The chink in voice over IP's armor

The threat of voice over IP hangs over service providers these days like an ominous cloud. Many carriers worry that the ability to send voice over IP will undermine their core voice or dial tone businesses. The technology does pose a certain threat to traditional voice service. But even without it, voice traffic represents a shrinking percentage of global communications traffic, a trend that is expected to continue.

But rather than feel threatened by voice over IP, service providers should explore the potential of new Internet protocol-based services such as videoconferencing. These IP-based services offer service providers promising new revenue sources.

The ubiquitous IP As the protocol that supports the Internet and corporate intranets, IP is ubiquitous today because of explosive growth in Internet use in recent years-growth that exceeds even the most optimistic projections. Many Internet service providers report that usage doubles every 100 days. According to International Data Corp., the number of Internet users is growing at a compounded annual growth rate of 130% (Figure 1).

Meanwhile bandwidth use is growing at 500% a year, according to some estimates. By 2000, Internet traffic will represent 50% of total bandwidth usage. Internet traffic is expected to consume 90% of all bandwidth by 2003 and 99% by the following year. On the other hand, voice traffic is expected to represent less than 1% of global traffic by 2004. By that year, voice is predicted to be a niche service.

The market changes caused by exploding Internet use require service providers to rethink their business strategies. Service providers, including ISPs, are in the business of selling bandwidth. However, amid increasing competition from competitive local exchange carriers, service providers need to think in terms of selling services and not just bandwidth. By convincing customers of the value of new services such as IP-based videoconferencing, providers will sell the services that, in turn, will sell bandwidth.

Service providers today typically limit their Internet service offerings to e-mail, electronic commerce and Web browsing. These services will soon be inadequate. Amid growing Internet usage, end customers are demanding new services that run on TCP/IP LANs.

In the future, customers will expect service providers to offer a broader range of Internet services such as voice and video, fax, frame relay, asynchronous transfer mode, virtual private networks, Switched 56, Sonet and synchronous digital hierarchy (SDH), according to Piper Jaffray Inc. (Figure 2).

Regardless of which IP-based services achieve long-term commercial viability, service providers are advised to begin deploying local and long-distance IP-based networks now. A carrier can develop its own network or acquire a network by partnering with a local operator such as UUNet, owned by MCI WorldCom. Either way, the carrier stands to gain some control over the explosive IP services market.

How real is the threat? Though it appears to have potential, the limitations of voice over IP prevent it from becoming a mainstream business application. Using voice over IP is similar to installing microphones and speakers on your computer and having a conversation with someone who has installed similar equipment. Several programs are now available that will ring through the computer when they receive an IP voice call.

Of course, the advantage of voice over IP is that long-distance charges are not incurred because the local call is routed through the ISP. The only expense is the caller's connection to his or her ISP.

Cost savings aside, however, voice over IP has significant drawbacks. First, the call goes unanswered if either party is not at their computer or fails to turn it on, and voice mail for voice over IP is not available. In today's fast-paced business environment, workers can't afford to miss vital communications because a call goes unanswered. Local carriers could act on this need by installing servers dedicated to receiving and routing IP calls. A service provider that offers voice mail for IP voice calls likely will find a very receptive audience.

A second problem with IP voice is that the connection sometimes terminates abruptly because of the difference in incoming and outgoing transmission speeds. How soon this occurs depends on how the timeouts on the receiving computer are set. High-performance IP voice products now on the market transmit at 4 Mb/s. The maximum speed of a typical telephone line is 56 kb/s, although ISDN and T-1 lines are much faster. Because 56 kb/s is 200 times slower than the connection that the IP voice product needs, the IP voice call drops frames and disconnects.

A third drawback to voice over IP is that its voice quality is not always comparable with landline conversations. The quality of an IP voice communication depends on Internet conditions. Quality is good when enough bandwidth is available, but if two parties try to hold an IP voice conversation when Internet traffic is heavy, the necessary bandwidth may not be available. Callers miss parts of the conversation when there isn't enough bandwidth. The call also can be plagued by delays between words, which formerly occurred with international telephone calls. Neither condition is acceptable to business users. In its current form, IP voice does not have the uniform quality that business applications demand.

Because of these limitations, IP voice calls appear unlikely to replace traditional telephone conversations altogether. In its current iteration, IP voice is more applicable for residential than business usage. For residential users, IP voice has become a more viable option with the development of cable modems. A cable modem provides a 10BaseT Ethernet circuit that runs over coaxial cable, transmitting at 10 Mb/s. The cable decoder connects directly to the computer via the 10BaseT. Users can transmit from their computers at 4 Mb/s and receive at rates up to 6 Mb/s. However, because most businesses do not have cable TV access, cable modems do not make IP voice a more practical option for companies.

Not until voice over IP is as convenient as a landline telephone call will it significantly threaten the mainstay of service providers' business: voice traffic. Rather than worry about the threat, service providers should create networks based on IP and get ready to deploy new services. One of the most promising and cost-effective is IP-based videoconferencing.

Well-suited for IP Desktop collaborative communications or videoconferencing is an ideal service for carriers to offer voice-over-IP networks. This service refers to PC-based videoconferences that transmit over IP, meaning any network based on Ethernet, fast Ethernet, T-1/E-1, frame relay, ATM or Sonet.

Not only is videoconferencing well-suited to IP, it appeals to business customers and represents a good new revenue source for carriers. Videoconferences most often are planned, meaning all parties are prepared for the call. This avoids the problem of missed calls that occurs with IP voice. In addition, IP-based videoconferencing has greater business practicality than voice over IP. Videoconferencing allows users to work collaboratively over distances without incurring travel or long-distance telephone charges. Unlike a regular telephone call, videoconferencing lets participants communicate both visually and audibly.

Despite the application's potential, all IP-based videoconferencing services are not the same. Here are some suggestions of what a carrier should look for in an IP videoconferencing service:

* Support for IP multicast. The industry developed this extension to standard IP to support videoconferences that involve communications from one to many parties or from many senders to many recipients. IP multicast allows the sender of the videoconferencing message to transmit a single copy to recipients who want the information. The multicast extension transmits the message to as many recipients as is appropriate. This transmission method ensures that only one copy of the message passes over any single link in the network, eliminating unnecessary transmissions and conserving network bandwidth. The industry offers two other transmission methods for videoconferencing: point-to-point unicast and point-to-point broadcast. However, IP multicast transmits more efficiently than the other two methods.

* Multipoint conferencing with multiple windows. Some videoconferencing systems require a separate piece of equipment known as a multipoint conferencing unit to videoconference with more than one person. Service providers should look for videoconferencing software that includes multipoint conferencing so that multiple-party conferences are easily supported.

* Easy scalability. The ideal IP-based videoconferencing service expands as the end user organization grows. As the network is upgraded, the organization does not have to reinvest in additional equipment. The best videoconferencing system also features optional equipment such as gateways that allow the system to interface with any desktop and conference room video equipment.

The ideal IP network The 1996 Telecommunications Act required service providers to offer infrastructure support to other carriers. Today, too many carriers remain solely focused on selling bandwidth, all the while lamenting their lack of access to the growing IP services market. For a traditional service provider to influence the IP services market, the carrier must do more than sell backbone space.

Over the next few years, the number of ISPs in the United States-now estimated at 5000-is expected to shrink so that a few ISPs dominate each market. By targeting surviving ISPs for acquisition or business partnerships, the service provider can gain some control over the IP delivery market. In addition to operating IP-based networks, ISPs are free of the regulation that controls traditional service providers. With access to an ISP network, traditional service providers can deploy IP-based services without the regulation that otherwise prevents them from quickly responding to changing market conditions.

Service providers need to develop the right kind of network for IP-based traffic, whether that is videoconferencing, data, e-mail or voice. The ideal IP network has points of presence in the major cities of the provider's region, with a high-speed backbone in between. Hops on the network are minimized so that the provider reduces the number of choke points-where traffic gets bottlenecked on the Internet.

For example, an e-mail message that is sent from Dallas to New York will pass through about 13 hops between the ISPs in those cities. The message could be delayed at each hop. If both the Dallas and New York service providers installed the recommended kind of IP network, this same e-mail message would simply travel from the Dallas POP to the New York POP. Hops would be kept to a minimum.

By installing this kind of IP network and by choosing the right kind of IP-based services to deploy, service providers will do more than stave off the threat of voice over IP. Customers want bandwidth from their service providers more than anything else. First the provider must convince the customer of the value of IP-based services such as videoconferencing.

The custome r needs to clearly see how IP videoconferencing or another service will enhance his reputation with his end customers, how it fits into his business plan and how it can reduce his costs. Once the customer is convinced of these points, the service provider can sell him the bandwidth he needs.