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Why VoIP Is Going To Be A Big Deal This Year

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Why Voip Is Going To Be A Big Deal This Year

January 5, 2004

By David Coursey

In the days before Christmas, three major communications companies--Time Warner, Qwest, and AT&T--announced plans to start selling Internet-based telephone services. They were joining other telecom giants--SBC and Verizon among them--who'd previously committed to doing the same thing.

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The Underlying technology, called voice over IP (abbreviated as VoIP), has been around for several years. It has, however, mostly been something for big corporations looking for a way to bypass their local telephone company and save some money.

A few companies--such as Vonage--offer residential service based on VoIP. Customers get significantly lower-priced long distance than with conventional service, at least if they buy enough of it. And the service seems to work fairly well. From my limited testing, the audio quality of the calls--something I was afraid Voip would reduce--was pretty good; reviewers and people I know who use it seem to agree. But Vonage's pricing is a tad complex and not everyone will save money with it.

At the CNET offices in San Francisco, everyone uses a Voip system from Shoreline, which includes some nice PC integration features, such as managing your voice mail from your computer and dialing directly from an Outlook address books. That's all cool enough, but not exactly life-changing.

Still, while Voip may be nothing new, it will gain some major momentum this year as a business and consumer technology. The announcements from Time-Warner, AT&T, et al., tell me that the technology should become a more common choice--if not this year, then someday soon--for homes and businesses. In the process, it could force tremendous changes in how telecom services are provided, priced, and regulated. Some even predict it will spell the end of the old copper-based telephone network.

But Should You and I care? Does it really matter which network carries our phone calls? After all, digital data is just a string of 1's and 0's, whether it's carried over the Internet or the existing copper network. (Come to think of it, isn't most Internet traffic carried over the copper network already?)

Voip supposedly makes the telephone network "smarter." Frankly, though, I'm not precisely sure what that means. It also makes for easier wiring (at least in new and retrofitted construction), because your Cat 5 Ethernet handles both voice and data to the desktop. But if I were purchasing telecom services, I'd be concerned about mixing Internet data and phone calls on one network: It would seem to create too many failure points, making it easier for both networks to stop working at the same time.

Interestingly, while vendors like Vonage make their use of Voip very clear to their customers, AT&T and (presumably) other big phone companies besides Qwest and cable/Internet providers like Time Warner, will likely make their use of Voip less obvious. To customers, these companies will simply be touting cheaper long distance.

Saving money seems to me like the only reason to consider Voip today. It's similar to the trick we used at a now-defunct technology business magazine I once worked for: We used a T-1 line to take our phone calls past the local phone company, straight to another carrier's switch, an arrangement that saved us a decent amount of money.

That, in essence, is what AT&T and others are threatening to do with VoIP. Offering Internet phone service cuts some of the fees these companies have to pay other phone companies to carry calls. In that sense, Voip is as much a regulatory loophole as it is a new technology.

But If It saves consumers money, everybody wins, right? Well, not if the carriers who have been receiving money from AT&T and others have to make up that lost revenue someplace else--like from their own customers. At some point, I suppose the company with the lowest fixed cost wins. But remember the joys that falling prices visited upon the airline industry? Sure, anyone can afford to fly now. But we do so on airplanes that are packed to the rafters, with airlines willing to do anything to rake in a few extra bucks.

Might our Internet service providers simply raise their prices to make using AT&T or some other Voip service less attractive? Will companies use Voip to further lock in customers and then raise prices, the way cable companies seem to do every year?

I don't think Voip is the be-all-end-all of telecom, the way some people seem to. To me, the ultimate solution is a single fiber optic connection that will bring gigabyte data, television, and voice into my home. But that's years--perhaps many years--away.

This year, despite the competitive and regulatory battles to be fought, Voip is the telecom technology to watch

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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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