are not conducting media interviews about their plans, Rogers Communications and Rogers Cable announced in mid-February the planned rollout of digital voice-over-cable telephone and other voice and data services. According to a press release, the target date for launch is mid 2005, with initial availability to approximately 1.8 million households and a wider rollout in 2006.

And that leaves Bell Canada. For now, Alain Thibault, associate director of marketing and communications for small- and medium-sized business, said Bell cannot commit to any timelines for such a service.

He said Bell’s digital telephone network should be fully operational by 2006, something which will change the communications landscape “Bell is planning a host of solutions for business high-speed customers. We know the technology is there, but we just want to provide a reliable service to our customers and many have even said that they aren’t ready to sacrifice their primary line yet,” he said from Quebec City.

“We know a good part of our customer base is going to move to this…we could have a lot to lose. We’re really trying to move as fast as we can in the next three years to become a full IP-based network for all our voice and data services.”