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The second network?
Can new voice-over-IP systems truly make a telephony player out of the Internet?
The ISPs are coming! The ISPs are coming!" At least that may have been the battle cry of U.S. long distance resellers when they first heard about Internet telephony. Now that it's been a little over a year since the initial brouhaha over 'Net Telephony began, that early panic might have been a little out of place, especially when compared with today's voice over IP solutions.
The initial controversy hit fever pitch when the America's Carriers Telecommunication Association petitioned the FCC to ban the sale of client-to-client 'Net phones, arguing the software posed a major threat to the U.S. long distance industry. How legitimate a threat 'Net phones posed to long-distance resellers and major long-distance carriers is debatable. According to "Talk is Cheap" (America's Network, July 15, 1996, page 34), should 'Net phones consume 3% of 1995's long-distance revenues, the loss would amount to more than $1 billion. Whereas the Voice on the Net Coalition, a body of 'Net phone software makers, estimated their 1996 business at $10 million and predicts growth between $30 million and $40 million for 1997. Of course, the VON Coalition is talking software sales.
So far, despite urging from both ACTA and VON Coalition, the FCC has not yet ruled on the issue. Both parties have legitimate concerns, but FCC chairman Reed Hundt has made quite clear in public his desire to avoid pushing through regulation on such a tricky subject without thinking it through.
From a technical standpoint, last year's 'Net phones are a far cry from POTS in terms of convenience, ubiquity, ease-of-use and quality. At best, the point-to-point kinds of solutions require user dedication bordering on that of Ham radio operators; the systems are at the hobbyist level. Today's high-end IP telephony systems have grown to be much more robust.
NEW TECH IN TOWN
A mere 11 months since ACTA's initial complaint, voice over IP systems have evolved far beyond simple 'Net phones and into true technical/business threats. Presently, emerging 'Net telephony platforms and services could eventually enable ISPs to provide 'Net telephony services to their customers as a simple value-added service.
The basic thrust of new IP telephony systems is to enable either end-to-end ubiquitous telephony service across IP networks, whether intranets or the Internet. In the case of intranets, IP telephony could serve as a supplemental or main voice carrier for enterprise-wide voice services; and in the case of the Internet, the end goal would be ubiquitous interoperability between users of an ISP's voice services and either other ISP users or customers served by the PSTN.
Theproducts promising large-scale IP telephony mostly revolve around a gateway concept, in which users call an edge gateway at an ISP's point of presence or within an intranet. The gateway functions like a "virtual Ernestine" (without the lousy attitude), taking the number the caller wants (either via interactive voice response or a software interface), and then sending the call to the next POP or edge device that is located in the area code closest to the dialed number (see figure 1).
One solution is Natural MicroSystems Corp.'s Fusion, an NT-based system that, according to Mike Katz, director of Internet telephony products for NMS (Natick, Mass.), consists of three parts: the AG-RT, a daughter card with real-time voice encoders/decoders; the AG-T1, which has 24 ports of voice/fax; and the TX2000, an IP router.
Two other products that work on a similar concept are Telephony Gateway from VocalTec (Northvale, N.J.) and POPware from NetCentric Corp. (Boston, Mass.), which is currently at the fax-only stage of its growth, with telephony planned for a future upgrade, says John Fleming, vice president of marketing and business development for NetCentric.
THE REAL COMMON GROUND
Despite any similarities in technical approach, the real common denominator between any IP telephony solutions out there is user demand. Both home 'Net access/SOHO customers and managers of large-scale corporate WANs want IP telephony.
In a Business Research Group (Newton, Mass.) study of 117 of users (65% of which were IS/MIS personnel), in which 109 answered, 19% plan to implement voicemail over the Internet, and 19% have studied such an application; while 19% plan to implement live calls over the Internet, and 23% have studied those plans, according to Greg Cline, directory of network and Internet research for BRG.
In a separate study, Aragon Consulting Group's Research Division (St. Louis, Mo.) found that more than six out of 10 computer users would switch to 'Net telephony if they could save 50% on their bill But user demand and the market are at two very different stages. Cline says value-added ISP services are currently fixed at providing store-and-forward facsimile services. "The market is just beginning for value added services over IP," he says. "[ISPs] can't make any real money at basic services for $20 a month. Fax is a no-brainer; they can charge a premium per page."
Already, at least one ISP, PSINet Inc. has taken the fax concept and rolled out a full-fledged service offering, which is based on NetCentric's POPware.
Telephony could be right around the corner. Cline says that as more core and edge ATM switches are deployed, ISPs can add more complex services, and telephony could easily be one of them. "They're looking for any and all ways possible to make a higher margin of income," he says.
"ISPs want to not just be network and connectivity providers, they want to be application providers," says NetCentric's Fleming. "Voice for voice's sake is not necessarily the best use for the 'Net.
The POP gateway approach, like that of NMS, NetCentric and VocalTec, could not only let ISPs offer end-to-end telephony over the Net and into the PSTN for residential callers, but might let them offer some powerful service bundles as well. For instance, ISPs offering outsourced intranets could bundle in IP telephony over those intranets as a value added service or for an additional charge, Cline says.
ISSUES FACING IP TELEPHONY
While fax over the 'Net might be an easier app to deploy, there are a number of technical, business and regulatory issues facing IP telephony, especially when it comes to the Internet, before any service can truly get off the ground.
The public Internet poses the most problems, since it is an open, uncontrollable environment. Where technical specifications are concerned, the H.323 protocol, which is based on the Internet Engineering Task Force's Real Time Transport Protocol, is the main standard most 'Net telephony vendors are rallying around for interoperability between users. "You could expect a Netscape voice-over-the-'Net solution to talk to a Microsoft client," says Christian Huitema, chief scientist of the Internet architecture laboratory for Bellcore (Morristown, N.J.).
Besides standards, Huitema says the entire issue of directories has to be addressed before true public 'Net telephony can take off. Also, quality problems regarding IP telephony must be solved, but Huitema thinks he has the main cause pinpointed. He says current IP telephony solutions must compress voice a great deal because bandwidth is so tight. The Internet's backbone is not slow at all, and the main problem lies with the access technology, which today is mostly via modem, he says.
Where business is concerned, intranet telephony poses no obvious threat to carriers, except in lost long-distance revenue opportunities. Besides, carriers can't dictate what companies can do with their networks. However, Internet telephony could pose a much direct threat to carriers in terms of lost market share, especially if voice over IP becomes easy to use and easy to interface with standard PSTN customers.
That scenario is fraught with many regulatory and business case problems. Will carriers consider ISPs as enhanced service providers or interconnects? How will ISPs bill their customers? Will telcos charge ISPs tariffs based on a call's originating POP or the POP that outdialed into their network? The questions spiral off in fractals.
However, these might be questions only the telcos and the FCC must answer. ISPs would most likely see voice as just ones and zeros. ISPs have no reason to charge more for voice than anyother service offering, according to Bellcore's Huitema "You have to realize voice is only one issue on the 'Net," he says. "There is no reason to isolate billing of one piece of telephony as opposed to graphics."
'NET PHONE EVOLUTION
How 'Net telephony services will evolve is not easy to track, which further confuses any forecasting efforts. Whether or not intranet or Internet telephony will start out of the gate first is tough to judge, and some experts assert that both will grow concurrently.
One feature of intranet telephony that could give it a head start over Internet telephony is a crucial factor: control. Corporations can decide in detail how IP telephony will be deployed in their networks from end to end.
"Intranets themselves are a real possibility because you can engineer them properly to minimize the number of hops and delays," says Eric Larson, senior product marketing manager for Motorola's information systems group (Mansfield, Mass.). "The delays absolutely kill you in the IP world."
Motorola should know about IP delays. The vendor has been experimenting with IP telephony on its own intranet with mixed results, Larson says, adding "[We're] all over the map in terms of congestion and high points." To minimize hops, Larson says it's important that network managers look at traffic loads between nodes, ensure bandwidth is appropriate as well as the buffering between routers. "It's a very painstaking process," he says.
Expand and export problems experienced in an intranet setting to the public Internet, and that pain staking problem might be a little more painful than initially anticipated.
Looking
at a technical evolution, NMS' Katz believes that if the origin of
the 'Net phone species began with client-to-client solutions, and the
next growth stage for IP telephony will be gateways that enable PC
users to call regular telephone users. After that comes regular
telephone users dialing into a gateway to reach another phone user,
with no end-user computers factoring into the process at all (see
figure 5). 
Bellcore's Huitema says 'Net telephony might evolve faster than
people think. Both the technology and standards are developed, and
ISPs certainly seem willing to give it a try. "I would expect to
see large scale trials," he says. "I wouldn't be surprised
to see large trials by the end of the year."
Internet and intranet telephony might develop concurrently, Huitema says. Besides, he adds, what would be the point of voice limited to within an enterprise? "If you want to deploy telephony over an intranet--just like e-mail--you don't want it just inside the company."
If ACTA thought client-to-client 'Net phones posed a major business threat, it might have something truly threatening to deal with in the near future. Long-distance resellers and providers might have more to worry about than losing a small piece of the telephony pie--this time it could be a sizable chunk. The big questions are: how long might that take, and how permissive will the regulatory climate be toward IP telephony?
These are questions that won't be answered until the technology grows and ISPs begin considering commercial services. Depending on how well ISPs deploy their services and how inviting the regulatory climate is, telcos might not have much say in the matter.
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