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VoIP: Here, There, Everywhere

Vonage In Print News

VoIP: Here, There, Everywhere

December 12, 2003

By Mark McClusky

Fans of Internet telephony will soon have a significantly larger selection of providers, as some of the biggest fishes in the telecommunications industry rush to roll out services.

On Thursday, AT&T, the largest U.S. long-distance provider, put its weight behind the popular technology, announcing that it will begin selling telephone service using voice over Internet protocol.

AT&T's move was the latest in a flurry that promises to bring Voip into the mainstream. Earlier in the week, Time Warner Cable announced plans to enter the national Voip market. Time Warner, the second-largest cable company in America, has been testing Voip technology in Portland, Maine, since last May and now intends to roll out service to its customers across the country.

AT&T and Time Warner join an increasingly crowded field, as Comcast, Cablevision and Cox Communications all are offering Voip service on a limited basis, and all are planning to roll it out more widely soon.

These companies join stand-alone providers of Voip service such as Vonage and VoicePulse that provide users with adapters to hook up their phones to their existing broadband connections, as well as local telephone companies such as Qwest, which began selling Voip to some customers in Minnesota on Monday.

But what does all of this activity mean for consumers? If all one wants to do is make phone calls as cheaply as possible with the best sound quality available, analysts say the increased availability of Voip is great news.

"I think that 2004 is going to be the most interesting year in telecom in quite a while," said Boyd Peterson, who tracks consumer technologies at the Yankee Group. "We're going to see companies going out and advertising the fact that your phone service doesn't have to come from the phone company any more."

One way that Peterson expects Voip providers will try to lure customers is through lower and more predictable costs.
"The pricing structure for voice communications is going to take a turn to the logical," said Peterson. "All of the variants in the past -- with local, regional and long-distance calls -- are going to go away. It's going to be more simple, with a flat fee for all calls."

This sort of competition, analysts say, will end up driving costs down, especially in areas where multiple vendors are trying to get a piece of the pie. In the short term, Peterson said, the competitive climate should provide some compelling deals.

Currently, local telephone companies charge between $50 and $70 for unlimited local and long-distance calls, using traditional switched analog circuits. In the Voip arena, AT&T hasn't announced its pricing, but Time Warner has been charging between $40 and $50 for the same package, and the independent Voip operators charge about $35.

These services build on technology that has been available since the mid-'90s. But previously, VoIP, often offered as a free service, required both callers to be at a computer using a headset and to connect using the same software. Now, Voip calls can connect to the standard phone network, allowing a Voip user to call anyone in the world.

Ravi Sakaria, CEO of VoicePulse, thinks that for the near term, competition in the Voip market will be price-driven.
"In the early stage, the focus will be on cost savings," he said. "But in the long run, that won't be the case.

Eighteen months from now, we'll start to see the focus shift to the features that different companies offer."
Marcelo Rodriguez, editor and publisher of the Voip information site Voxilla, thinks Voip is poised to explode, but that some problems still need to be worked out.

"Right now, the biggest barrier is that it's a technology that hasn't made itself totally understandable to the consumer," said Rodriguez. Some of those barriers will likely fall in the coming months, as companies improve and expand their services.

But Rodriguez also feels that some of the unique capabilities of Voip will be a big selling point for consumers.

"One of the things that IP telephony can do is eliminate geography in telephony," he said. "I could take my 415 (area code) number and go anywhere in the world, and have the calls routed to follow me. I could be sitting in a house in the south of France, and my friends in San Francisco could reach me with a local call."

However, that geographic freedom also leads to one of the most prominent obstacles to widespread adoption of the technology -- the inability of the current 911 emergency system to correctly handle Voip calls. When callers dial 911 from a standard phone, their location is automatically included to speed dispatching of emergency personnel. Since Voip calls can be routed anywhere, that geographic information isn't available.

Other drawbacks of switching to Voip include the need for a working Internet connection. If callers are having technical problems with their Net connection, then Voip phone service won't work either.

A reliable Internet connection also requires power, another disadvantage of VoIP. Traditional phones are powered by the phone circuit, and work when the power's out.

However, once those barriers are overcome, analysts say Voip has the potential to offer a lot of options to consumers that circuit-switched phone services do not.
"It's data," said Peterson. "Once you have the phone call as IP packets, you can do almost anything. You can have five different phone numbers come over the same connection.

When your in-laws visit, they can move their number to ring at your house for the week. Once the market share for Voip is there, we're going to see a lot of innovation."

Rodriguez agrees that Voip is the future. "Two years ago, an infinitesimal percentage of phone calls happened using IP," he said. "Now, more than 11 percent of calls use IP networks for some portion of the conversation. In 15 years, the standard phone network will no longer exist, because of the efficiency of IP telephony and its low cost. The IP network will be the phone system."

Until that happens, consumers can look for lower prices and more features from whoever provides their phone service, as the battle for their dial tone intensifies.

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