 Number 256 - September 2004 |
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| VoIP - Changing The Way We Phone | |
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by Peter Lange, Melbourne PC User Group Peter Lange takes away the covers and reveals the depth to which VoIP has already penetrated our Telecommunications Systems | |
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The technology known as
Voice over Internet Protocol (VoIP) is revolutionising what we know
today as telephony. It will forever change the way we telecommunicate.
Much cheaper than conventional telephone calls, even virtually free, and
by its nature ideal for combining voice, video and data to form a truly
integrated service, VoIP is sending shock waves through traditional
telephone companies like Telstra, forcing them to scramble for ways to
deal with this new competition. The technology is maturing, enabling
voice quality almost equal to conventional telephone calls. VoIP is no
longer a futuristic idea. It is available to be used right here, right
now in Australia, and anywhere else there is Internet access.
Historic Overview VoIP is less than 10 years old. Experiments with transmitting voice over data networks started in the mid 1990s. Vocaltec, an Israel-based company was the first to release software for PC-to-PC VoIP in 1995. Users would need only a home PC with a sound card, speakers, microphone and modem. The software, called InternetPhone, compressed the voice signal, translated it into voice packets and sent it out over the Internet. The technology worked as long as both the caller and the receiver had the same equipment and software. Although the sound quality was nowhere near that of a conventional telephone, this effort represented the first IP phone. PC-to-PC solutions like Vocaltec's meant that VoIP communication stayed within rather small, closed groups of users at the time, like companies, or computer enthusiasts. By the late 1990s, several companies began setting up gateways to enable the first PC-to-phone and later phone-to-phone connections using the Internet as the transmission medium. The cost of these IP-based phone calls was significantly lower than that of conventional phone calls, especially for international calls. Some of the offerings actually included making calls absolutely free, using a regular telephone, provided that the user was prepared to listen to an advertisement at the beginning of the call. Around 1998, the first IP switching equipment appeared on the market. It was similar in principle to the switching equipment used in the exchanges of conventional phone companies, enabling true VoIP call connectivity. A growing number of companies began establishing themselves as service providers, effectively they were alternative telephone companies - and some have since grown into multi-million dollar businesses. At the same time, IP phones and IP-PABX (IP-based Private Branch Exchanges) began appearing on the market. In 1998, 150 million minutes of international phone calls were carried by VoIP, less than 0.2% of the world's total international traffic. Today, billions of minutes of VoIP traffic worth more than a billion US dollars are carried per year, representing more than 10% of the world's international traffic. It is estimated that this figure will rise to 50% within a few years and that IP technologies will then form the core of most telephony networks in the world. Pressure On the Telcos What does all this mean for the telcos - the conventional telephone companies with their traditional switching equipment and copper networks, like Telstra in Australia? Well, they don't sleep soundly at night any more! VoIP in the hands of other Internet service providers (ISPs) threatens to eat right into their core business and biggest cash cow, voice telephony. So, most of the incumbent telcos are fleeing ahead and have started to use the technology themselves while at the same time trying to make life as difficult as possible for the new, upcoming VoIP service providers who for the most part, still depend on the incumbent telco's network infrastructure to reach their customers--for example the conventional copper telephone wires that the telco owns to every house, and ISPs use to deliver their Internet and VoIP services. However, telecommunications regulation in most countries ensures that a de facto monopolist incumbent provides equal access to its network infrastructure for competitors and that no anti-competitive behaviour is used to push competitors out of the market. Many startup competitors will still not make it against the telcos' vast financial strength and market power, but at least one pressure remains and has already taken a heavy toll on incumbents--price. Price? How can price be an issue any more when telephone calls are already so cheap? With a conventional phone call, you can call anywhere in Australia for five cents a minute these days, and calling Europe, the other side of the planet, interestingly costs even less, three cents a minute. True--but do you remember when it was that these prices came down from the several dollars a minute we suffered, not too long ago? Yes! pretty much around the time VoIP came along. It costs between 30 and 80% less to carry a phone call over the Internet using VoIP than to carry it via conventional telephone networks. The new VoIP service providers used this fact to undercut the telco rates, and as the technology matured, the telcos had to follow with price reductions. So not only are they losing market share to the VoIP providers, they also have to live with smaller profit margins on the remaining market share. Naturally the telcos also started saving costs by using VoIP to carry their own calls. Prices came down firstly on international calls--the area where VoIP was mainly used in its early years--to undercut the telcos' exorbitant rates. National long-distance calls followed. Telcos around the globe tried to compensate smaller profit margins in these areas by raising their prices for local calls and their monthly service fees where, admittedly, the biggest costs for a telco lie, in operating and maintaining the local access network, those millions of wires that run from the telephone exchanges to every house. Telcos in most countries actually started billing local calls by the minute rather than charging the untimed flat fee that we are still enjoying here in Australia. But alas, this last de facto monopoly domain of the traditional telcos is also being attacked by VoIP service providers: In Australia for example, Comindico Fully Integrated Services Price is no longer the main differentiator between VoIP-based and conventional telephone service. The real attraction of VoIP lies in the fact that it enables true integrated services, location independent, with always-on capability and great flexibility: Voice, video and data, all over the same line and the same technology, terminating at a single device which could be your PC at home, your laptop when travelling, or your wireless-enabled PDA (Personal Digital Assistant) or Smart Phone. With VoIP, voice is just another type of data transmitted over the Internet, and with all these services being Internet-based, you can be reached for all of them under the same single identity, your IP address. Future bla-bla, telco anywhere-anytime sales lingo? Well, you will already have a taste of what lies ahead in the way we (or at least our children) will communicate in the future if you are an Instant Messenger (IM) user. Think further--VoIP applications actually offer some fundamental, practical advantages: |
So the major attraction of VoIP is its flexibility and the range of applications it opens up. But on the price front it has one last revolution in store. Eventually we will see flat fee pricing for our broadband Internet connections (as we already see today), but it will include all our "telephone" calls as well. There is no reason why not. The effort of billing those billions of minutes individually, all for a few cents each, is already becoming an over-proportional burden for the service providers--not technically, but just imagine all those many billing enquiries from customers they get every day, that take up time and resources and therefore cost money! Yes, indeed, voice services embedded into our Internet access can still get even cheaper than it already is today, moving towards a cost close to zero. Other Issues Quality concerns are diminishing, but there are other issues as well. There are so many positives for VoIP--are there any negatives? Inferior voice quality and reliability/delay are often quoted. In the days when conventional phone calls were still a lot more expensive than VoIP calls, admittedly the quality of VoIP still left a lot to be desired. But by now this is almost a thing of the past. These days VoIP can be engineered to be as reliable as one wants it to be--the necessary compression technology exists and the Internet bandwidth within and between most countries to provide call quality almost undistinguishable from conventional phone calls. Often you will be making VoIP calls these days without even knowing it. International calls in particular (where we are already accustomed to slightly degraded call quality and delay) are often routed using VoIP, especially when you don't use the telco's own international direct dialling (IDD) but a calling card or callback provider. Before VoIP really becomes a mainstream technology for telco-grade voice services, however, a few other issues besides quality still need to be worked on: The World and Australia The leading VoIP markets in the world are currently the USA and Japan, but the very nature of VoIP makes many facets of the business truly international. For example VoIP is used extensively even in developing countries such as in Africa, to bypass the local incumbent telcos' exorbitant rates for international calls--in both directions. Locals use VoIP (illegally in many countries) to make their international calls, and carriers (companies that carry telephone traffic) use VoIP to interconnect other carriers' networks and terminate calls from abroad in these countries, because the local telcos would also charge excessive prices for this termination service. The biggest players in this segment of the VoIP business are ITXC You will notice that all of the companies named here are based in the US, but nothing stops you as an Australian from subscribing to some of their services too, because VoIP is location-independent. The fact that the companies' servers and switches are located in the US and their call prices are US-based makes no real difference, a call to Australia (within Australia for you then) still costs only about 2.5 US cents, about 3.5 Australian cents--still cheaper than any other way of calling. But there are also some Australian VoIP players: Comindico for example And then there is Skype At the time of writing the company has announced it will enable calls to regular phones as well (at a charge then) some time this year, so it will then be a handy tool that combines both your free PC-to-PC voice communication and regular calls. As we go to press, the first beta version of Skype for Linux has been released and is available from About the Author Peter Lange, Reprinted from the July 2004 issue of PC Update, the magazine of Melbourne PC User Group, Australia |
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Number 256 - September 2004
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