April 1999

Internet Telephony -- Connecting As A Commodity

BY LAURENCE J. FROMM

For an industry barely three years old, Internet telephony has matured quickly. We now have Internet telephony-focused trade shows, companies, and periodicals -- and the traditional telco and data networking vendors are taking all this very seriously. But the real sign that Internet telephony is a maturing industry? The fact that INTERNET TELEPHONY is covering "distribution and resale of IT products" in this very issue (see the feature article, "Resellers: Cash In On Convergence"). It seems that just yesterday we were all figuring out if this stuff would even work.

So what exactly is an Internet telephony product, and how do you go about buying them? I see four broad categories: Minutes, Client Devices, Gateways, and Gatekeepers.

Minutes
You may not normally think of Internet telephony minutes as a product, but on the open market you can buy and sell minutes of telephony service between two endpoints. Internet telephony service is increasingly being deployed in the open minutes market, and no one can tell the difference between calls carried over packet backbones and calls carried over circuit backbones. In 1998, we saw the advent of a number of companies that broker Internet telephony minutes -- buying some, selling some. Minutes are now traded just like other commodities.

Client Devices
If you want to talk through your computer via Internet telephony, several products are available. Many are free, and almost all are easily downloaded from the Internet. The Ethernet IP phones, introduced in 1998, are not yet widely available, but will be soon. In the future, you'll be able to purchase an Ethernet IP phone, or a cable IP phone, from the places you probably buy phones today. They will just have different connectors on the back (or maybe all of them).

Gateways
Gateways already exist in many forms, performing many functions. They are available directly from vendors big and small, as well as from specialized VARs and distributors like Catalyst Telecom (www.catalysttelecom.com) or Alliance (www.alliancesystems.com). Gateways will continue to change and branch out, in some cases expanding to incorporate new communications functionality and in other cases becoming more specialized. Different channels will emerge, and existing channels will rise up to meet the challenge of selling these communication devices.

Gatekeepers
A gatekeeper is the network software that controls the call routing of an Internet telephony system. Gatekeepers are complex, configurable pieces of software, most of which currently come from hardware companies, bundled with gateways. Today, gatekeepers are not easy to use without training. But over time, gatekeepers will be sold like other sophisticated software products, separately from gateways.

INTEGRATION IS KEY
One overriding consideration in the distribution of Internet telephony products is their link to today's PSTN. The telephony network is much less standardized than data networking equipment. (See the Industry Insight column, "Opening Doors For Internet Telephony" in the January 1999 issue of INTERNET TELEPHONY.) Almost every country has a different standard for connecting to its public network, and in some cases, there are multiple standards within a country. Each PBX vendor has proprietary ways to integrate adjunct applications with the PBX. Imagine if a data switch had to work with different country-specific Ethernet protocols, so that a product that works in France would not work in Bulgaria or Indonesia. Imagine if a Web server had to be configured differently depending on the brand of router to which it is connected. This kind of connectivity challenge persists with phone equipment today.

Because there are so many interface protocols, integrating applications to the phone network -- in either the public network or private enterprises -- is a somewhat specialized skill. Until we get to an all-IP world, the channel for gateways, at least, needs to encompass this skill. And, generally speaking, VARs and distributors good at integrating phone networks are not good at installing data networks -- and vice versa.

OPPORTUNITY KNOCKING
As a result, we will see a quick blending of phone VARs (interconnects) and data VARs in this fast-maturing industry. System integrators, including those like Compaq (www.compaq.com) and IBM (www.ibm.com) that are focused on server solutions, will offer communication servers that include Internet telephony capability.

The companies able to exploit the channel opportunity will prosper. The super-VARs, adept in both the phone world and the data world, will have boundless opportunity. And the integrators who deliver communication servers will tap into a vast new market. Initially, the challenge will be to integrate the packet- and circuit-switched worlds. As that happens, the industry will move to adding communications applications that take advantage of the universal, real-time, full-duplex, multimedia communication network we are building.

Laurence J. Fromm is vice president, new business development for Dialogic Corporation. Dialogic is a leading manufacturer of high-performance, standards-based computer telephony components. Dialogic products are used in fax, data, voice recognition, speech synthesis, and call center management CT applications. The company is headquartered in Parsippany, New Jersey, with regional headquarters in Tokyo and Brussels, and sales offices worldwide. For more information, visit the Dialogic Web site at www.dialogic.com.