Minute By Minute: VoIP
Has Become A Reality
BY JOSH BENVENISTE
Now that we are well into the year 2000, you�re probably wondering
why all your voice calls aren�t being carried over IP. Wasn�t Voice
over IP (VoIP) supposed to have taken off by now? Some naysayers are still
proclaiming VoIP is not ready for prime time and the technology is
incapable of matching the quality of plain old telephone service (POTS).
Reading their articles, you might think VoIP was still in its infancy,
experiencing all the growing pains characteristic of a new technology. In
reality, as we begin the 21st century, VoIP is maturing, and in many
places, is being actively deployed.
It would be easy to evangelize equipment vendors� stories describing
how IP telephony interoperability issues are being taken care of and how
IP voice quality is supporting 99.999 percent reliability. But does this
really prove that VoIP is being widely accepted and deployed? What
quantitative measuring stick should we use to best assess the use of VoIP
technology today and where it is headed? Would the number of ports shipped
give us a fair assessment? How about revenue figures? Maybe minutes
traffic?
THE PROOF IS IN THE MINUTES
For well over 100 years the phone industry has been measuring traffic in
billable minutes. Phone users� perceptions of use have always been in
minutes. Minutes have been, and for the foreseeable future will be the
universal currency for measuring phone use. The revenue of an Internet
Telephony Service Provider (ITSP), for example, is based on the minutes
that originate on, terminate on, or transit the ITSP�s network. Thus,
the measure of minutes is the most viable means for coming to any
conclusions about the use of IP telephony.
IDC is projecting that IP telephony minutes will grow to 2.7 billion
minutes in 1999 from 310 million in 1998. IDC also forecasts that IP
telephony minutes will nearly triple in 2000 to reach 9.6 billion. By
2004, IP telephony minutes will reach 135 billion for a 1999�2004 CAGR
of 119 percent. How many VoIP minutes were passed over the Internet in
1996? Almost none. This astonishing growth rate points to the fact that
VoIP technology has caught on and will further develop to be the way of
the future.
When examining global telecommunications use, we normally see a usage
increase in minutes; factors such as population growth, increases in phone
infrastructure, and price elasticity lead to yearly increases in PSTN
calling. Total global PSTN phone-calling minutes (including local and
domestic long distance) are projected to increase to 9.1 trillion minutes
in 2005 from 6.4 trillion in 1998 (Probe Research). This represents a
five-percent increase in CAGR over a seven-year period. A five-percent
increase may not sound like much, but when you look at it from a minutes
perspective, that is an increase of well over three to four hundred
billion minutes per year!
With the explosive growth of Internet traffic over the last five years,
most of the focus has been placed on data transport. Just recently, a
senior executive at a well-known networking giant was quoted as saying,
�People are getting confused about convergence being driven by
telephony, but it�s not. It�s being driven by data � telephony works
okay for telephone calls, but not for the amount of data being moved over
the public infrastructure.�
Obviously the amount of data traffic passing through the Internet
infrastructure is growing at a faster percentage rate than the amount of
voice traffic, but when looking at the numbers, voice minutes are
increasing at an astronomical rate. ITXC,
a wholesale Internet telephony company, reported its carrier customers
sent it around 1.5 million minutes of call traffic on Christmas Day for
completion over the Internet. What does this tell us about convergence? It
is spelling out the fact that the hype is giving way to truly converged
services � voice traffic is immense and will remain a primary
communications tool used by people worldwide for years to come.
While there are a variety of companies experimenting with flat-rate
pricing structures for voice, the vast majority of traffic is still
measured in minutes. Minutes mean big business. Telephone companies are
some of the biggest revenue generating businesses on the planet, passing
billions of minutes over their networks every year. When you take the
minutes volumes of the existing carriers, and then apply the percentages
that are expected to come from minutes transported over IP telephony, the
growth of traffic that should travel over IP telephony networks is
tremendous.
WHAT�S DRIVING THE VoIP MACHINE?
To date, VoIP�s biggest selling point has been the promise of huge
savings in voice and fax transport, especially for international routes.
Businesses currently using this technology have typically cut their
long-distance charges in half. PC-to-phone and phone-to-phone calling over
IP provides as much as 50�70 percent savings over rates of traditional
U.S.-based long-distance carriers, and as much as 95 percent savings for
calls originating outside the US (IDC Report).
Ease of use has also contributed to the popularity of VoIP. In the
early days of the technology, one of the few ways to pass voice over the
Internet was by using PC-to-PC communications. This put a real constraint
on the end user; in many cases the caller needed the same hardware and
software as the receiving party or the voice quality was very poor in the
PC client software. Today, with IP telephony-based prepaid calling card
applications, customers can dial a local number from a regular telephone
to reach the ITSP�s network, enter a PIN, the number they are calling,
and they will be connected to the destination phone. Furthermore,
single-stage dialing has already been implemented with certain
telecommunications service providers in South Korea, Taiwan, the US, and a
number of other places around the world. IP telephony can also be
completely transparent to the user; in many cases today, wholesale
long-distance carriers are routing voice traffic over IP without customers
even knowing it. Single-stage dialing can be implemented by way of a group
of access features within the PSTN known as Feature Group D (allowing
customers who pre-select a long-distance carrier in the US to have their
call routed over IP telephony), or by integration with Signaling System 7
(SS7/C7) systems.
VoIP is rapidly emerging as the transport of choice for large-scale
minutes exchange. Carriers with access to high-quality bandwidth and large
volumes of telephony minutes are finding that the migration of trunking
and core network services to IP-based transport are resulting in lower
costs, faster network infrastructure deployment, and a time-to-market
advantage in offering IP-based services to customers. Large volumes of
multi-million-minute-per-month contracts are already in place among major
carriers.
MORE MINUTES TO COME
What will drive the VoIP market when the economics of toll bypass begin to
change towards price equalization? One of the biggest drivers for VoIP
will be the development of enhanced services, based on the unification of
data and voice on one network. Some examples of enhanced services that are
currently available or under development include:
- Unified messaging,
- Web-enabled call center services,
- Facsimile,
- End user control features (call forwarding, follow me/find me), and
- Internet call waiting.
The expansion of IP telephony into new geographies will have a profound
effect on IP voice traffic over the next few years. The deregulation and
privatization in regions such as Latin America and Eastern Europe will
make room for a multitude of new carriers and providers. The mere
potential of offering new revenue generating services will compel carriers
to adopt some type of IP telephony strategy.
The telecom industries in countries such as China and Russia are
currently experiencing dramatic change not only in deregulation, but also
infrastructure development � newer IP networks can be less expensive to
install and easier for carriers to manage than traditional
circuit-switched networks.
The proliferation of broadband networks such as cable, DSL, and
wireless will also serve as a future driver for IP telephony traffic. An
abundance of residences and small offices with broadband access will soon
be able to have IP telephony service over the local loop, creating an
end-to-end IP voice solution. This will prove very valuable to residences
and small businesses by providing low-cost long distance, second-line
phone service, and VPNs.
The number of ITSPs passing VoIP minutes is growing at an incredible
clip every month. As these ITSPs use VoIP to fuel a major transformation
in the types of new services incorporated into the PSTN and Internet,
watch for IP telephony to quickly garner a significant share of the
worldwide voice minutes.
Josh Benveniste is marketing manager for Clarent Corporation.
Clarent is a premier provider of scalable, IP telephony products to
carriers and Internet service providers around the world. Clarent�s
intelligent architecture and the Clarent Command Center enable Clarent
products to route, manage, inter-connect and terminate high volumes of
calls for service provider customers including the world�s largest
long-distance telecommunication companies. For more information, visit the
company�s Web site at www.clarent.com. |