First Quarter 1998

BY RICH TEHRANI, GROUP PUBLISHER

Internet telephony: This most controversial technology pits industry analyst against industry analyst, dividing them into two distinct groups: believers and non-believers. Some say the technology will fill a small niche, forever destined to be a hobbyist's plaything. Others say that, within the first decade of the next millennium, Internet telephony will be a $10 billion industry. Wall Street has taken Internet telephony stocks on a wild ride in the past 6 months, with stock prices fluctuating as much as 300-1000 percent. Few (if any) industries invoke such strong reactions as Internet telephony.

One reason for the analysts' differing opinions and Wall Street's inconsistent investment pattern is a lack of good, solid reliable information on the topic. At Internet Telephony™ magazine, our goal is bring to market regular publication of the technology, terminology, implications, and products that compose the Internet telephony market.

Our parent company, TMC, is proud to offer you the first magazine focusing exclusively on Internet telephony and the related convergence of voice, video, fax, and data.

WHAT IS IT?
It is important to understand how Internet telephony defines its market. In order to better gauge this perception, we asked several pioneers in the Internet telephony arena, "How will Internet telephony revolutionize telecommunications?" Their responses appear here.

We use the term loosely, as we see every network as an extension of the Internet. Put simply, the basis of Internet telephony is telephony, transmitted on a network running IP (Internet Protocol). This network can be a corporate LAN, a WAN, intranet, extranet, or the Internet. These are very important distinctions, since as of yet, the Internet cannot guarantee the Quality of Service (QoS) that we expect from the Public Switched Telephone Network (PSTN). While it's true that for hobbyists and for those simply trying to avoid some long-distance charges quality may not be of primary importance, it remains that corporate America will not be willing to invest heavily in a technology that doesn't fully deliver. We believe that questions surrounding QoS will become less and less of an issue as the Internet backbone is upgraded with QoS in mind. We will concentrate much of our editorial on the applications and equipment that allow IP telephony, video, and fax to take place regardless of the underlying network infrastructure.

CIRCUITS & PACKETS
The PSTN currently uses circuit-switched lines to transmit telephone calls. These lines transmit traffic in each direction at a fixed rate of 64 Kbps. This choice of bandwidth was arrived at many decades ago and was a decision based on the latest technology at that time. Note that regardless of what was being transmitted -- even silence -- the telephone network still transmitted a total of 128 Kbps per call. This legacy circuit-switched architecture, coupled with multinational government mandated rates, have limited telecommunications options and kept telecommunications costs artificially high. Add to the mix the monopolistic culture that these telephone companies have become accustomed to and you see why telecommunications rates have not yet reached the low levels we were all expecting. Thankfully, recent deregulation in the United States and beyond aimed at large monopolistic telephone companies has produced a market more favorable to competition.

Another recent (and perhaps more important) development which has taken place over the past decade is that every telephone user worldwide has been given access to a ubiquitous data network through the Internet and intranets. This has led to the adoption of the Internet Protocol (IP) as the standard protocol for data networking. Furthermore, Moore's law has simultaneously provided the microprocessor industry with a hefty 100 percent performance increase every 18 months at similar cost points.

The technology now exists that allows a packet network with the equivalent bandwidth of a single 2-way telephone call (128 Kbps) to carry over 16 simultaneous compressed Internet telephony conversations with no loss of quality! Compression has been used effectively in the computer industry and fax industry for years. Only recently has it been making a big splash in voice communications. As processors have become faster, more compression has become possible on each end of an IP telephony call.

THE TIME IS NOW
All the elements -- phenomenal microprocessor performance increases; IP acting as the ubiquitous packet network standard; a rapidly evolving telecommunications infrastructure -- have created an atmosphere ripe for opportunity. This opportunity manifests itself in many forms with many benefactors. It is advantageous to any one interested in transporting voice, video, and fax information most efficiently.

The official birth of today's Internet telephony products began with the invention of Internet telephones, client software that connected one PC to another over the Internet. These products yielded poor performance but offered tremendous savings on long-distance phone calls. Unfortunately, the perception of Internet telephony became one of low quality albeit free telephone calls. That perception has stuck. The goal of Internet Telephony™ magazine is to change that perception. The fact of the matter is that Internet telephony calls running on a network that guarantees (QoS) can be of much higher quality than telephone calls over the PSTN. IP telephony will eventually allow us to speak over the telephone with the fidelity of CD quality sound if we like. We will pay for this level of quality, but it will be available for those who want it. IP telephony voice quality has come a long way and will continue to progress as the market matures.

GATEWAYS
The product that facilitates this excellent voice quality is known as an Internet telephony gateway. An Internet telephony gateway is a device that has connections to both a telephone network and an IP network. These gateways allow users to transport voice, video, and fax traffic over an IP network with identical or better quality levels than the PSTN at substantially lower cost. Internet telephony gateways can be used in an infinitely large number of ways by a diverse audience.

Telephone companies now have the ability to transport voice traffic much more efficiently than they currently go about it. These telephone companies can set up their own worldwide managed network with gateways in major cities. They can now transmit telephone calls worldwide without sharing the per-minute profits of the phone call with other telephone companies as they do today. These same gateways allow ISPs, cable companies -- in fact, anyone with the resources and drive - to become a telephone carrier. All you need to get started in the business is a pair of gateways in locations that otherwise require toll charges, some calling cards, and a healthy dose of advertising.

Worldwide long-distance revenues measure in the billions of dollars. The fuel for the Internet telephony industry will be the savings of these revenues. Now, regardless of which companies provide the service, they still must buy gateways! In other words, lower long-distance rates will not slow the Internet telephony industry. The growth of the industry will provide lower rates! Corporations can amortize their investments in Internet telephony technology over the course of many years of long-distance savings, all of which leads us to believe that we'll soon see tremendous growth and huge volumes of sales in this industry. Internet telephony provides an irresistible opportunity for resellers, developers, entrepreneurs, and has even created a new breed of telephone carrier. A new breed of ISP, Internet Telephony Service Providers (ITSP) have been springing up, providing networks of gateways connected to an IP network with QoS guarantees.

It is interesting to note that recent telecommunications deregulation has not really increased competition as was expected. In fact, telecommunications companies are merging and subsequently decreasing competition. As you can imagine, becoming a competitor to a telephone company is no small undertaking. All of this is about to change, in part due to the existing standards upon which the industry is built.

STANDARDS
The Internet telephony industry has many standards. One of these, H.323, allows gateway owners to eventually transmit calls between their networks. As you may recall, Automated Teller Machines (ATMs) initially allowed customers to make transactions only at ATMs owned by that bank. Eventually, these ATM machines became networked, allowing the user to bank from any location on the network. As Internet telephony gateways begin to incorporate H.323 and other standards, users will eventually be able to use local gateways to transparently place and receive calls globally.

Corporations with multiple locations are inherently rich with high volumes of inter-company communication, be it voice, fax, or video. This communication, once traditionally carried by the PSTN, will begin to migrate (through the use of Internet telephony gateways) onto existing fixed-cost, IP-based corporate intranets. This traffic will, however, still use the PSTN as the mechanism of transport. By now it is obvious that the packet-switched network of today is much more efficient than the decades-old circuit-switched network.

MICROSOFT'S ROLE
Not to be left out in the cold, Microsoft will soon provide TAPI 3.0, the universal specification for Internet telephony, conferencing and multicasting in all of its operating systems. QoS, a critical component of Internet telephony, will also be implemented in future Microsoft operating systems. TAPI 3.0 will furthermore bring Internet telephony into the realm of the Common Object Model (COM) framework, thus allowing millions of developers to quickly develop Internet telephony applications. What Visual Basic did to Windows programming, TAPI 3.0 will do to telephony programming. We cannot even fathom the range of new telephony applications that will be soon be available. Telephony today is at the point the PC market was in 1982. We did not realize what an enabler the PC was at that time. We will look back at 1998 as the beginning of the IP telephony revolution.

TMC™ LABS
As an added attraction, the engineers of our in-house TMC™ Labs will provide Internet Telephony™ magazine with in-depth and objective testing and reviews of Internet telephony products. TMC™ Labs has gained widespread respect in the telecom, datacom, and call center industries as the best place to look to before making purchasing decisions. Most telecommunications publications provide superficial reviews of products: TMC™ Labs pioneered the type of in-depth product reviews of computer-telephony integration (CTI) products that have become so highly regarded in CTI™ magazine. This same laboratory -- with its decades of telecom and datacom experience -- will provide reviews for Internet Telephony™ magazine.

DRAWING CONCLUSIONS
The most obvious conclusion drawn from the above is that Internet telephony provides a mechanism that will bring our legacy telephony network into the realm of Moore's law with phenomenal, regular increases in performance and flexibility. Opportunities are available to the corporation, the service provider, and the individual on a grand scale.

Interest in Internet telephony is reaching a fever pitch, and there are few sources of information that will help its varied audiences take advantage of this exciting new technology. Internet Telephony™ magazine will provide its readers with the information necessary to learn about and purchase the equipment, software, and services necessary to reap the greatest rewards from Internet telephony.

Vienna Systems Corporation designs and manufactures hardware and software products to distribute voice and data calls across IP networks. Vienna's flagship product, Vienna.way, is a client/server application that enables users to make calls over the IP network to another client. It also enables a customer to use the gateway to call someone on the PSTN, or even call into the Vienna.way network using the gateway.

To test its product, Vienna Systems chose the Hammer IT from Hammer Technologies. Although initially used as a traffic generator, the Hammer IT is expandable for more sophisticated testing, it's easier to use, and it supports many features critical to testing IP telephony systems that other bulk generators just don't provide. The tool allows Vienna to generate a specified number of simultaneous calls, confirm that voice channels have been established, capture and recognize defined voice prompts, disconnect the calls, and collect statistics pertaining to success rates. Using Hammer telephony test scripts enables easy recreation of problem scenarios. Tests are able to run overnight and on weekends, thus allowing Vienna to stress its system at a higher level and discover defects which may otherwise go undetected. Vienna also uses Hammer in a more qualitative testing capacity, ensuring that different telephony events are dealt with accordingly and testing the quality of the voice being transmitted over the Internet. Needless to say, Hammer has ensured the quality of Vienna's Voice-over-IP product.