Eager for IP: Businesses' demand good news for vendors, carriers

Telecom and datacom managers at large companies are expecting Internet protocol to start living up to its billing as a multiservice dynamo very quickly.

That's the indication from a survey of such managers at Fortune 1000 companies by consulting firm Killen & Associates. Killen surveyed managers in large retail, manufacturing and insurance companies to find out how quickly they expect to migrate voice traffic to IP networks.

According to the survey, less than 1% of these companies' voice traffic travels over IP today. But the data gathered indicates that those companies expect 18% of their voice traffic to travel over IP by 2002. By 2005, they expect to be sending a third of their voice traffic over IP.

The enthusiasm for using data networks to carry voice traffic is good news for IP equipment vendors and for carriers that are implementing IP service plans today. It also sends a message to carriers that are putting IP on the back burner.

"If I'm a service provider counting on voice customer traffic at the normal [circuit-switched] price, I could become concerned about the threat" posed by IP, said Bob Goodwin, senior vice president at Killen & Associates.

One of IP telephony's big selling points is lower rates for long-distance, Goodwin said, and price advantages will draw business customers' attention. But price alone is not the key element in large companies' interest.

"Large companies are motivated by price, but they have such good prices [based on volume discounts], they're looking at multimedia applications" for IP, he said.

Whatever the lure, carriers that are emphasizing an IP strategy can take encouragement from the growing interest in IP telephony. ICG Telecom Group Inc. acquired Internet service provider NetCom, and the combined company is positioning itself to offer an IP service package for combined voice and data.

Telecom managers' enthusiasm for IP "confirms our IP business platform," said Sheldon Ohringer, president of ICG. "Carrying voice over data networks is a natural. We've gotten into it very quickly with an entrepreneurial telephone company and a huge ISP."

The survey respondents' enthusiasm must be tempered with realistic expectations for IP deployment as well as the time it takes for large organizations to sign off on such decisions. Killen made projections for the large company market before conducting the survey, and the company's forecast predicts a slower transition to IP than the survey indicates (see figure).

"Large companies are not moving [to IP] as quickly as smaller companies," said Karl Duffy, Killen's telecom services director.

Smaller companies may be a better target for IP services for the near term, but not because of a lack of interest on the part of larger companies, said Ohringer.

Smaller to medium-sized companies don't care about the medium of transmission as long as price and quality are acceptable, he said, "and maybe it's just easier to get to [a smaller company's] decision-maker."

Even if the survey results present an overly optimistic outlook for IP telephony's growth among large business customers, carriers will be very pleased if growth matches more conservative estimates.

"I like the trend of promising growth estimates," Ohringer said, adding that he's not surprised that telecom managers at large companies are eager to incorporate IP telephony. "When you say to them that you can put voice traffic over their data network, they'll say, 'Sure, why not?'"

Although ICG is excited about market projections, those numbers aren't likely to produce any changes in its business plan, Ohringer said.

"I don't think anybody has a more aggressive rollout plan than us," he said.

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