Internet telephony - like its namesake, the Internet - is advancing at a furious
pace. I receive a slew of new IP telephony product releases, news items, and merger
announcements daily. Sometimes I feel as if I'm running just to keep up, with little
chance to look ahead or behind to assess the progress thus far. I can only imagine what it
must be like for enterprises and businesses not directly involved in the communications
industry to keep pace with the changes happening around them. But the changes are
happening, and if you aren't keeping up, you will certainly be left behind.
So what is it exactly that Internet telephony offers to businesses of all sizes that
makes it so important to keep up with? Let's take a look at this question in some detail.
MORE THAN TOLL BYPASS: IT’S OPEN TELEPHONY
Various members of the Web community have been touting Internet telephony for
some time now, but it hasn’t taken off with the speed that some of them may have
hoped for. The reason for this is that the sell points for Internet telephony have
traditionally been focused on cost savings. Make free Internet phone calls! Reduce your
long-distance bills now! This is the stuff of Web banners, and a lot of people became
interested in Internet telephony initially because they hoped they could save money.
However, for businesses to implement Internet telephony on a broad basis, there needs
to be more of a benefit than saving some money on the phone bill. What else can this
Internet telephony thing do? Businesses didn’t switch from typewriters to word
processors just because they could save money on ribbons and only print a document once.
There all kinds of enhanced features: the ability to cut and paste text, save versions of
a document, share files with multiple users, and attach documents to an e-mail message.
These added features helped validate the upfront investment in hardware and software that
resulted in a mass port from Smith Coronas to Microsoft Word.
IP telephony promises much the same benefits that were promised by word processors, but
these benefits are just beginning to become apparent to end users. Up until now, Internet
telephony has remained the domain of hobbyists and people looking to save a few bucks on
their phone bills. But there is much more about to arrive.
WHAT’S THE HOLD-UP?
What is the biggest challenge faced by companies looking to move to an IP
communications system? Well, even though hundreds of billions of dollars are spent
annually worldwide on long distance charges and telecom equipment, most telecom equipment
is still proprietary and doesn’t play well with equipment from other companies.
In contrast, consider the computer industry: It is rife with change and innovation
because the barrier to entry is relatively small and progress is brought on by
competition. Innovation and interoperability have made the computer industry grow as
quickly as it has.
DIDN’T CTI OPEN TELECOM?
Sure CTI products have opened up the market, and TAPI lets one program run on
switches from multiple manufacturers, but in the end, when you upgrade your PBX, you have
to go back to the same manufacturer who sold it to you. Microsoft’s TAPI was a great
start and it’s getting better — CT Media is a step in the right direction as
well. (Please see the
May 1999 Publisher’s Outlook for a complete account of Microsoft licensing
Dialogic’s CT Media.)
But compare the current state of enterprise communications with enterprise data
networking. When you buy a network hub and outgrow it, you can easily add another hub from
a different manufacturer. SNMP allows you to manage disparate products as if they were
one. Hubs and NICs are purchased based on price and performance.
This interoperability is still not available with traditional telecom. With TAPI or CT
Media, you could build a system that would allow two disparate PBXs to work together
almost seamlessly, but that’s still a far cry from datacom, where you can just plug a
3Com NIC into any hub and not even think twice about compatibility.
This is one of the reasons TMC launched ConvergeNET at Internet Telephony EXPO (see sidebar). We are looking to help the industry overcome the
interoperability hurdle. The purpose of ConvergeNET is to show disparate
manufacturers’ IP telephony equipment working together and adhering to the latest
standards — not just paper standards but real-world standards. As service providers
and end users get a taste of open telephony enabled by CTI and IP telephony, there will be
no turning back.
ENHANCED SERVICES
Once the interoperability issues are resolved, VARs and integrators will still
need stronger arguments than phone bill savings to convince businesses to implement
Internet telephony in their networks. Enhanced services are one of the least understood
aspects of IP telephony, and yet they provide the most convincing support for the argument
that IP telephony will permeate traditional circuit-switched networks. Enhanced services
range from Web-based unified messaging with streaming voice mail to Internet call waiting.
Let’s look at some of the benefits to be had from a select few enhanced services.
Internet Call Waiting
This service is of use to single line Web surfers who are currently missing
incoming phone calls when they are online. With Internet call waiting, your service
provider forwards all incoming calls from your busy telephone line and contacts you via
the Internet. The notification comes in the form of a pop-up window prompting you to take
the call. If you take the call, it can be streamed through IP telephony, so that you still
maintain your Web connection. Since there are typically no routers between you and the
service provider, the sound quality is as good as on the PSTN.
Call Center Applications
In the future, corporations will be able to purchase call center CTI
functionality as IP enhanced services evolved from today’s Centrex service providers.
For example, IP telephony-based ACD enhanced services with full screen pop and Web-based
call control functionality will lower the cost of entering the call center market
substantially. Large full-featured ACDs cost hundreds of thousands of dollars. If this
service is priced right, it will be irresistible to new call centers.
SOHO/Remote Access
Then there is the SOHO and remote worker market. Using IP telephony over DSL or a
cable modem, a service provider can carry multiple conversations to and from the
customer’s premise. So as a SOHO business grows, it can opt for inexpensive IP
Centrex-style services as opposed to a proprietary key system or PBX. If the SOHO business
owner decides to hire additional people, he doesn’t need to physically locate them in
his office. Instead, he can build a virtual Internet PBX that will allow him to transfer
calls with a full screen pop of customer information to anyone else who subscribes to the
Internet PBX service.
Remote Video Security
Another great enhanced service is remote video monitoring (Big Brother will be
watching and he’ll be using IP). Using a Web browser, you can access any number of
video cameras and instantaneously view streaming video from various cameras. Many of
today’s video cameras are motion activated, allowing you to be notified only when
there is some remote movement in the camera’s field of view. Security is one of the
big uses of this technology, and Motorola showed me
a real-world demo of this technology about a month ago.
SIGN OF THE TIMES
Many of you might remember that datacom and telecom tried to merge unsuccessfully
in the 1980s. Witness the failed mergers of IBM and ROLM as well as AT&T and NCR. This
time, though, it’s different. This time there is a common unifying infrastructure in
the Internet and other IP-based networks. This time there is more support than we could
ever imagine. Nortel Networks, Microsoft, Lucent, Cisco, and AT&T are all investing
billions in IP-related development, acquisitions, and strategies. Rarely, if ever, have so
many companies in disparate fields agreed on a common future. Over the years, CTI has
been a major proponent of Internet telephony, and we’ve always known it was only a
matter of time before datacom converged with telecom.
In the last few weeks there have been more and more announcements about deployment of
Internet telephony, and I have also happened upon numerous analyst reports projecting the
future of IP-based, packetized networks carrying voice, video, and fax. For example, Piper Jaffray, a market research and investment firm that
specializes in telecommunications, projects that the market for IP telephony will grow at
a Cumulative Aggregate Growth Rate (CAGR) in excess of 100 percent at least until 2003, at
which point the market size will be approximately $14.7 billion. Specifically, IP
telephony solutions will grow at a CAGR of 116 percent and IP telephony services will grow
at a CAGR of 168 percent!
Piper Jaffray goes on to state that currently 80 percent of all IP telephony solutions
are currently from international markets. However, they expect the international market to
decrease to 45 percent of the entire IP telephony market by the year 2003. They attribute
this to the fact that domestic carriers will take longer to deploy IP telephony solutions,
and by this time, a significant number of small businesses will also have deployed their
own IP telephony solutions.
Another way to look at the numbers (see Figure 1) is to compare the
total number of minutes traveling over an IP telephony network. Piper Jaffray estimates
that in 1998, 476 million minutes of traffic was carried on IP telephony networks. They
expect this to increase nearly 175 times, to 81.7 billion minutes being carried over IP
telephony networks by 2003.
CARRIERS REDEFINING THEMSELVES
The largest drivers of IP telephony are the carriers themselves, who realize they
must change or lose business. It seems almost all major global telephony players are
experimenting with IP telephony, fax, or enhanced services. In Figure 2,
we see that different service providers are predicting success selling different services.
One of the above carriers, China Telecom, selected ITXC
as a tier 1 carrier for its pilot IP telephony services. In fact, these companies are
already exchanging billable minutes. ITXC has already set up gateways in 14 major Chinese
cities over ChinaNet, China’s nationwide managed IP network. China Telecom serves 1.2
billion people in China and joins Bell Atlantic, Korea Telecom, and Japan Telecom as an
affiliate on the ITXC network.
Tom Evslin, ITXC’s chairman and CEO, spoke about their extensive network at the
keynote at our recent CTI EXPO™ in D.C.
He further stated that his IP telephony network was built orders of magnitude faster than
any circuit-switched network could ever be built. (If you are interested in this or any
other keynotes from CTI EXPO™, please
e-mail Stephanie Bauer at sbauer@tmcnet.com.)
AT&T also plans on introducing Internet telephony over cable through their
acquisition of cable leader TCI early in March 1999, and more recently, through their
purchase of MediaOne.
Another service provider, Inter-Tel.net (a division of Inter-Tel), terminated over 2
million minutes of IP telephony traffic in March of 1999. This is a 300 percent increase
over prior months. Inter-Tel also sells Internet telephony gateways, and their network was
one of the first I ever tested when TMC Labs did an in-depth review of one of their
Internet telephony gateways a few years back. At that time, the quality of their network
from Phoenix to New York was quite good.
A BIT OF WISDOM
Never has there been such a great consensus among leading vendors in the telecom,
datacom, and service provider markets. There is a frenzy of activity as companies are
trying to position themselves to be IP telephony leaders in the next millenium. If
Internet telephony lives up to its namesake — and it shows every sign of doing so
— it is destined to change the face of corporate communications as we know it.
Consider, assess, evaluate — but whatever you do, don’t get left behind.
Rich Tehrani welcomes your feedback at rtehrani@tmcnet.com.
Figure 1 Voice
Minutes over IP by year
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