As we approach the year 2000, what events or announcements of the past year have had a significant impact on the Internet Telephony industry? What impact will they have on the future growth/success of the industry?

We asked several industry-leading vendors for their views on the Internet telephony industry. Their responses appear below.

• Brian Allain, Vice President, Internet Business Systems, Lucent Technologies
• Al Bender, Vice President, General Manager, VoIP Network Solutions, Nortel Networks
• Lisa Allocca, VP Solutions Marketing, Unisphere Solutions
• Leslie Lord, Senior Business Development Manager, Ericsson
• J.B. Rousselot, Chief Executive Officer, Interline, a company of MCI WorldCom, Inc.

Several developments helped move Internet telephony forward in 1999.

On the service provider side, the introduction of "softswitch" technologies that deliver advanced telephony and voice and data services over IP networks at carrier-grade levels of reliability made headlines. This technology will continue to play a key role in fueling the growth of Internet telephony at the service provider level.

For enterprise customers, the past year showed that IP as a transport mechanism is only a small portion of an Internet telephony system's value, particularly relative to the system's reliability and feature functionality. The development of IP-enabled PBXs and next-generation IP-PBXs were major milestones, along with the standards-based technologies, policy management, and directory tools that help improve quality of service (QoS) and allow IP telephony products to interoperate and function more reliably within a converged voice/data network.

In addition, the idea of VoIP has moved beyond toll arbitrage to focus on the benefits that converged applications can now offer, such as Internet call centers, unified messaging, and pre- and post-paid billing applications. Future advancements will continue to concentrate on reliability and easier interoperability, coupled with the introduction of new advanced applications that can help businesses achieve simpler CTI and realize the competitive advantages offered by voice, data, Web, and video integration.

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Al Bender, Vice President, General Manager,VoIP Network Solutions, Nortel Networks

The most significant event this year is the deployment of large-scale, full-service, carrier-grade Internet telephony networks, transitioning the market from toll arbitrage to primary infrastructure. To achieve this, Nortel had to overcome the tremendous challenges of SS7 interoperability, scalability, protocols, back office support, and services delivery such as local number portability (LNP), free call and voice VPNs, all in a way that is transparent to the end-user. We've worked through these issues with companies like BT in Spain, AT&T, and France Telecom.

The significance of these events is that end users are demanding advanced IP services and applications today. Service providers are demanding the infrastructure to deliver new revenue opportunities and decreased network ownership costs today. Internet telephony is a great application to start your next-generation network with, and voice services are a means to pay for its build-out today, enabling the future rollout of more advanced packet applications.

As important as when you can deliver this next generation network is what you are delivering. So, the most important event this year in the Internet telephony market is the delivery of full-service, large-scale, carrier-grade, Internet telephony networks today.

The time for talk from equipment vendors is over. Its time to deliver.

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Lisa Allocca, VP Solutions Marketing, Unisphere Solutions

Service mediation has had the most significant impact on Internet telephony. Service mediation allows providers to converge at the infrastructure level or at the service level without making huge investments in their existing infrastructure. It allows providers to take advantage of the best features of both the data and voice world.

Castle Networks was the first to announce product, followed by Salix and TransMedia. It combines multiple, software-based gateway functions within a single device. It allows the delivery of phone calls and the extension of custom access special services (CLASS) — built around SS7 and other advanced intelligent networks.

So, it’s no surprise that the first firms to bring the service mediation technologies to the industry were also the first to be acquired. From the data side, Cisco bought TransMedia to help them find a way into the voice world. From the voice side, Siemens acquired Castle Networks and joined it with their Information and Communication Networks division, and two other startups, Argon Networks and Redstone Communications, to form Unisphere Solutions.

Without service mediation, carriers and service providers would have a hard time building integrated networks that connect the PSTN to the PSDN (Public Switched Data Network), and unite circuit- and packet-based switching. No mediation between the data and voice networks means no enhanced services such as unified messaging, which are revenue generating and customer loyalty offerings. For example, unified messaging would not be possible unless the voice services were being delivered on a data network. Because packet voice services are still in their infancy, they are not widely deployed, thus limiting the market potential for unified or integrated messaging. Service mediation allows providers to create services using both the PSTN and the PSDN transparently to the ultimate customer.

Simply, service mediation is the bridge to the future of converged networks.

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Leslie Lord, Senior Business Development Manager, Ericsson

A handful of VoIP applications have made the most significant impact on our industry. The three Ericsson defines as most significant are:

• Virtual Second Line
• Web-Based Click-to-Call
• Voice-Enabled Instant Messaging Applications.

These three applications highlight the promise of IP telephony, a promise that includes new, more productive ways to communicate. They provide new revenue streams for the operator. Or simply allow operators to retain valued customers by providing these “sticky” services.

Click-to-Call helps close more business because it lowers the number of abandoned “shopping carts” and boosts customer satisfaction.

Voice-Enabled Instant Messaging is a new breed of IP telephony service, which connects residential or professional users to friends, family, or colleagues regardless of whether they are using a PC, phone (wireless or wireline), or pager.
As we approach year 2000, mobility and the wireless Internet are the next generation for VoIP. Voice becomes an IP application available over a wireless packet-based network and integrated into Internet applications. This segment of the market is expected to take off when WAP, GPRS, and 3G wireless data technologies are deployed and wireless applications are fast, easy to use, personalized, and guaranteed secure.

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J.B. Rousselot, Chief Executive Officer, Interline, a company of MCI WorldCom, Inc.

I see six areas impacting the Internet telephony industry.

Growing traffic and its impact on VoIP and PSTN: International Data Corporation recently announced VoIP traffic is expected to rise from 310 million minutes last year to 2.7 billion minutes by the end of this year. An increasing number of carriers are using VoIP to route some of their traffic. In fact, many wholesale or retail users cannot distinguish between PSTN traffic and VoIP traffic. The result is that more and more telecommunication services providers are considering — and investing in — VoIP. This increase in usage will continue to fuel new developments on the hardware and software sides of the industry.

Price reductions: PSTN long-distance rates are decreasing around the world. As the price advantage disappears, the VoIP industry will be forced to raise the quality of its product to the level of PSTN. VoIP providers will be further pressured to add value to their service by developing features not replicable on PSTN, such as PC-to-phone products.

Consolidation/maturation of the industry: The Internet telephony industry is reaching a development stage characterized by IPOs and mergers among the large players, such as MCI WorldCom’s acquisition of Interline. As the technology matures, the larger players realize a solid infrastructure is needed to be a long-term player. Most of the start-ups from three years ago now have either reached critical mass, enabling them to raise significant capital on the market, or have been acquired by larger telco players. This trend is likely to continue.

Greater capacity: Several major vendors have announced they are developing large capacity gateways (hundreds and even thousands of ports), allowing the shift of traffic from PSTN to VoIP in much larger proportions than currently available.

Two coexisting standards: H323 and SIP: Currently, most vendors and service providers are working within one of these two standards. The jury is still out as to whether one standard will dominate or if the two will coexist. Until one standard emerges, the industry will continue to spend twice as much time on development. Larger players who can support parallel efforts in these two environments are probably in a better position.

Continuing deregulation: A number of countries, such as China and India, which blocked VoIP opportunities through regulation, have announced plans to introduce it, making some of these destinations available for further coverage by VoIP traffic.

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