December 2004

VoIP 2.0

BY RICH TEHRANI

If you are in the telecom industry and especially VoIP, you’ll understand my Mel Brooks paraphrase, “It is good to be in VoIP.” Seriously, being the founder of a magazine called Internet Telephony, a magazine going on its 80th issue soon is beyond my personal belief. It has been a fascinating and incredible journey seeing the entire world come around to our way of thinking.

This leads me to my next point. For the first seven years of publishing this magazine people asked me, “Do you think IP telephony will ever take off?” I never hear those words these days, instead I hear “What’s next.” I’ve pondered what’s next. I’d thought about it as I meet vendors, go to industry events and travel to IP telephony vendors around the world. What’s next is VoIP 2.0.

The heavy lifting has been done already. We all know VoIP is here to stay. Writing case studies about VoIP adoption is easy. There are thousands of deployments happening and they are taking place in service provider networks, in our houses and across government agencies and enterprises of all sizes. But where do we go from here? How do we leverage VoIP to take us to the next level? What hurdles are left to be cleared? And what exactly is VoIP 2.0? Below you will find the technologies and issues facing the industry as we leave VoIP 1.0 behind and move onto VoIP 2.0.

Service Providers
Triple-Play is becoming quadruple-play, quintuple-play and more. The service providers of tomorrow will have to contend with providing voice, video, and data to their customers, the basic three food groups that make up the triple-play. Where it gets interesting is in the quadruple-play, which throws mobility into the mix. Think mobile VoIP; imagine the ability to have VoIP work in WLAN environments allowing for WiFi telephony. Some vendors are throwing around the term quintuple-play thinking that service providers will also need to sell data services and they could be right. These are anti-virus services, back-up services, and the like.

The Device Sells The Service
There are at last count over 100 VoIP service providers out there and counting. How will they differentiate themselves? Some will have the best user interface, price, quality of service, etc., but is that enough differentiation for hundreds of competitors that are effectively able to compete with one another globally? Carrier’s carriers like Level 3 and other new entrants to this market are going to be the backbone of the next generation of service provider making it easier than ever to compete in this market. The answer is simple. As VoIP becomes commoditized, many providers will look to Apple and copy the iPod model.

I am not talking about MP3 over IP. I am suggesting the development or rebranding of a device to lure customers into buying a service. When I look at my home wireless phone and compare it to my mobile phone I can’t believe they were both sold in the same century. Home phones do basically nothing, while today’s mobile phones can record calls, download and play music, boast speakerphone functionality, have built in SMS, IM and e-mail clients, can take and e-mail photos, videos, and voice messages, can operate in a walkie-talkie fashion, can support bluetooth, can be a PDA, can store thousands of contact records, can have memory expansion slots, can store appointments, a to-do list, and more. Surprisingly the prices for typical cordless phones and mobile phones aren’t that different.

I believe that teenagers would give up their Xboxes this Christmas if they could buy a killer WiFi VoIP phone that let them talk for an unlimited amount of time, conference, IM, speakerphone, bluetooth, etc. I am just waiting for the brilliant service provider who brings it to market first.

VoIP E911
I have said it before and I will say it again if we don’t get our act together soon as an industry we will have some serious headaches to contend with. The positive press friendly to VoIP that we witnessed for a year will vanish the moment someone is injured or worse because there is a problem with VoIP and E911 connectivity.

The current state of 911 over today’s VoIP providers is not good. The incumbents aren’t as much of an issue as the newer carriers who transfer 911 calls to lower priority administrative lines in PSAPs. E911 over VoIP can be much better than PSTN 911. We need to come together as an industry and discuss the challenges and standards issues and make sure that e911 over VoIP becomes a reason to adopt and not a reason to pass on VoIP.

I consider this a stumbling block that needs addressing on our way to achieving VoIP 2.0. Companies like Vonage, who use technology from an innovative company called Intrado, are taking bold steps to ensure the safety of their customers. They should be commended for their efforts and others need to follow.

Taxation/Regulation
Here is another potential stumbling block. The FCC has vowed to do its best to keep from taxing VoIP, but politicians are screaming to regulate it, tax it, and behind closed doors even kill it. The problem is among other things, the Universal Service Fund is drying up as we have been writing about for years. As of early November the company that runs the fund, Universal Service Administration Corp. has asked regulators to increase the percentage of long-distance revenue that service providers have to pay from 8.9 percent to 12.5 percent! Others say that amount needs to be 25 percent or another 2 billion dollars on top of already increased payments. The USF was a great idea whose time has come and gone. Trying to generate USF revenue from a percentage of long-distance revenue is like trying to generate revenue from e-mail.

While it is impossible to predict the future of the VoIP market, Skype allows free VoIP calling and then charges for the various additional services it provides. What if this model holds for the industry? If it does, forcing VoIP providers to contribute a percentage of their sales to the USF would mean getting a percentage of nothing. These providers will make money on voicemail, virtual numbers and the like. Can you tax voicemail and not e-mail? In my opinion, broadband will be taxed and/or services that are delivered via broadband will be taxed. VoIP will just be one of those services.

VoIP Peering
This is the least understood shift in telecom, and in my opinion has the greatest potential to change the way VoIP works. Peering is the concept of interconnecting networks allowing IP and subsequently VoIP traffic to be carried between service providers and companies without the need to pay a middleman or in this case an additional VoIP service provider. Think of how inefficient VoIP is today. If a Packet8 customer calls a Voiceglo customer, even though both customers are using VoIP, their calls have to go over the PSTN. Some of the issues that need to be addressed when using peering are how to deal with different protocols between the different providers so that calls can be seamless between callers. The answer to this is the use of session border controllers who fit nicely between the service providers providing a translation service between providers who don’t seamlessly interoperate. We also need a way for service providers to compensate one another.

To assist in peering we need a way to inexpensively allow callers to find one another on the network. ENUM is one way to do this but a new technology — developed in part by Mark Spencer the creator of Digium’s Asterisk, the open source IP PBX — allows ENUM databases to be interconnected. Sort of like a network of directories allowing you to navigate your way to the contact you are trying to communicate with. It is too early to tell if DUNDI will be the killer ENUM enabler but the peering community has embraced it so far and the concept makes a good deal of logical sense.

Open Source
Open source telephony solutions are flourishing from the service provider to the enterprise. Behind the scenes, more and more service providers are using Digium’s Asterisk to run their operations and support thousands of customers. Enterprise users are in the testing phase now and I know a number of early adopters that are thrilled with Asterisk. The verdict is in, open source telephony systems are reliable and telephony is the latest area to embrace open source technology.

The Reseller Opportunity
There are two huge opportunities in VoIP for resellers: Equipment and service. The equipment play is obvious; more VoIP products are being sold on a daily basis. Corporations are snapping them up at a rapid clip. Equally impressive is the opportunity to sell VoIP service. More service providers means more opportunities to help these providers sell services to new customers. At a recent reseller event where I was a keynote speaker invited to motivate the crowd looking for products to sell, the follow-up keynoter came out and said no one is making money selling VoIP. This was perhaps the most uninformed comment I have ever heard and it came from a clever person who is out of touch with what is happening in the market. I am getting a call a week from resellers that are making great money selling VoIP equipment and service to enterprises. This is the best time to be in this business and resell VoIP. In fact I can’t think of another technology that is seeing as much growth and is generating as much spending as VoIP.

Peer To Peer
The peer to peer phenomenon is real. It is happening. When I say VoIP 2.0 is here it is in part because p2p clients like Skype have had over 32 million downloads. The next frontier for this technology is in the equipment market where p2p allows phones to become virtual PBXs on the network without the need for a centralized server otherwise known as a PBX. Companies like Nimcat networks and Popular Telephony are working with established PBX providers to outfit their next generation of phones with the ability to have over 100 features out of the box, the ability to auto-discover one another and pretty much do everything today’s PBX attached phones can do. This technology really shines in the hosted world where the phones can communicate with each other in the event of a lost WAN connection. Recently Popular Telephony struck a deal with Stealth Communications to allow phones with Popular Telephony’s Peerio technology to interconnect with service providers working with the Stealth peering network.

If you study what is happening you can see that there is a huge push to decentralize telephony. I have never seen anything like this in the telecom world. P2P software and now desktop telephones, enterprise and service provider peering, ENUM peering… VoIP is allowing decentralized telephony on a massive scale.

WiFi Telephony & WiMAX
There is no way to overestimate the effects of wireless VoIP. Just as virtually every prediction about the mobile phone market was surpassed by reality, so too will mobility change the face of how we work and communicate with one another. As truly inexpensive wireless networks proliferate, so too will communications. A colleague of mine said that WiFi telephony lost its reason to exist when Verizon decided to allow free in-network calling. Further consideration makes me think he isn’t quite right. Verizon penalizes you severely by disabling its devices’ key features such as bluetooth connectivity on one of its phones. Further it charges high rates, cajoles you into signing two-year contracts, and the like. If you have a laptop or soon most any consumer electronics device, you will be able to use it as a WiFi telephony device. Today’s PDAs do this but tomorrow’s cell phones will do this as well. In urban areas a WiFi or WiMAX phone will be good enough for most people and it will cost a fraction of a fraction of what Verizon charges today. I don’t want to go off on too much of a tangent but a WiFi telephony iPOD using VoIP is not too far away. They will likely call it the VoiPOD.

Ambient Telephony
At our most recent VoIP Developer show in San Jose, Michael Stanford, Intel’s Technology Strategist, had a keynote where he mentioned a concept called ambient telephony. He mentioned an example where a colleague of his was talking to his wife using Skype and didn’t hang up when the call was over. He didn’t need to as it was free. He continued to work while his wife cooked breakfast. Soon thereafter the kids woke up and came into the kitchen where their voices triggered a conversation. It is easy to see networks of VoIP conferences taking place with family members. Perhaps every Sunday families will have a conference call and just leave the lines open, allowing members to jump in and out of the conference at will. A GUI could inform all the participants as to who is in and who is out. Family members can enter VoIP chat rooms, etc.

UNE-P To VoIP
Yesterday’s CLECs exist because of a FCC ruling called unbundled network access-platform or UNE-P for short. This rule specifies the rates incumbent carriers can charge CLECs to lease their lines. Recently the FCC has rethought this concept allowing ILECs to raise these rates and subsequently reduce competition severely. UNE-P’s demise is VoIP’s gain. This point is crucial as it forces CLECs to embrace VoIP and as a result will rapidly accelerate the growth of the already rapidly accelerating IP telephony market.

There you have it, all the major issues and technologies as well as business models that will move our industry forward. We are finally going to see how the next generation of VoIP products and services will transform the world we live in. That, my friends, is VoIP 2.0.

[ Return To The December 2004 Table Of Contents ]