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Long-Promised Technology Likely To Reshape Industry

Vonage In Print News

Voice Over IP Makes Its Debut
Long-Promised Technology Likely To Reshape Industry

December 31, 2003

By Jonathan B. Cox

Bob Goudreau makes and receives calls from his Cary home. It's pretty unremarkable, until you consider that his voice doesn't move over phone lines. It travels through the cable-television system using a technology that until recently would probably have made him sound like he was holed up inside a barrel with a cold.

His voice is clear and he gets unlimited local and long-distance calling for a flat monthly fee. It's all thanks to Voice over Internet Protocol, a technology that is poised to reshape the telecommunications industry.

"This is going to end up being one of the major milestones," said Daryl Schoolar, senior analyst with In-Stat/MDR in Scottsdale, Ariz. "In some ways it's much bigger than we even realize."

Triangle residents will get a better feel for the technology in 2004. Time Warner Cable within days will begin rolling out a telephone service -- Goudreau is a test customer -- that uses VoIP. It's an effort that will redefine phone competition in the region, providing consumers with a significant, and cheaper, alternative to the traditional carriers.

The company will start in Cary, targeting customers of its high-speed Internet access and digital-TV service. It will expand the offering across its local division throughout the year.

It won't be the only one. AT&T, the long-distance company, plans to sell Voip service to business and residential consumers beginning in 2004.

Vonage, a New Jersey company that connects calls over the Internet, has 85,000 customers. About 4,300 of those are in North Carolina.

BellSouth, Verizon Communications and other large local-phone companies are putting together their own offerings.
"We're just starting to scratch the surface," said Rick Moran, vice president of product technology marketing for IP communications at Cisco Systems in San Jose, Calif.

The company, one of the biggest manufacturers of gear to make Voip service work, employs 2,500 in Research Triangle Park. Voip technology has been in development for about a decade. In essence, it treats voice calls like e-mail or other Web data. A call is broken into packets of information. The packets scatter through a communications network -- either the public Internet or a private network -- and are reassembled on the other end.

It's a more efficient way to transmit voice than the traditional telephone system, which sets aside a channel for each call. Providers need less equipment to make Voip work.

The cost of placing a call, therefore, is about the same as sending an e-mail message: minuscule. That reduces prices, a big draw for consumers. And, because voice on a Voip system is just another piece of data, service providers are able to offer additional features.

"It's more choice at a slightly discounted price," said Kate Griffin, senior analyst with the Yankee Group in Boston.

In its earliest form, the technology yielded scratchy and interrupted conversations. But it has evolved. Many consumers already use the technology without realizing it.

Phone carriers have put it in the middle of their networks to carry calls. Businesses have adopted Voip to cut costs.
Even with the advantages, Voip has pitfalls. A Web virus can disrupt calls, leading to poor quality. A power outage is likely to cut service.

In some cases, emergency personnel can't automatically identify a caller who dials 911.

"My concern overall with Voice over IP at this point is it's been overhyped," said Mark Kaish, vice president of data services at BellSouth, which plans to offer businesses services that use the technology next year. "People are making it seem easier than it is, especially when there's this expectation of this becoming your primary line."

Goudreau, 40, recognized that there could be problems when he signed up as part of a trial conducted by Time Warner Cable.

Two technicians visited his home about 2 1/2 weeks ago and swapped out the modem he used to connect to the cable company's Road Runner high-speed Internet service with a model that had extra connections. A wire running from the modem to a standard phone jack turned on all the other jacks in his home.

Within a couple of hours, his telephone number had moved from BellSouth to Time Warner.

"I'm just kind of curious about the novelty of the thing," said Goudreau, a software engineer with EMC in RTP and a father of three, as he explained why he signed up for it. "I know Voice over IP is the wave of the future."

He's temporarily paying less than the $39.95 a month that Time Warner plans to charge, and can't tell the difference between the connection and the one he had from BellSouth.

As For Any Problems?

"If you had asked me 10 years ago if I would ever trust my phone service to the cable company, I would have looked at you like you were from another planet," he said. "The only technical difference I have noticed is the dial tone seems a little louder. We have given it the thumbs up."

By 2005, the number of U.S. Voip customers could approach 756,000, up from 135,000 this year, according to statistics from market research company In-Stat/MDR.

The growth of high-speed Internet connections, called broadband, is helping spur interest. Customers generally pay between $30 and $50 a month for the links and are looking for applications to make it worthwhile. Voip works best over fat pipes.

"It's really about what we've been talking about for a long time now: convergence, bringing voice and data together," said Bob Hafner, chief of research for Gartner, a market research firm based in Stamford, Conn. "It's certainly going to change a lot of things."

Imagine seeing a dialogue box pop up on your television screen when the phone rings. It tells you not only who is calling, but also how long you usually talk to the person, helping you decide whether to take the call. Dial tones could be replaced by weather reports or your favorite tunes.

Already, companies such as Vonage and FeatureTel, a Raleigh company that sells IP telephony to businesses, let customers check voice mail messages online or set preferences to determine which calls get through and when.

Cisco sells an IP telephone that can be linked into corporate databases. When a customer calls, a screen can instantly display account information, providing more personalization and quicker responses to questions.

"If you take everything you have today and move it to IP, who cares," said Al Safarikas, vice president of marketing at Nortel Networks, which also makes gear needed in Voip networks and employs about 3,000 in RTP. "You want to do more, not the same thing differently."

Federal regulators also are taking a unique approach to VoIP. They don't want to regulate it, for now, at least. Federal Communications Commission Chairman Michael Powell says fewer rules will let the technology develop more quickly. It also reduces fees, helping companies keep prices low.

State regulators are weighing their own approaches.
Raleigh lawyer John T. Benjamin Jr. is a recent Voip convert. He needed to upgrade his traditional two-line phone system and about a month ago purchased service from FeatureTel.

Fewer government charges and more features are enticing, but for an attorney who talks on the phone incessantly, voice quality matters most. No one can tell he uses a different breed of phone, he said.

"I don't know anything about it, or how it works," Benjamin said. "I don't care to."

And he doesn't have to. That might just be the best testament to the evolution -- and future -- of the technology

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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 for details.

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