Last month I reviewed the fact that Internet telephony, a field that many
said would never be a serious threat to traditional telephony, is taking
Wall Street by storm. Internet telephony service providers are enjoying
incredible valuations in the billions of dollars as it becomes evident that
the reign of traditional telephony is rapidly coming to an end.
Of course, disruptive technologies are not unique to communications --
the media has been saying that mainframes are dead and PCs are the future
for over a decade, but in reality, the mainframe market is still alive. In
fact, it's growing. The analogy here-- and it is an accurate one -- is that
the bulk of innovation and the future of computing lies in the PC platform,
not the mainframe. So too with Internet telephony. Traditional telephony has
a limited future but with trillions of dollars invested in infrastructure,
it will take a while for the circuit-switched world to whither away.
While it may be obvious today that converged networks are the future, I
recall being laughed at by more than one telecom company president when we
announced Internet Telephony magazine a few short years ago. People
thought that TMC had lost its mind in those days when we were preaching
the convergence of voice and data over IP networks. This is probably why no
one is more excited than our parent company -- TMC-- when analysts predict
the future of telephony is Internet Protocol Telephony.
The most recent analyst forecast regarding IP telephony comes from Cahners
In-Stat Group who predict that LAN telephony will be the dominant
enterprise architecture by 2004. In fact In-Stat concludes:
- The features, applications, and ultimately decreased pricing of LAN
telephony will result in the demise of PBX systems.
- IP packets will rise over Ethernet technology due to its openness and
- Benefits will include: Complete handset and extension portability to
remote locations, integration with contact management software, and
worldwide IP-based contact centers.
- Following interoperability among vendors, eventual retail of packet
handsets to consumers will occur causing the industry to ignite.
- The U.S. LAN telephony market will grow to nearly $1.5 billion by
TALKING THE TALK & WALKING THE WALK
But why talk about predictions and stock prices when these products are
selling so well and we can cite actual sales figures? According to 3Com,
they have already sold close to 2,500 NBX phone systems through their
network of close to 500 independent resellers in 50 states! As you may
recall, 3Com purchased NBX (one of the first IP-PBX vendors on the market)
and has used the 3Com brand recognition to sell IP-PBXs into corporate
A recent conversation with 3Com was a real eye-opener; I feel 3Com has
the potential to dominate the corporate IP telephony market if they play
their cards right.
For years prior to being a publisher I was an MIS director, and during my
tenure as such, I would regularly purchase 3Com hubs for our corporate LAN.
3Com was the hands-down leader in this area and although they cost more, you
couldn't go wrong buying 3Com hubs and NICs. They now tell me that they are
entitled to the lion's share of the LAN telephony market, and you know what?
There are so many small offices out there that recognize 3Com as a
networking leader, especially in hubs and NICs. It is in these locations
where 3Com IP-PBXs should be a no-brainer. This is especially true in light
of the fact that 3Com will make sure that all your 3Com datacom and telecom
equipment will work together seamlessly.
By leveraging their strength and good name in the SMB market they have
been very successful in selling phone systems to modest size companies. 3Com
now plans to expand into the large enterprise and call center markets where
they will battle Nortel Networks
and Lucent Technologies. Cisco
of course is a dominant player in the large enterprise market with
aspirations to dominate call centers as well.
However, 3Com is committed to becoming a major player in the IP telephony
market and they will leverage their data networking products and Palm
platforms to help them sell telephony products. The first step in this
strategy is to voice enable all 3Com platforms. (This, by the way, is what
all of their competitors will have to do as well. We can soon expect almost
all datacom equipment to have the ability to seamlessly be telephony
enabled.) And, not only does 3Com have a head start in selling IP-PBXs, they
are beginning to release lists of satisfied customers and other important
partnerships that will help keep them on the forefront of corporate IP
Home Shopping Network
3Com is not shy when it comes to sharing their customer wins. For example,
one of their installs is at Home Shopping Network (HSN), where an NBX 100
Communications System is being used in their shipping and storage facility.
The IP telephony phone system is deployed over the company's existing
Ethernet LAN where the phones act as ordinary IP devices on the network. The
phone system has saved HSN nearly 60 percent of the costs of a traditional
phone system and in addition, allows them to manage the phone system
remotely from their headquarters, which of course results in additional
savings. The deployment was so successful that HSN plans to deploy 3Com NBX
systems in other locations as well.
New Mexico State University
We could go on and on talking about customer installs for any number of IP
telephony PBX vendors and each sale is one step closer to a packet-switched
telephony world. Where we can expect exponential growth however, is where we
train entire classrooms of students about the benefits of this burgeoning
technology. That is why it is important to support educational initiatives
in the convergence space. One such example is New Mexico State University (NMSU),
the first I am aware of to offer a course where students get to deploy
converged voice/data networks as part of their coursework. A grant from the
FBI's national security technology program in conjunction with Sandia Labs
makes it possible for NMSU to afford NBX systems.
By successfully deploying NBX phone systems at NMSU, 3Com has ensured
generations of graduates will be comfortable deploying and working with NBX
systems in the field. Having educated graduates who understand how to
install PBXs will help grow our market even further by increasing awareness
of converged platforms.
If you are trying to pick a long-term winner in this market, I don't envy
you. The market is so vibrant with acquisitions that you are likely to
always have product support and a migration path, regardless of which
platform you choose. Certainly 3Com wants to be number one in LAN telephony,
and they will be at war with Cisco, Nortel, and Lucent in doing so. Each of
these companies will try to leverage their core strengths to grow their
packet switched business. But 3Com has two arrows in its quiver that will
help it fight:
- They are known for rock-solid LAN products in small to medium
- They are the only vendor among their competitors to offer a handheld
computing platform (Palm) and that platform is the defacto standard. If
they can leverage the Palm as a seamless wireless access device in the
enterprise and beyond, they will be difficult to compete with.
Of course the IP telephony market is moving so quickly that it is
difficult to predict what will happen next week, much less in the long term.
Besides the plethora of traditional datacom and telecom players, a host of
independent companies are producing truly leading-edge LAN telephony
products. One thing is for certain, the number of new technologies and
acquisitions will only increase, meaning that we will be faced with even
more choices as time progresses.
Rich Tehrani is President, Group Publisher, and Group Editor-in-Chief
for TMC publications. He welcomes your comments at email@example.com