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Voice Over Internet Gains Ground in Granite State

Vonage In Print News

Voice Over Internet Gains Ground in Granite State

August 22, 2005

By Denis Paiste

Voice over Internet Protocol has the potential to be a disruptive technology, according to James M. Prendergast, executive director of Americans for Technology Leadership, a Washington, D.C.-based lobbying group.

"The idea that you can get a phone number and take your laptop and a phone that you plug into a jack and take your phone wherever it can ring, no matter where in the world you are, is an intriguing concept. I think it injects another layer of competition," he said.

Unlike a traditional phone that uses the old Bell system's lines and switches, a Voip call travels over the Internet. Depending on the technology being used, a Voip call can be delivered entirely through the Internet or connect at one end through a traditional land line or a cellular connection.

Prendergast discussed the latest telecommunications technology during a recent interview at New Hampshire Union Leader offices where he was joined by Jonathan Zuck, president of the Association for Competitive Technology. They were in town for an off-the-record session between local businesses and U.S. Sen. John E. Sununu, R-N.H., covering technology issues.

By 2010, 62 percent of U.S. households will have broadband access to the Internet, according to a recent report by Cambridge, Mass.-based Forrester Research. In "The State of Consumers and Technology: Benchmark 2005," Forrester Research said 29 percent of North American households connected to the Internet using broadband connections in 2004, up from 19 percent in 2003.

Speaking of VoIP, Prendergast said, "It's a phone call ... how it's transferred and how it's handled is what's different."

"Vonage and Skype are two sort of good examples," said Zuck, "because they have two different models from an infrastructure standpoint. Skype is a pure, I'm just connecting over the Internet, the way I do IM (Instant Messaging), and Vonage has a more dedicated connection.

"Certain solutions, like Skype for example, are designed for you to speak to another Skype customer," Zuck said. "It's not a phone on either side, it's a pair of headsets plugged into a PC on both ends, whereas Vonage is going through the work of getting termination services from the local carrier so that you can call your mother's land-line from your Internet-based phone.

"It's two different business models. One is almost like an extension of Instant Messaging, and the other is meant to be a more traditional replacement for phone service.

"It's likely that the real threat to regular land-based phone lines is going to be the Vonage model, not the Skype model," Zuck said.

But the technology underlying Voip offers more uses than simply replacing a traditional land-line or cellular call.

More applications

"What you're going to see more and more of is Voice over IP integrated into other technologies, whether it's your game console, your television set, etc.," Zuck said. "You're going to have that voice functionality added to existing functionality and seamlessly integrated to create a more interactive experience in other arenas, your refrigerator, etc. There's going to be other areas where they take advantage of the fact that you can have multiple types of data going over the line."

"This decade is the decade of convergence of technology."

A handheld Blackberry-like device, he said, already can offer a choice of a cellular phone call or a Voip phone call through its Wi-Fi capability.

"The convergence is what I think is most interesting about the technology now," Zuck said. "It's one of the things that really dramatically effects the competitive landscape.

An analysis by Boston-based research group TeleGeography put the revenue generated from consumer Voip services remained relatively small, at $220 million, but TeleGeography forecasts Voip revenue will grow to $3 billion in two years.

That could mean more losses for traditional telephone carriers like Verizon. In June 2004, Verizon New Hampshire, for example, said lost between 30,000 and 35,000 landline access line customers in New it Hampshire had over the previous three years to competitors. Then the threat was from cable companies and competitive local exchange carriers.

As services offered by telephone, cable and satellite companies converge, functional boundaries are going to become more important than industrial boundaries, he said. "It doesn't matter if there is only one satellite provider, so long as whatever they do has competition from other sectors."

"Our job in Washington is affected by that."

The Federal Communications Commission's job is made more complex because it has to find functional boundaries for competitive analysis rather than industrial boundaries, Zuck said.

But that convergence can benefit consumers through competition and lower prices.

Consumer driven

"More and more around the country, they are going to bundled services," Zuck said. "If you get all three services (telephone, cable TV and Internet access) from (one vendor) then it will be cheaper than getting them from three different vendors."

"I think prices for a lot of stuff have come down dramatically. Broadband pricing has come down quite a bit," Zuck said.

"We have already begun to see and will see more price competition between different providers. Some of it is a critical mass problem and the extent to which you have sufficient deployment of broadband is what's going to help bring down the price of broadband."

Zuck's organization, ACT, represents predominantly information technology companies. "We have kind of an indirect interest in that we will benefit from broader broadband deployment, more lines in to the house, more ways to get across our products, which is distance learning or telecommuting applications or distance medicine, those are the kinds of things that we're focused on.

"We just want good, clean broadband available, and we honestly don't care how it gets there," he said, "so it's only a sliver of telecom reform that we'll be spending that much time on.

"Ideally, we'd like to see things like hybrid Voip be less regulated or taxed in its infancy so that it has the opportunity to really mature and grow," he said, "but telecom is kind of a bank shot for us. We are indirect beneficiaries of the outcome if the outcome is more broadband. The biggest issue for our industry is the other type of IP, Intellectual Property."

"By now, we're an industry that gets 60 percent of its revenues from exports, and so the laws of everyone else have become just as important as the laws here with respect to IP, and that's where we have the most hope of maintaining a competitive advantage in the generation of innovative technologies."

Prendergast's organization, ATL, focuses more on how technology issues affect consumers. Voip technology, for example, presents several challenges as a substitute for traditional land-lines.

"For the consumer, I think, there are things that people need to do a little research on before they switch from their Verizon or whatever their Bell operating company is," Prendergast said. "First of all, the FCC has mandated the need to provide 911 service, but I don't think that's come into effect yet. So if you get rid of your Bell telephone company and you pick up your Voip phone and dial 911, somebody may not answer, and unfortunately, there have been one or two cases where that's led to some bad things.

"The other thing is, you need (power) ... I still have a non-wireless phone in my house that just plugs into the wall. That works when the power goes out; my cordless phones don't. Your Voip phone won't, so you need electricity in order to make it happen."

Nevertheless, Zuck said, "There certainly are some people that are using Vonage as their primary phone service, their residential phone service."

Prendergast said he thinks the people who are abandoning their telephone companies are probably going to their cellular provider first.

Voip "is not perfect at this point," Zuck said, "but a lot of people are using it as their primary phone service when they go abroad, for example, because those lines aren't that great to begin with.

"We've set very high expectations from what a conversation would be based on calling from here to downtown Manchester, but the reality is if you're calling Botswana from here, you don't have a very good connection over laid lines anyway, and something like Skype is actually going to give you a better connection than the one that you enjoy today on a regular phone line, so it certainly has made tremendous strides, and I think it's only getting better."

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