WATCH OUT TELCOS,

HERE COMES INTERNET TELEPHONY!

By Dave Wallace

RIVER BENDER - December, 1998

What is Internet Telephony? It's the capability to talk over the Internet just as you'd use a telephone for long distance. It's not new. For some time Microsoft has offered free software called NetMeeting and currently includes it as part of their Internet browser. I played around with NetMeeting a bit, used it to speak to a fellow in New Zealand and England but wasn't impressed. It was like a free long distance call but there were gaps and clipping in the conversation and the speech quality was rather poor. Furthermore, to use it one must have a microphone and a pretty fast modem connected to a PC and establish a prearranged schedule to speak to someone specific. One of the problems of NetMeeting is that the end links are limited by your PC's modem speed.

But something new and exciting is about to happen. It's called "Voice Over Internet Protocol" (VOIP), Internet telephony or IP telephony. A new piece of hardware, called a gateway server, is the first step in a transition moving long-distance phone calls from traditional circuit-switched networks to the packet-switched Internet. The quality will be closer to toll grade telephone service and expected to be better than cellular service. Also one can use their regular telephone instead of a PC. But it will cost because of investments in new gateway servers and facilities and the fact that Internet Service Providers (ISPs) will probably have to pay similar access charges to the local exchange carriers like long-distance carriers now pay. Initial costs of Internet telephony long distance calls are expected to be about 50% of traditional calls but drop to 20% or lower as competition increases. Here's how VOIP works:

Let's say you want to make a call overseas. First you dial the local or 800 number of the closest gateway server using your regular telephone (you don't even need a PC). These servers sit next to the large central office switches that direct voice traffic for AT&T, MCI and Sprint. Once connected, you get an automated voice prompt and punch in the number you want to reach. The servers do two things: They convert your analog voice signal into digital packet data and route your packets over the Internet. A server overseas converts the data back to analog voice and directs the call over local lines to its destination. You pay only for the local connections on either end of the servers. What actually happens is that instead of having a traditional dedicated end-to-end circuit you will have a virtual circuit and your voice will be sent as packets of data over whatever Internet route happens to be available at that moment.

VOIP is said to be as significant to the telecommunications industry as the PC was to the computer industry. With a genuine alternative to the established telephone network, new companies will be able to compete with the traditional telephone companies.

What will AT&T, Sprint and MCI do about the competition? They'll continue to provide the pipes of course and will surely become involved in Internet telephony. But they may not be as aggressive and nimble as smaller companies and could see revenues erode as Silicon Valley starts calling the shots. It is estimated that 40% of AT&T's revenue comes from international calls. This just happens to be where Internet telephony will provide the greatest savings.

The main problem of VOIP is that the grade of service will not, at least initially, be quite as good as regular telephone service because of the virtual connection and the fact that delays can occur in reassembling data packets in their original order at the destination. Hopefully, this may be resolved by perhaps the adoption of another packet protocol for Internet such as Resource Reservation Protocol (RSVP) that will treat voice differently than data over the Internet.