June 1998

BY MOR SELA

Telcos and Internet Service Providers (ISPs) are engaged in a battle for position, as they take a long, hard look at how the Internet can be developed into a suitable infrastructure for a much wider array of cost-effective, value-added services. Compared to previous significant developments, which have been initiated from within the telecom environment, the Internet stands apart as introducing change from the outside. Although the numbers remain relatively small at present, there is no question that the Internet, and specifically Internet Protocol (IP) telephony, is changing the face of telecommunications.

Combined with increasing demand for more bandwidth as multimedia applications capitalize on the availability of ISDN and future ATM-based network technologies, the future continues to look very promising. This has produced a scenario where the totally unregulated network of the Internet is set to overturn a historically highly-regulated environment, which is itself undergoing deregulation at varying rates around the world. This presents both dangers and opportunities, with the need to drive prices downwards acting as the catalyst. Although the global carrier market is now making rapid changes to accommodate deregulation in key markets, customers continue to complain that prices are not dropping fast enough. As a result, they are quick to investigate alternative methods of communication such as the Internet. Customer loyalty depends increasingly on being able to meet this demand for lower prices, coupled with more flexible services.

COST STRUCTURES
It is not surprising, therefore, to see the enthusiasm with which many innovative network operators are greeting the Internet, as they seek to put themselves ahead of the competition. If you make a direct comparison between the two approaches, one thing is very clear: Circuit-switched networks offer a proven, reliable solution for voice and data transmission, but at a price. They are without doubt more expensive than packet network technologies. This is especially true for long-distance and international communications, where the difference between PSTN and IP telephony pricing is significant. Another factor is the charging structure itself. The flat-rate structure common to Internet usage counters the traditional telco method of charging by distance and duration.

INFRASTRUCTURE
The infrastructure issue itself is also a major subject of debate, over and above the simple arbitrage equation between IP networks and telephone networks. Carriers are typically supporting multiple pipeline infrastructures -- PSTN, private, wireless, intranet, and IP networks -- and are likely to continue this approach.

The next question is one of infrastructure optimization. In order to keep costs and therefore consumer prices down, telcos and ISPs are looking for systems that allow multiple-media transmission via each of their network pipes in order to maximize the use of their infrastructure. Transparent call routing is a must in this context, using the most cost-effective pipe available without impacting the critical nature of real-time voice or fax communications. This puts the emphasis on finding efficient IP voice and fax servers and gateways which enable the optimum utilization of all media components on all networks simultaneously, taking advantage of pricing/loading alternatives between the network pipes.

THE NEW, COMPETITIVE TELCO
For forward-thinking telcos, the Internet can be regarded as a complementary resource to the existing fixed and mobile networks, providing a convenient platform to handle multimedia applications that demand high-speed data transmission. This need, coupled with strong growth forecasts for global Internet usage, make it an appealing avenue for investment, particularly with regard to the developing countries where conventional telephony is limited in deployment. These telcos are ranged against a cross-section of other interested parties. ISPs are obviously at the forefront of this list, but snapping at their heels are cable TV operators, wireless service providers, and satellite operators -- all looking for a piece of this potentially lucrative market.

Server/Gateways
The key to unlocking this potential cash flow lies in taking a proactive market position and implementing a well-conceived integrated platform that allows the operator to provide a high-quality service matched to current requirements, while leaving considerable scope for the future provisioning of additional services. At the heart of this specification lies the IP telephony server/gateway as the network's linchpin. In addition to delivering cost savings and optimized infrastructure utilization, the server/gateway must therefore provide the capability for value-added services if it is to meet these longer-term objectives. These services are likely to yield the all-important differentiation factor, relying on store-and-forward technology to cater for the immediately obvious -- such as e-mail-to-fax messaging, universal inbox, and broadcast fax -- as well as the value-added concepts of the future.

Putting Emphasis On Usability
A well-conceived and well-executed IP platform relies extensively on careful design and planning. The objective is not to reinvent the wheel in terms of conventional telephone and fax communications. Ideally, users will continue to interact in the same manner as before -- that is, a simple phone number initiates a connection. The quest for simplicity without sacrificing features will increase the likelihood of user adoption. IP telephony services can be integrated transparently into home and office environments, provided that the method of identifying a destination continues to be a common phone number.

BEYOND STATUS QUO
User acceptance is the key to any new service becoming popular. If the use of voice and fax over TCP/IP is to thrive, it is important to preserve the most successful features of conventional telephone and fax usage. Modifying the service quality without providing additional features would deter the acceptance of Internet telephony.

Reliability is a high priority in this context -- currently, both telephone and fax transmission reliability is very high. At the minimum level, IP telephony must provide comparable performance with PSTN fax transmission. However, IP telephony also has the potential to exceed this performance, through the deployment of new value-added services.

Remote Network Management And Flexible Billing
High voice quality and fax reliability are without doubt among the most important criteria of a telephony system, especially when it comes to selling the service. From an operational perspective, however, the need is wider -- involving a system that can support mass-traffic over a multi-node network -- reliably and cost effectively. In addition, the system should provide a flexible solution for centralized and distributed network management, as well as customer billing and bilateral service providers' billing.

Smart Routing
Smart routing, as opposed to least-cost routing, means that calls are sent via the most cost-effective routing. In other words, loading status and node congestion are also taken into consideration (in addition to the direct cost of the transmission). A fundamental requirement is for messages to move as quickly as possible around the network, avoiding any unnecessary loading of servers and gateways on the network. In order to meet this requirement, IP telephony platforms need to use intelligent message routing mechanisms.

Need for Universal Standards
The issue of standards for the exchange of voice and fax messages across IP telephony is at a relatively early stage, but it is widely recognized that in order to deliver a genuinely universal service, standards must be in place. Common industry standards will increase interoperability and, as interoperability increases, so does the value of Internet telephony services, leading to more rapid implementation and greater penetration.

Led by Intel and Microsoft, there is a strong industry move towards standards based on the ITU recommendation H.323, which specifies the use of audio codec parameters. The low-bandwidth codecs -- G.729 at 8 Kbps and G.723 at 5.3/6.3 Kbps -- are the two that are relevant for IP telephony. G.723 in particular is emerging as one of several "standard" codecs for Internet telephony, backed by Intel, Microsoft, and Netscape. Currently, other principal IP telephony-related standards include Voice Over Internet Protocol (VoIP) and Voice Profile for Internet Messaging (VPIM), with S.100 as the standard application programming interface (API) for computer telephony.

There are no common Internet fax standards in place yet -- fax servers use proprietary techniques for passing messages between nodes. However, work continues within the ITU and IETF (Internet Engineering Task Force) on an IP fax standard. And, most recently, the Internet Fax Routing Forum (IFRF) published a specification that defines inter-nodal communications.

PUSHING IP TELEPHONY FORWARD
Operators are in a dynamic market, facing ever-increasing competition. In order to maintain market position, they need reliable systems based on standard operating environments that provide scalability in terms of capacity and performance. This is particularly true as they look to enter the IP telephony market -- in addition to basic real-time voice and fax communications, the system should support value-added services such as unified messaging, e-mail to fax guaranteed delivery, and fax broadcasting, if those providers are to stay ahead.

Network convergence is a reality, and the need to optimize the usage of all network pipelines will become increasingly critical and move Internet telephony forward as a direct result. As telcos and ISPs compete to offer a greater mix of real-time and non-real-time services, the need to optimize network capacity simultaneously across all technologies will increase. Initially conceived as a means of reducing costs, IP telephony's future will be driven by this need to optimize the usage of all network pipelines.

As IP Telephony server/ gateways become part of the communications infrastructure, they will allow telcos and ISPs to offer virtual voice circuits through the use of IP networks. Permitting intelligent routing through the IP network, IP telephony platforms will also herald a new era of open standards in the highly proprietary telecom marketplace. New generation service providers' "switches" will become messaging platforms, allowing simultaneous real-time and non-real-time, voice, fax, and e-mail communications over IP and telephone networks, in addition to new enhanced services such as unified messaging, guaranteed delivery, and broadcasting. This emerging technology will generate many new opportunities for service providers as the process of convergence accelerates. The question is not whether Internet telephony will succeed but rather, who will dictate the pace at which it accelerates?

Mor Sela is manager, marketing communications of ArelNet, Ltd. ArelNet is a worldwide provider of Internet faxing solutions and advanced customized integrated messaging systems. With successful installations in the U.S., Europe, Africa, the Far East, the Middle East, and South America, the company has extensive experience in developing, installing, and supporting its systems worldwide. ArelNet's main product lines are the ARCOM, an integrated messaging system, and the newly released i-FAX, an Internet fax solution for service providers and for intra-corporate use. For more information, visit the company's Web site at www.arelnet.com.