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VoIP Goes Big


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Voip Goes Big Business

September 20, 2004

By Staff

A growing portion of international business calling traffic is being carried over IP.

At the end of 2003 only 2.5% of business lines were operating over IP, which is approximately 10 million lines. But according to new data from IDATE, by 2009 corporate voice over IP and telephony over IP (VoIP and ToIP) will account for 40% of business telephone lines, or 180 million lines. That will mean close to one-third of classic analog and ISDN lines will disappear.

IDATE predicts that IP business calls will exceed 50% of all business traffic by 2010.



This rapid migration is creating a revolution in telecommunications and transforming the competitive landscape.

Many telecoms have already announced plans to migrate classic TDM networks to IP networks. NTT has committed to full IP migration (Global V2oIP), and BT is rolling out its 21CN project. For its part, Telecom Italia deployed a packet-based voice transport infrastructure for international traffic in late 2003. The reasons behind these migrations are: a single network to manage, lower price of IP routers, lower administration and maintenance costs, demand from customers for convergent services and the ability to launch new services. And telecoms aren't the only players.

Since 2002, with the growing ubiquity of broadband, large scale Voip consumer services have been launched in Asia, the US and Europe. Services are also being marketed by cablecos, DSL operators and virtual operators like Vonage and Skype, and portals offering messaging and conferencing services. Several hundred thousand people are already using Voip in a number of markets. In early 2004, for instance, Japan's Yahoo!BB had a base of over 3.6 million Voip subscribers; in the US, Vonage announced close to 115,000 subscribers, while Skype reports having 400,000 active users.

Faced with a rapidly growing market, incumbent carriers like AT&T, Verizon, Qwest and France Telecom are now launching their own Voip solutions.

Business markets too are undergoing a high increase of installed bases, although the ways in which Voip are introduced vary considerably, the US is slightly ahead of Japan, and well ahead of Europe. At the start of 2004, 23% of Japan's largest companies were using VoIP, compared to between 25% and 30% of American companies. In Europe, the penetration rate is between 15% and 20%. Europe began to catch up significantly between late 2003 and early 2004, with the UK then northern Europe leading the way.

First installed in large companies, Voip is gradually making its way into smaller businesses. A close look at SMEs' intentions indicates there is a high potential for Voip to be adopted massively by SMEs equipped with broadband access. It should be noted that migration issues are easier to manage in smaller companies: the private automatic branch exchange (PABX) base is smaller, there are fewer locales to manage and the data network is less complex.

For big businesses or small, the chief incentive for adopting Voip is cost savings. Most providers promote savings of around 20%. This level of savings is often the psychological threshold that allows a dynamic systems initiative (DSI) to justify a technological investment, regardless of its nature, and is not specific to VoIP. Some examples reveal that savings can go as high as 40%, while others point to savings of closer to 10%. Potential savings in fact depend a great deal on a company's topology and the solutions selected for deployment.

One key element is on-net traffic: the higher the volume of on-net traffic, the higher the savings. Savings on off-net traffic are lower, but still significant for international calls. On the flipside, a national company that generates little on-net traffic and little international traffic will enjoy minimal savings, compared to the public switched network.

Of course, not all the news is rosy. There are obstacles to Voip deployment, too. They are:

 


Initial investment

Security concerns

Difficulty of calculating ROI

Need to reconfigure internal networks




 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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