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IP telephony ready to explode into corporate world.

IP VPNs will accelerate its adoption.

This could be the year when IP telephony starts to take hold in the corporate world.

Until now, the principal users of the cheap phone call services have been price-conscious consumers, such as expatriate communities and international travelers. Businesses were slow to adopt IP telephony due to quality and usability barriers.

Last year saw some initial breakthrough with small and midsize businesses (SMBs) as the IP telephony service providers (ITSPs) enhanced call quality and began developing integrated equipment and service offerings geared to SMBs. This momentum is likely to continue and extend to larger enterprises, as major carriers develop integrated voice-over-IP (VoIP) offerings to run over corporate virtual private networks (VPNs).

Widespread deployment of native-mode IP telephony customer premises equipment will be another driving factor. New IP developments, such as IP private branch exchanges, IP fax machines and remote access devices, will make IP telephony transparent to users and should broaden its adoption within enterprises.

Over the next four years, IDC expects business use of IP telephony to grow faster than consumer use, with enhanced, premium and paid long-distance services dominating the market. IDC believes that Internet service providers (ISPs) and portals will increasingly be pressured to offer these services to remain competitive.

As a result, IDC sees corporate VoIP use growing at a compound annual rate of 527%, exploding from a worldwide total of only 497 million minutes of use in 2001 to 127.6 billion minutes by 2005. In comparison, IDC expects paid IP telephony services to grow at a compound annual rate of 128%, rising from 9.1 billion minutes of use in 2001 to 204.2 billion minutes by 2005.


IP telephony refers to the real-time transmission of voice signals using the Internet protocol (IP) over the public Internet or a private data network. It is implemented through networks of voiceover-IP gateway switches, which interface between the public switched telephone network (PSTN) and IP networks, such as the Internet, corporate intranet or private IP network. The local gateway receives the incoming PSTN call, which is compressed and packetized, and sent over the data network to a destination gateway. Here, the call is decompressed and depacketized for call termination over the PSTN.

Once the caller is linked to another user, the telephony software samples and digitizes the caller's voice, compresses the signal and transmits the compressed packets to the other party using transmission control protocol/Internet protocol (TCP/IP). When packets are late or lost, the software compensates by averaging over the gaps. This can hurt speech quality and. occasionally, when congestion is severe, may cause a loss of connection.

When the traffic is routed over the public Internet, any connection may be a poor one, depending on how it is routed and the amount of congestion at the routing nodes. Response delays of one or two seconds are possible, compared with typical delays of 50 to 70 milliseconds with the regular phone network. With corporate intranets, or managed IP networks, the infrastructure is more controllable, so IP telephony should come close to matching the performance of regular phones.

Compared with circuit-switched services, IP networks can carry five to 10 times the number of voice calls over the same bandwidth. Also, there are no access fees or toll charges for long-distance or international calls, so service providers can offer cut-rate prices for IP telephony. Further, IP telephony can cut costs through operational efficiencies gained through converging their voice and data networks.

Despite these cost savings, though, the greatest potential may lie with applications that merge voice and data traffic--and ultimately video, as well. In a Web-enabled call center application, for instance, IP telephony allows a customer browsing a firm's website to talk to a sales or service agent simply by clicking on an icon. Online merchants have found that, by voice-enabling their e-commerce websites, they can animate personal interaction with surfers and improve the rate at which browsers are converted to buyers. In the long run, IP telephony will most likely become an enabling technology for multimedia communications and e-business applications, rather than a separate service.

Besides the inadequacies of the Internet's infrastructure, one of the restraints to the growth of IP telephony is a lack of interoperability among today's proprietary products. With codecs, for instance, differences in the voice-compression algorithms add to the interoperability problems created by the various software designs.

A working group of the International Multimedia Teleconferencing Consortium has provided some help by standardizing on a codec, the G.723.1, which is also part of the H.323 specification for audioconferencing and videoconferencing over IP and other "unguaranteed networks."

In addition, the Internet Engineering Task Force (IETF) has proposed a new protocol, session initialization protocol (SIP), which is more scalable and faster than existing H.323 implementations. SIP is an application layer, control/signaling protocol for creating, modifying and terminating sessions with one or more participants. These sessions may include Internet phone calls, distance learning, Internet multimedia conferences and multimedia distribution.

The IETF has also developed specifications to improve the performance of telephony and other multimedia applications over the Internet. Real-time transport protocol (RTP), for instance, includes packet sequencing information and time stamps for synchronizing data streams.

A companion protocol, real-time transport control protocol (RTCP), provides feedback on current network conditions, allowing the telephony software to switch compression algorithms in response to degraded connections.

Another important protocol is resource reservation protocol (RSVP), which dynamically reserves network resources, such as bandwidth or buffers, to guarantee quality of service for telephony and other multimedia applications on the Internet.


Only about 7% of U.S. enterprises have deployed IPtelephony, mostly in small pilot installations. That leaves the market wide open for service providers to sell their outsourcing capabilities, For enterprises seeking to take advantage of the cost savings and other benefits of IPtelephony, this option of outsourcing to a service provider is becoming increasingly attractive.

Service providers are already packetizing their networks, so offering converged voice/data services is easier for them. In addition, since the new networks are less expensive to install and manage, service providers can afford to offer attractive bundles of voice and data services. What's more, with transport services rapidly becoming a commodity, service providers are anxious to boost their profit margins with value-added services like as unified messaging, which combines voice with fax and e-mail.

From the enterprise perspective, the speed of technology change is increasing the risk posed by large-scale infrastructure deployments, making outsourcing more attractive. By using a service provider, companies can introduce IP telephony incrementally, with little risk and minimum disruption to users.

ITSPs may sell IP telephony services directly to consumers and businesses on a retail basis, or may sell time wholesale on an IP telephony network to other ITSPs, or to traditional telephone companies and other service providers. Genuity, the largest wholesale ITSP utilizes its own managed network, while other wholesale ITSPs, such as ITXC and iBasis, route traffic over the public Internet. In the consumer retail market, the dominant ITSPs are Dialpad, Net2Phone. GlocalNet, MediaRing anti deltathree, which accounted for 55% of the total minutes of use in 2000. according to IDC.

Concert, the $7 billion global venture between AT&T and British Telecom, provides wholesale IP telephony services to carriers and service providers around the world. Last September, it began offering corporate customers toll-quality calling capability over its global managed IP backbone.

Targeted at customers seeking to converge their global voice and data applications on one platform. Concert IP Voice provides both on-Net calling between a customer's sites around the world and off-Net calling to any public telephone number in more than 200 countries. Concert provisions, manages and maintains the service end-to-end, including the managed IP gateways on the customer premises.

Another global telecommunications carrier. Cable & Wireless, has embarked on a massive migration initiative to transform its legacy switched network to a fully operational VoIP network within three years. The goal is to bring together voice, data and IP applications on a single network to provide business customers with a new range of fully integrated end-to-end applications, offering greater cost efficiencies and improved customer control.

To implement its initiative. Cable & Wireless has signed a 10-year, $1.4 billion agreement with Nortel Networks to manage its legacy switched assets in the U.S. and Europe, and to build a new VoIPswitchlng platform and migrate existing customers onto it. Cable & Wireless will retain control of the network architecture and VoIP platform design. It is already developing new integrated voice/data products for the platform, including IP video to the desktop, unified messaging, the capability for the telephone system to track and follow users, and the ability for call center personnel to share Web pages with callers.

WorldCom has also announced plans to launch a suite of services, called IP Communications, that will allow businesses to move their voice traffic to an IPnetwork and take advantage of next-generation multimedia applications. WorldCom will also incorporate IP Communications into its IP VPN, Private IP and Web Center offerings.

With IP Communications, businesses will be able to shift their voice communications to an IP environment for internal and external calling. Users will be able to complete calls to domestic and international locations, while maintaining existing dial plans and calling features, such as call forwarding, voice mail, calling privileges and call screening.

New features, such as "presence," instant conferencing and unified messaging will be available later this year. By implementing presence, users will be able to inform callers of their availability and preferred method of communication, such as e-mail, telephone call or instant message. Presence will also enable users to set up chat sessions and audio conferences.

Meanwhile, Qwest Communications has launched its CyberVoice initiative, which leverages the firm's nationwide OC-192 IP backbone and CyberCenter hosting facilities to deliver voice services integrated with Internet-oriented applications. Built specifically to run on IPnetworks, the hybrid voice/data services and applications include speech recognition, voice portals. conference bridging and Web messaging.

Qwest also offers a Web-directed, customer-controlled telephony platform. called Web Contact Center, for integrating voice- and Web-based customer contact center applications. It allows such voice-based applications as touch-tone and speech-enabled voice response, complex queuing and routing, messaging and outbound call management to be developed as Web applications, independent of platform or programming language.

Edwards manages communications and network consulting for IDC, a global IT market research and consulting firm headquartered in Framingham. MA.
COPYRIGHT 2001 Nelson Publishing
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Industry Trend or Event
Comment:The adoption of IP telephony is expected to increase significantly in the corporate world.
Author:Edwards, Morris
Publication:Communications News
Geographic Code:1USA
Date:May 1, 2001
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