Fax fees get the ax: ISPs move in on fax market with services that cut fax costs

Internet service providers and conventional telcos haven't traditionally gone head-to-head when selling the same service. Voice over the Internet has yet to be fully exploited by ISPs because of sound quality and standards issues, and carriers with ISP arms are working hard to gain market share in an environment crowded with Internet specialty firms.

However, one communications medium may change all that by pitting traditional and emerging service providers against each other. In a little more than 18 months, Internet faxing applications have grown from a novelty to an important service offered by ISPs seeking to woo large business customers, especially those who frequently send documents outside the U.S.

Most customers are already familiar with sending faxes through their computers over the public network. Using the Internet in its place isn't a major cultural adjustment. Faxes are less vulnerable to delays and latency than real-time services such as voice and video. But more important, the cost of using the Internet to establish a fax connection is significantly less expensive than using the switched network-around 7.5 cents a page.

For companies that invest in Internet fax systems, the return on investment is very fast, said Dan Taylor, a senior analyst at The Aberdeen Group, a Boston-based market research firm. "We are not looking at an 18- to 36-month time table here. We are looking at things that pay for themselves in a couple of months, depending on your traffic patterns," he said.

For traditional carriers, increasing use of the Internet for faxing is a bottom-line issue. In 1996, fax traffic accounted for $92 billion in carrier billing, about 15% of the total, according to an International Data Corp. study. A shift of 1% of this traffic to the Internet would mean that carriers worldwide would lose $960 million dollars.

While some customers install and manage the technology themselves, ISPs such as UUNet, PSINet and Concentric Networks were quick to seize on the opportunity to turn Internet faxing into a value-added service. Other carriers such as FaxSav and RightFAX use leased lines and frame relay for reduced-cost faxing services.

"The cost is dramatically cheaper for users, and it costs us less to provide than ordinary faxing" because UUNet's service operates entirely over the WorldCom backbone, said John Sidgmore, UUNet's CEO.

The second generation of Internet faxing services is even more user-friendly because the software does not require a PC to initiate a fax transmission (see figure). These systems let users dial from a fax machine and have their documents directed to their ISP's point of presence (POP) via a local call. These calls can be directed to other POPs, which complete the faxes.

Service providers picked up the know-how from a variety of sources. PSINet uses a solution from NetCentric, one of the first players in the Internet faxing game. The software allows PSINet to track and manage faxes, and it uses the secure sockets layer protocol to assure customers that their faxes are secure.

UUNet's UUfax service uses Open Port Technology's fax software and Ascend Communications' dial-up concentrators.

While the medium for transmitting faxes may seem removed from traditional telephony, some things remain the same. "All the major service providers with fax services also offer service level guarantees," said Taylor, "so there has to be a management and monitoring structure in place. If you're a business, saving money is great, but getting those critical faxes through is much more important."

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