There was a time when phone service, especially long distance service, was much more expensive than it is now. Before the break-up of AT&T in 1984, long distance calling was avoided or planned for—some people even devised surreptitious ring signals and collect calling codes to get around the high price of long distance.
It's now a new century and fierce competition among telecom companies has pushed the costs of phone services way down. Most people don't think twice about making long-distance phone calls—many cell phone companies offer free and nearly free national long distance, and special home telephone plans and calling cards give callers access to international calls for pennies per minute.
Another force that is driving down the cost of talking on the phone is VOIP, which stands for Voice Over Internet Protocol. The full name may sound like Star Trek jargon and the acronym may remind you of the sound of Batman hitting The Joker in the belly, but VOIP is rapidly joining “voice mail” and “cell phone” as household words.
Simply complicated
The technical particulars of VOIP are pretty hairy, but the concept is easy to understand: it's a cross between ordinary phone service and Internet Protocol (IP).
Most people know how these two systems work separately: an ordinary telephone converts sounds to analog signals, sends the signals over copper wire, and a second telephone turns the analog signals back into sounds. IP, the protocol used to send e-mail, breaks text or other information into data packets and sends them through the Internet or another data network. On the other end, the packets are reassembled into text and information.
VOIP combines the two processes. The analog signal from a telephone is converted to data packets that can be sent via IP across the Internet. On the other end of the VOIP conversation, one piece of equipment converts the packets back to an analog signal, and then a telephone turns the signal into sounds.
VOIP (also known as “IP telephony” or “netphone”) is said to have started among Israeli hackers in 1995, before the World Wide Web itself reached puberty. Of course, early VOIP technology was not very accessible to casual computer users. In the mid-90s not all personal computers had sound cards nor modems, let alone the obscure software and hardware required for VOIP.
For the next 3 or 4 years, VOIP loitered on the margins of viability, unable to overcome its shortcomings, not the least of which was sound quality, which couldn't match the quality of even the poorest ordinary telephone connections. Early VOIP also lacked services common to ordinary telephone phone service, like 911, directory assistance, and call waiting. Far from an alternative to plain old telephone service, VOIP was mostly for hobbyists and desperate, techno-savvy college students who needed to phone home.
Still, VOIP technology gradually advanced, and by 1998, communication companies (mostly in the United States) were offering VOIP services with a variety of business models. One VOIP company offered completely free long distance, but customers had to listen to advertisements at the beginning and end of each call. Some VOIP companies required tricky software and special gear that could quickly offset the savings to be had by making lots of free long distance calls.
In 2000, VOIP took a big forward step when companies such as Cisco and Nortel began developing VOIP-capable phone equipment that would handle the voice-to-data conversion internally. This made VOIP less dependent on separate computer equipment and much more feasible for ordinary people.
All grown up
Ten years after a humble beginning in the Holy Land, VOIP has muscled into the world telecom market and it's expected to expand rapidly. According to Internet news agency Intertangent, VOIP accounted for around 3 percent of all U.S. voice traffic in 2000. By the end of 2005, it is estimated that VOIP will represent 25-40 percent of all U.S. voice traffic. According to market information quoted on voipsurvival.com, VOIP will represent 75 percent of world voice services by 2007.
The main thing that makes VOIP special, of course, is that it can be very inexpensive. Numerous national providers now offer VOIP service to home users for less than $20 per month. Calling plans are similar to cellular phone plans, with monthly minutes, peak calling periods, unlimited plans, etc.
Corporate VOIP pioneer Vonage makes a bold claim on its website: “Traditional phones are fading. Land lines are taking their last gasps.” But is VOIP really ready for prime time? That depends. VOIP is definitely ready for home and small business users. If you like new technology and corporate upheaval, go to VOIP now. Even though it's been around for a decade, VOIP is an emerging technology that is bound to take some zigs and jogs before things quiet down—think of cable TV companies in the 1980s or Internet service providers in the 1990s. New companies will appear out of nowhere, merge, crumble into insolvency, and re-emerge with new names and logos. Service and customer support may be spotty at times. Customers will benefit from healthy competition and enticing offers, but not everyone will appreciate the corporate volatility, and no one likes bad service.
As for larger businesses and enterprise-level operations, VOIP is still a new kid on the technology block. In 2004 FCC Chairman Michael Powell reported that 2 percent of U.S. business firms used some form of IP telephony, and he said that number was expected to grow to 19 percent by 2007. So, even you wait until 2007 to launch VOIP at your firm, you'll still be very close to the cutting edge, which can be thrilling, nerve-wracking, or both, depending on your disposition.
However, this relatively shallow penetration into business and enterprise seems to be more a matter of availability than any intrinsic flaws in the technology—VOIP technology is solid, but it is still not as accessible or familiar to businesses as conventional systems are. As VOIP providers and their networks grow, and it seems inevitable that they will, acceptance and availability will rise, and adoption of the technology will accelerate.
Some VOIP providers, such as Los Angeles-based ConnectTo, have positioned themselves as one-stop communications providers, combining access to telephone, cellular, calling card, e-mail, and fax services all from a single interface. Vonage and other VOIP providers offer similar forms of communication combination, like integration of voice mail and e-mail.
If you can't beat 'em, VOIP 'em
Currently, the big names in VOIP include Vonage, BroadVoice, and Skype, but numerous providers are emerging across the U.S. and throughout the world. There are, no doubt, more to come. VOIP companies are already facing a second generation of competitors in the form of old-school telecom companies like AT&T and Cablevision, who are now offering various forms of netphone service. Verizon and Qwest, names familiar in Utah and the western United States, are also moving into VOIP markets.
Vonage
Vonage http://www.vonage.com/ has had its share of corporate growing pains, but the New Jersey-based company has also managed to become synonymous with VOIP while other companies are still working on their business models. Vonage's subscriber base topped 1 million in 2005, just 3 years after its establishment in 2002. CEO Jeffrey Citron recently said that Vonage could have more than 2 million subscribers by the end of 2005. Vonage offers several affordable and convenient calling plans, reviews of which are typically quite positive.
A home user user could easily switch to Vonage and get everything currently available with ordinary phone service, including 911, directory service, fax capability, and other extras like e-mail and Internet tie-ins. One user we interviewed said he had been using Vonage for about 6 months. Richard Eugene, a Salt Lake City computer science student, said although the service seems to undergo constant tweaking and refinement, the service has been flawless so far and has saved him hundreds of dollars in long distance calls to within the United States and to Mexico. Vonage customers use their existing phone equipment with a VOIP adapter (provided by Vonage) that connects to a broadband Internet connection.
BroadVoice
BroadVoice http://www.broadvoice.com/ is hard on the heels of Vonage, but offers leaner, less frilly service. Established in 2003, BroadVoice is based in Massachusetts and is a wholly owned subsidiary of Convergent Networks. BroadVoice offers a variety of very low-cost calling plans, but reviews of BroadVoice service are currently nowhere near as positive as those of Vonage.
Thom Bowers, a member of the Iodynamics team, recently signed up for BroadVoice service. He said although it worked well at first, he has since had extensive problems, extended outages, and very poor customer service. BroadVoice also lacks some services like 911 and fax capability. Like Vonage, BroadVoice customers use their existing phone equipment, but must have a broadband Internet connection and a VOIP adapter that is provided by BroadVoice.
Skype
Skype http://www.skype.com/ is unlike Vonage, BroadVoice, and most of the other big VOIP companies. Skype, which has no real central location but is probably loosely based in Sweden or eastern Europe, offers a free software download that allows users to make completely free local and long distance phone calls over the Internet. The catch is that the free Skype software does not enable the customer to use an ordinary telephone—all calls are made with a computer—and Skype's free software does not accept calls originating from ordinary telephones. Skype customers can use ordinary landlines and accept calls from ordinary telephones, but the service costs extra.
Created by the inventors of KaZaa (a file-sharing/download descendant of the original Napster), Skype claims to have served out more than 100 million copies of its software. Skype even quotes FCC Chairman Powell as being impressed with their product. Reviews of the usability and voice quality are mixed, but the software got a unqualified thumbs-up from Stephen weeks, another member of the Iodynamics team. Stephen said he has been experimenting with Skype for about a year and he says the service is impressive. The software was easy to download and install and works almost flawlessly, Stephen said, although he apparently didn't trust it to dump his ordinary phone service. However, can 100 million downloads be completely wrong? Even figuring for exaggeration, repeat downloads, and people who download Skype but never use it, Skype likely has more “customers” than Vonage and BroadVoice combined.
Here to stay
Regardless of whether you jump into VOIP now or later, several things are certain. First, the face of VOIP is likely to change dramatically in the next 4-8 years, meaning the VOIP provider you sign up with today will probably change radically, merge with some other company, or go belly-up (or maybe it will do all three) before your VOIP service stabilizes. Second, VIOP technology will continue to advance and improve, and VOIP could push the costs of all phone service even lower than it is now. Finally, although VOIP is still developing, the technology is sound and is not going anywhere. Watch for more multiple forms of crossover and integration—combinations of VOIP with existing services like calling cards, webphones, and e-mail are rather exotic now, but will become commonplace. Before VOIP reaches its twentieth birthday, it will likely bloom into full maturity and penetrate deeply into every available communication market, from home users to small businesses to multi-national enterprises.
Please join us in the next issue of The dIOlogue, where we will continue our exploration of VOIP with a discussion of enterprise-class VOIP service.