The Fax-Over-IP Market: Ripe With Possibilities
BY LAURENCE J. FROMM
Low-hanging fruit: That's the emerging opportunity for fax-over-IP products and
services. Fax is a natural for Internet telephony, for two simple reasons. First,
corporations spend an enormous amount on fax transmission each year. Also, fax is immune
to the moderate latency that can plague Internet telephony service. Despite its promise,
fax over IP has yet to make any sizable impact in the market. But that picture is about to
change. Three key factors -- awareness, technology, and standards -- are all converging to
bring the true potential for sending fax over IP tantalizingly within reach.
In 1998, about $83 billion is being spent on sending faxes, according to Pete Davidson,
president of Davidson Consulting. Contrary to popular perception about the demise of fax
machines, the use of fax is actually increasing. Despite ever-lower transmission costs,
fax service expenditure is actually growing at around 6 percent a year. Moreover, 40
percent of the average company's phone bill is spent on sending faxes. (While many
companies use internal tie lines for voice traffic between corporate sites, most companies
still send fax over regular long-distance circuits.) By using the untaxed Internet instead
of the heavily taxed phone network, corporations can save tremendous amounts off their fax
phone bill - including 50 percent or more off international rates.
Moreover, the quality of a fax transmission is not affected by moderate latency. While
real-time voice communications begin to degrade with more than 150 milliseconds of one-way
latency, a fax arriving 2 seconds, or 5 seconds, or 8 seconds after it was sent is just as
a good as a real-time fax.
Despite the natural opportunity for fax over IP, its impact has so far been almost
negligible. In 1998, Davidson estimates fax over IP will account for only 0.04 percent of
total fax transmissions. Why? A lack of awareness, standards, and technology have all
contributed to the technology's poor showing. But this is all about to change.
The reason the average Fortune 500 company is willing to spend $15 million per year
sending faxes is that they do not know they are doing it. No one manages and tracks fax
machine telephone bills. They get swallowed into corporate or department telephone
budgets, rarely itemized or examined.
Sometimes perception does create reality. While the average CIO was unaware of any kind
of Internet telephony two years ago, not only are CIOs aware of it today, but most are
planning to implement it. A recent survey by the Yankee Group shows 73 percent of
companies are moving or considering moving some of their telephony traffic over an
alternative network. All the attention Internet telephony has received in the press, at
conferences, and by the financial community is increasing awareness. The low-hanging fruit
will get picked first.
Almost all current fax-over-IP services use store-and-forward technology. A gateway at the
origination side receives the fax and sends it over an IP network to a gateway on the
receiving side, which then sends it on to the destination fax machine. Two separate,
asynchronous T.30 protocol sessions occur, one between the originating fax machine and the
originating gateway, and another between the receiving gateway and receiving fax machine.
These T.30 sessions can be offset by a few seconds, a few hours, or even a few days. And
there's the rub.
It is hard to get users to change their habits merely to save the corporation money.
Users like knowing that when they see the paper go into their fax machine, it is coming
out on the other side. Store-and-forward fax technology changes the user's experience. Now
the user only knows the fax made it to the originating gateway. If the communication
breaks down between the originating gateway and the receiving fax machine -- if, for
example, the user enters the recipient's phone number instead of fax number -- the
fax-over-IP service provider must find some way to notify the user that the fax did not
get through. There are several ways to solve this problem, but each requires a change in
the way users interact with their fax machines.
We are just beginning to see gateways that can deliver fax over IP in real time. When
the paper goes into the originating fax machine, it really is coming out the destination
fax machine. When the receiving fax machine confirms a page, it really got it. When it
does not confirm a page, it really did not get it. Real-time fax over IP provides the same
user experience as normal fax transmissions.
Until recently, every implementation of fax over IP was vendor specific. Products from
Vendor A could not speak to products from Vendor B. Besides making networks unable to
interoperate with other networks, this lack of standards has inhibited capital investment.
After all, who wants to risk cornering the market on Betamax VCRs?
The standards have arrived. In June 1998, the International Telecommunications Union
approved the T.38 and T.37 Internet fax standards. T.38 enables real-time delivery of fax
over IP, allowing the huge installed base (70 million and growing) of existing fax
machines to take advantage of Internet telephony without changing the user's experience.
The coincidence of technology, market awareness, and industry standards converging at the
same time will expand and finally launch IP fax product and services.
INTO THE FUTURE
Fax transmission will always exist to fill the need for image communication. Existing
Class 3 fax machines, however, are destined to fade away (albeit, over a long period of
time). It is wasteful to indefinitely use real-time delivery services for an inherently
near-real-time or store-and-forward communication. Gradually, the market will transition
from circuit-switched fax to packet-switched fax as enhancements as the T.37 standard
enables end-to-end confirmation and IP fax machines become available. T.37 enables more
efficient packetization and allows fax traffic to be prioritized -- and ultimately priced
-- at a lower rate than real-time voice and video traffic.
So for now, real-time fax is where it's at. But keep watching, because the low-hanging
fruit won't stay on the branches for long.
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 voice, 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.