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Why telcos are scared of the Internet.

Are you one of those who dismissed using the Internet to make voice or multimedia phone calls as a techie plaything that has little corporate use? Don't judge too quickly; it could affect you soon.

The newly formed Internet Telephony Interoperability Project, spurred by the Massachusetts Institute of Technology (MIT), focuses on the technical, economic, regulatory and business issues involved. It is open to all interested organizations.

The opening project meeting in May drew 17 companies, big and small. Taking part were giants like AT&T, MCI, Nortel, British Telecom ... and tiny Internet software companies. Extensive follow-up work is going on to secure commitments from all these firms before a planned second meeting in July and formation of an actual consortium.

Lee McKnight is principal investigator for the project. He is a lecturer in MIT's Technology and Policy Program as well as Principal Research Associate in the Center for Technology, Policy and Industrial Development.

Considering what's at stake, McKnight says the first meeting was pretty congenial. "I have been in a lot of cross-industry standards efforts, and this was far milder than other meetings," says McKnight. But, he adds, "This is a precompetitive arena. We aren't proposing final standards, but are a feeder organization that will contribute ideas. They can fight to the death somewhere else, but here they can talk to each other."

For more information about the project, McKnight can be reached at 617-253-0995 or E-mailed at

Right now, there are more than 20 Internet telephony applications available, all emerging since VocalTec introduced its Internet Phone in early 1995.

Internet telephony companies generally do what most other companies do in providing software for the Internet. They offer free demo versions that can be downloaded from Web sites. VocalTec, for instance, lets users make one-minute calls, then reload the software. For full capabilities, there is a one-time fee. Another vendor, Freetel, gives the software away free, making money on advertising to users.

Other vendors bundle telephony software with other Internet software, while (this is the Internet, after all) there are also researchers and others who make such software applications available at no charge or obligation.

MIT's project site on the Web (http:// has loads of information on Internet telephony applications. It notes that the market has low barriers to entry, with VocalTec the current market leader. However, as Netscape packages Cooltalk with the next release of its browser, and if Microsoft goes through with a similar plan, the installed base will skyrocket.

Technologically, Internet telephony isn't ready for mass use. There are noticeable transmission delays, sound quality is neither high nor reliable, and calls can now only be made from one computer to another. This means users must prearrange calls or always leave the Internet telephony application running on their computer. Also, applications require use of a microphone and speakers rather than a headset.

"All of these problems prompted announcements of a new generation of Internet telephony applications, which allow users to place calls through the public switched telephone network," says MIT. This involves a gateway linking the Internet and a telephone on the PSTN (public switched telephone network) rather than a computer.

Telephone carriers have reason to be worried. Internet telephony represents savings to users through bulk purchase of leased lines, speech compression and the bandwidth efficiency of packet switching.

"Internet telephony is essentially the reselling of long distance capacity ... in a much more efficient way than existing long distance resellers because of the savings from using packet switching and savings from the economies of scale of the Internet," says the MIT information.

"Because of these efficiencies, if Internet telephony could produce reliable quality of service, it could become the dominant technology in long distance reselling."

Recently America's Carriers Telecommunications Association (ACTA) filed an FCC petition asking that the sale of Internet telephony software be banned and that FCC regulate the Internet as a telecommunications service. A key issue with this regulation is whether Internet users would be required to pay a local subsidy of approximately 2.5 cents per minute to the local telco.

ACTA argues that Internet telephony software carries long-distance voice at "virtually no charge," and providers of such software should be subject to FCC regulation like all carriers. They argue that it is not in the public interest to deprive those who maintain the telecomm infrastructure of the revenue they need, nor should some carriers operate outside regulatory requirements.
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Title Annotation:Internet/Web/Online Service Information; The Proving Ground; afraid Internet-telephony products will compete for long-distance phone services market
Author:Tanzillo, Kevin
Publication:Communications News
Article Type:Column
Date:Jul 1, 1996
Previous Article:How fast is fast enough?
Next Article:Violins over video.

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