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Rich Tehrani

[February 4, 2004]

The Future Of IP Telephony: A Panel Discussion At INTERNET TELEPHONY Conference & EXPO



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Panelist R. Pierce Reid of Qovia answers our questions:

Q. IP Telephony's market share is increasing. What are your predictions for continued growth of IP Telephony in the Enterprise space? What about in the service provider space?

A. Clearly, the enterprise space is the proving ground for VoIP and Internet Telephony.  Enterprise installations are growing at a tremendous rate as Internet Telephony not only brings savings through convergence, but offers businesses and government users the productivity increases that are needed to stay competitive in today's 7 x 24 economy.  As more and more enterprises adopt VoIP technologies, this will bring the costs down further and make the ROI of Internet Telephony even more attractive.  

As this rolls out, however, we will see a tremendous reliance on Hybrid systems -- with "Islands of VoIP" deploying in company divisions, branch offices or departments.  To date, it has been very painful for companies to do a complete replacement of their "traditional" phones.  So VoIP Telephony hardware and systems are going to have to work well in a hybrid environment.  There will also be a tremendous need to pull together disparate equipment (from many vendors) as enterprises move more completely into VoIP.
Counter to years of predictions that "Internet Telephony will make the Phone Company Obsolete," VoIP is clearly on the horizon for carriers with all the major Long-Haul and LEC carriers embracing the technology.  Currently, a number of carriers are acting as VoIP managed service providers for their enterprise and small business customers.  From this beachhead, they will certainly move into the residential market and watch for consolidation of hot "consumer" VoIP companies into larger telecom entities in the years ahead.

Q. How do IP Telephony systems compare to legacy systems on a cost basis? Does it make financial sense to move from legacy systems to IP telephony? And what of the "soft" cost savings (productivity, ease of use)...? What impact does that have on the decision to adopt new technology?

A. Cost has long been the rallying cry for VoIP.  But costs come in many shapes and sizes.  It definitely makes financial sense for a lot of enterprises to move to VoIP, not only as their legacy phone systems reach end of life, but to take advantage of the productivity increases that VoIP delivers.  For enterprises (and this includes departments and branch offices) that are highly dependant on their phone systems and, especially, for government agencies, VoIP makes sense immediately.  For the rest, as economies of scale bring the costs down, VoIP will make sense.  Currently, there is probably not a single enterprise out there that isn't at least considering VoIP as they look to upgrade their legacy phone systems.  

The other thing that has to be taken into consideration is the long term cost of owning a VoIP system.  Like data networks, VoIP phones don't just run themselves.  They require the same "care and feeding" that complex data networks have long required -- with the added complexity of the critical nature of Voice.  If your e-mail if 5 seconds late, it is irrelevant.  If your voice packet is 1/10 of a second off, it is noticeable to everyone.  As companies move to VoIP and put the responsibilities for managing the phone systems into the hands of their IT teams, the cost of reliability (and the greater costs of lack of reliability) are a key consideration.

Q.  What are some of the specific steps the industry needs to take in order to ensure continued growth and user adoption of IP Telephony? What are some potential pitfalls and how should they be avoided?

A. Maintaining call quality and network reliability are critical.  Internet Telephony didn't take off in 1995 because it was, essentially, an unreliable toy for Internet hobbyists who were happy to shout at their PC screens in order to get some free long distance.  But that isn't enterprise strength!  This time around, the core equipment from key vendors like 3Com, Cisco, Nortel, Avaya, NEC and others is up to the task.  But VoIP networks don't just run themselves and the creation and availability of tools to manage those networks is key.

The industry is also going to have to manage its relationship with the regulatory community.  So far, it has dodged bullets through the successful Vonage court case and through Michael Powell's FCC declaration that they were giving VoIP room to grow.  Treating VoIP like the Internet is a good thing for the industry right now and we need the room to grow and establish a foothold without a patchwork of regulation across the US.  However, regulation will keep coming up.  Unlike the "traditional" Internet which moved into virgin territory, VoIP is moving into one of the most regulated areas of American Society.. telecommunications.  With Federal, state, municipal and even local regulatory boards covering the phone system, the industry should be prepared to work with the regulatory agencies to ensure its long-term success.   One area that the industry should pursue:  Federal preemption to have VoIP regulated only at the Federal level, so we don't have to face a patchwork of legislation from across the US.  Remember, government can do things for you... or do things to you.  The industry needs to work with government to make sure we everyone wins.

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Rich Tehrani is TMC's president. He welcomes your comments. Participate in our forums.

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