Voice over Internet Protocol (VOIP), or broadband telephony, allows users to make telephone calls over a data network like the Internet, converting voice into a digital signal that is then reassembled back into voice. It uses existing lines coupled with software running on the PC to run calls through the Public Switched Telephone Network (PSTN).
At first, the technology was pushed into niche markets such as international voice calling. Later, multi-office businesses began to use it for inter-company calling.
"We initially put VOIP in for five-digit calling nationwide, and it still operates for this function," Grant Thorton's national manager of telecommunication Kevin Lopez said from his Oak Brook, Illinois-based office. "Now, we have begun installing IP soft-phones and have unified messenger in place as well."
Larger Enterprises First to Adopt VOIP
Big technology players have brought telephony technology to market in the last few years to widen their net and service customers like Grant Thorton, offering products such as unified messenger, which manages voice, email, and fax messages using either a telephone or a multimedia personal computer.
The birth of these value-added services is a reflection of the overall growth in the telecommunications industry. Earlier this year, research by the Telecommunications Industry Association (TIA) reported a 7.9% growth in U.S. telecommunications revenue, surpassing the amount of growth in the industry over the past three years. As well, Frost & Sullivan reported that by 2008 the VOIP market could grow to more than 16.5 million residential users, specifically.
This growth reflects VOIP's adoption into the mainstream market and consumer demand for VOIP, believes Michael O'Hara, Microsoft's general manager for service provider business. Larger enterprises, however, are currently adopting IP private branch exchanges (PBXs) "because they have the IT expertise to deploy and manage the solutions."
Director of VOIP Services for AT&T Mike Barca said that in 2004 the company's customers were just dabbling in the technology. His company was asked to provide an environment where businesses and their staff could test the technology first "because it was difficult for them to plan out any type of migration." This year, his customers are getting ready to migrate office locations compared to solely Greenfield environments by creating a hybrid traditional/VOIP environment throughout the organization. "A lot of these new IP service providers look for that flash-cut, for that Greenfield environment," Barca explained. "But that's not the how the majority of our enterprise customers operate. They are going to be in a hybrid environment for quite some time as they move their services over to IP."
Regulators and Lobbyists Debate VOIP Regulation
This trend toward companies deploying VOIP has gained the attention of federal regulators. For example the U.S. Federal Communications Commission (FCC) is currently discussing VOIP's reliability and its ability to replace traditional telephony services.
These ongoing discussions have stalled since the 2005 resignation of FCC Chairman Michael Powell. President Bush designated Chairman Kevin J. Martin only a few months ago on March 18, 2005, and the industry now awaits his policies on VOIP regulation.
"We are looking at a lot of issues," spokesman for the FCC's Wireline Competition Bureau Mark Wigfield said about the commission's plans for regulating VOIP. "[This includes] how it should be defined; who should have jurisdiction; a requirement to provide 911 and disability access; and how it fits into the conventional structure of inter-carrier compensation as well as universal service in rural areas."
Tech lobbies are also concerned with these issues. Nick Kolovos is the director and counsel of Government Relations for the Information Technology Industry Council (ITIC). The ITIC is pushing for a policy focused on asserting federal jurisdiction, "eliminating regulatory burdens and supporting universal and public interest services" (including U.S. 911 and Europe's 999). The ITIC also supports consumer protections from misleading and deceptive advertising "so consumers can make informed choices about what they are receiving and what their options are."
Education about VOIP, its flaws, and user responsibility came to the forefront recently when Texas sued one of the largest residential providers of VOIP after a customer couldn't reach 911 emergency services using a Vonage connection. It was a service that was offered; all users had an option to sign up for 911 access for an additional fee. It began a regulatory discussion throughout the community over state versus federal authority on VOIP services.
Kolovos said that because of the nature of the technology, it would be "nearly impossible to regulate on a state-by-state level." Because VOIP is a telephone call broken down to packets and those packets travel over the IP network, they cross a number of jurisdictional boundaries. Providers across the globe would then have at least 50 jurisdictions and 50 different sets of regulations. "How would you end up trying to regulate that and attach some sort of pricing scheme or economic stipulation?" Kolovos questioned. "Beyond that, we are not only talking about providers in the United States; they can be located anywhere in the world."
As of now, the FCC is moving toward VOIP as "an unregulated service," according to FCC spokesperson Wigfield. "Initiatives are underway," he noted. "Where they go is up to the new chairman and the support he gets from other commissioners." Kolovos agrees and adds, "It should be regulated as little as possible."
VOIP may become an unregulated service, but one looming question is fair accessibility. Universal service is still an unresolved issue that neither the FCC nor the industry seemingly has any answers to, placing part of the blame on broadband's limited reach into rural areas. In Kolovos' opinion, under the universal service umbrella, it is often still a matter of accessibility to broadband. Other public safety service questions--including the absence of 911 services and law enforcement access (lauded as a major flaw in the technology)--result because VOIP does not tie users to a geographical location. To an emergency dispatcher, it appears as if the call is coming from a home location even if the caller is actually in another state.
Microsoft's O'Hara said the challenge in a voice environment is that a user becomes an IP address. "I could be sitting in London with a Boston number because of the mapping of the IT addresses," O'Hara explained. "When calling 911 or 999 in Europe...you have to specify where you are."
A user must realize that, in most cases, a landline will be needed during an emergency unless a location can be verbally specified. "It is a whole mindset change as you move into the VOIP arena," he said. "You have to think that you're location-independent."
AT&T's Barca concurs. For now, his company offers its traditional landline services that offer the security of 911 access, coupled with VOIP. "911 services we are building allow you to configure your service and put in a location," Barca said about a current project not yet released to the public. "You can also change it when you log on; this way, if you dial a 911 service, it knows where you are."
"No doubt it can be worked out," Kolovos optimistically noted. "The best approach is giving industry time to develop those technologies, instead of having a government mandate that requires them to develop it a certain way."
As far as FCC regulation, it may be awhile. "The Hill is gearing up on this issue, and I think that the bills that are being contemplated take a minimal regulatory approach," said Kolovos. "Whether something gets passed or not is another matter." Microsoft's O'Hara thinks regulations will move forward based on current consumer demand, and they are actually "favorable as they stand today to allow these deployments to go ahead." In his opinion, regulators have an incentive. VOIP offers an effective way to create local competition because a broadband connection creates a shared-line environment automatically. "We believe it fuels competition and a lot of people to compete with features."
Advantages and Disadvantages of VOIP Implementation
When it comes to the value of VOIP, providers like Microsoft tout the pros of implementation, such as cost-effectiveness. But there are also weaknesses in the technology: quality control, public safety, and the aforementioned accessibility to universal services. "Other cons are bandwidth allocation and controlling call quality," opined Grant Thorton's Lopez.
Still, many Fortune 500s continue to use the technology--for example, AOL, Comcaste Cable, and Grant Thorton. Kolovos said the business incentive is the bottom-line savings resulting from being able to deploy an enterprise-wide dialing plan. The ability to customize applications is another advantage, he said, which can allow access to voicemail over the Internet and special programming for the disabled. "It is an array of customized applications that can benefit businesses," he said. "It streamlines things."
O'Hara added that the main benefits of implementing VOIP are reduction of voice services costs and delivery of "value-added services like presence, instant messaging, and collaboration." Enterprises can recognize cost savings that result from moving internal voice traffic from a separate voice-only network to the local IP network. "I would say 30% is a good approximate reduction in cost," claimed O'Hara. An initial cost is preparing the workforce to deploy the technology. "You are going to have retraining. You are moving your phone service away from traditional phone engineers into more of an IT environment. So there is a transitional cost there."
Another set-up cost revolves around the requirement for costly local IP network upgrades or legacy PBXs that have not reached the end of their useful life. Small- and medium-sized businesses have not adopted VOIP as widely as a result. The implementation is "top down" noted AT&T's Barca. Fortune 500s start the trend. They look for a place to test it out, often their branch offices or Greenfield locations because they have to invest in new equipment anyway, Barca clarified. So they use that location to test out VOIP. "It's easier for them," he said. "There is no initial or embedded type of equipment they need to worry about."
Cost savings is the impetus for implementation, agreed Juniper Networks Senior Solutions Marketing Manager Scott Heinlein. "Many of the deployments to date are multi-site businesses that are looking to save toll or long-distance costs for intra-company calling."
However, adding real-time applications such as voice requires a much higher level of network device performance, he continued. Network devices must be able to support the small packet sizes of voice with very minimal latency, jitter, or packet loss--too much of any will render voice communications inoperable. That is why, according to Heinlein, all switches, routers, and firewalls must be analyzed to determine whether they can handle voice traffic. "Many times, this step is overlooked, only later found after voice quality suffers significantly," he said. "One solution is that Multiprotocol Label Switching
(MPLS) technology can be used at the network level for traffic engineering sufficient bandwidth throughout the IP network. At the network device level, sub-second stateful failovers should be supported by the device so that existing calls are not impacted when a network device fails."
Heinlein said staffers should be prepared for retraining to address these issues, both those covering data or voice converged network and IT. They must also be ready for the inevitable: VOIP implementation often leads to staff reductions. "However, the skill set requirements might change since personnel that understand both data and voice are ideal for managing the network."
"Too much of either data or voice experience isn't good," added Grant Thorton's Lopez. "A well-rounded individual with knowledge of voice and data should be able to deal with most issues."
Microsoft's O'Hara explained that businesses must first determine whether they want to manage their VOIP service themselves or purchase hosted VOIP services from an operator. "If the business is deploying a premise-based solution such as an IP PBX, they will require a knowledgeable IT staff to deploy the server, install the software, move/add/change/or delete user extensions, install patches, and troubleshoot problems," he said.
Cost considerations for a premise-based solution, O'Hara said, include purchasing server hardware, IP PBX software licenses, and IP telephones (or adapters that allow you to use regular telephone handsets) and pre-installation costs such as evaluating and potentially upgrading the local IP network. Businesses interested in deploying a premise-based VOIP service need to determine whether their internal IP network can support voice in addition to their current data traffic. They also must take into account possible growth in both voice and data traffic levels. "While it is expensive to rewire and upgrade a wired network, there are wireless alternatives today that offer businesses more cost-effective options for network implementations," he said.
Pundits Debate VOIP Data Security
Another concern is the security of data. Dr. Shashi Phoha, director of the Information Technology Laboratory at the National Institute of Standards and Technology, has spoken publicly about her concerns with VOIP--such as ease of hacking, fraud, and abuse.
So is VOIP secure? Heinlein said adding voice onto the data network introduces security risks that must be addressed. "Security threats include PBX hacking, toll fraud, eavesdropping of phone conversations, DDos/DoS attacks, compromising the data network by allowing incoming calls to enter the network, and many others," he listed. "It is critical that increased security is implemented to ensure the business network is not compromised."
On the other side of the coin, O'Hara said there is a sufficient focus on security in the networks today; they can exist and happily proliferate and grow. "My experience is that we are not seeing security issues with the technology," he said. "However, you never say never."
It was the network they turned to for security, instead of invention, when Grant Thorton installed VOIP in 2001. "Security is something in this day and age we just have to live with in every way," said Lopez. "Each business must assess the threat and deal with it in a way they feel best."
While the industry sorts out the myriad issues still associated with the effectiveness in the technology, many agree this is the beginning of the end of traditional telephone lines, especially if issues of universal and 911 services are worked out. "Traditional phone service, as we know it, is diminishing," ITIC's Kolovo said. "And what we will have five to 10 years from now will be completely different."