Myths and Misconceptions of IP Telephony

Posted: 03/1999

Myths and Misconceptions of IP Telephony
By Ofer Gneezy

Internet protocol (IP) telephony continues to heat up the already smoking telecommunications industry. As VIP Calling Inc., Burlington, Mass., and other next-generation telcos play David to the established circuit-switched Goliaths, we alternately are buoyed by some analysts' predictions of an "imminent packetized world" and cast down by others who see only Chicken Little squawking about the sky. But how sharp are those slingshot stones? And what's actually holding up the sky?

In the midst of any period of hype there comes a time to clear the air, to cast off the prevailing tales born from an initial absence of real-world experience. In this spirit, I offer the following "unconventional wisdom" based on my recent adventures delivering millions of wholesale IP telephony minutes around the world.

Myth: Voice over IP (VoIP) is inexpensive and low-quality.

Reality: VoIP is inexpensive and capable of delivering toll-quality calls.

We don't believe inexpensive, low-quality voice is a significant market. The real market is inexpensive, toll-quality voice. IP telephony service providers have created networks and monitoring tools to deliver the quality customers expect at packet-based costs. This quality includes one-stage dialing, no echo, low latency, low post-dial delay and high call-completion ratios.

Myth: Fax is easier than voice.

Reality: Real-time fax technology is still in flux.

Many industry pundits portray fax as the easy way to enter Internet telephony markets. Unfortunately, real-time fax actually is quite difficult because it lacks the flexibility and versatility of voice. Two fax machines operate under extremely tight protocols. This is partially because if I send you a spreadsheet, you don't want to hear that it is 99 percent accurate.

The industry protocol debate continues: Should fax go transmission control protocol (TCP) or unreliable datagram protocol (UDP)? The jury, for my part, is still out, but the end game is clear: Gateways must provide universal port functionality. This way, when a gateway receives a call, it immediately delivers it to the destination regardless of whether it was a voice or fax call.

Myth: Worldwide point-of-presence (POP) coverage is the key for every service provider.

Reality: Every IP telephony service provider (ITSP) has worldwide presence.

Every ITSP has worldwide coverage today. By effectively carrying some of our traffic on-network and some off-network, VIP Calling provides its customers the ability to call everyone in the world. For instance, if an end user in Japan wants to call London, where VIP does not have a POP, the traffic comes over the Internet to the United States where we reoriginate it on the public switched telephone network (PSTN). The "United States-London" aspect of the call costs less than 4 cents a minute, making the entire call extremely cost-effective.

Myth: Interoperability is the most important issue facing VoIP providers.

Reality: Operability is more important than interoperability.

By all accounts, today's first-generation IP telephony hardware lacks scale, flexibility and reliability. Most gateways have one or two T-spans. This pales in comparison to the demands created by large call volumes generated through wholesale operations. ITSPs need port numbers in the hundreds, not tens. Additionally, many gateways are based on industrial-strength personal computers (PCs), resulting in limited routing-choice flexibility and extensive integration requirements. Hubs, routers, channel service units (CSUs), data service units (DSUs), DS-3 multiplexers, digital system cross-connect frame (DSX) panels and gateways must be assembled to deliver the service that customers expect.

Truly operable gateways would provide more of a "tandem-switch" offering reliability and functionality with a high degree of integration. Equipment providers need to undertake the challenge of assembling components into boxes. Once the equipment is truly "industrial strength," interoperability will provide real value.

Myth: Value-added services are the key to IP telephony.

Reality: Today's value is in voice and real-time fax.

There are three phases in the deployment of IP telephony: Phase one is to offer the same services at lower cost; phase two is to add value-added applications; and phase three is packet-based network domination. Today, despite all of the hype surrounding value-added services, the service offering is really voice and fax at a lower cost. Outstanding, life-changing applications will arrive, but they are not available for commercial deployment right now.

Myth: Enterprise networks will emerge as the dominant VoIP market channel.

Reality: IP telephony is enabling carriers to provide the enterprise with the cost advantage that previously was only possible through a private network.

Voice private networks allowed corporations to perform rate arbitrage when there was no alternative technology to avoid regulation. Wholesale IP telephony delivers comparable cost-savings with the added benefit of outsourcing network management, which is not a core competency of many corporations. Many companies currently invest significant resources babysitting their networks. As the demand for new services increases, the technological knowledge required will only expand. This will drive the cost and complexity of internally managing a network upward. The simultaneous new opportunity for cost-effective outsourcing will decrease popularity of enterprise networks.

Myth: The public Internet is too unreliable to deliver high-quality voice.

Reality: Using the public Internet for Internet telephony is not easy, but the right tools and processes can deliver toll-quality voice over the public Internet.

Initial PC-to-phone VoIP offerings have colored prevailing perceptions of quality. These models allowed callers to use the Internet indiscriminately with unpredictable quality. Commercial operations are not held prey to these vices, however; they can establish high-speed connections and judiciously choose less congested Internet service providers (ISPs). Carriers can maintain multiple DS-3s into the Internet backbone and require that Internet connections into each country support low latency.

Latency, however important, has been misperceived by some as the sole key to unlocking quality. In reality, a provider must deliver quality across multiple parameters--call completion rate and post-dial delay echo cancellation, in addition to latency. To achieve this while maintaining an Internet cost structure requires maintaining "two networks." VIP Calling does this through assured quality routing, a set of processes and procedures that automatically reroutes calls to the PSTN when parameters on a given call exceed developed acceptable ranges.

The final stamp of quality, of course, comes from the customer. Customers simply will not tolerate poor quality; they will hang up. Average call duration, which is more than five minutes (for mixed voice and fax traffic), provides the most powerful testimony of quality. Today's IP telephony customers are receiving the quality level they expect.

IP telephony pulses with excitement. Every week the Davids of the market announce new sharp stones while the Goliaths trump aggressive migration plans to avoid the falling (circuit-switching) sky. The long-foreseen opportunity is real and focused players are delivering on it now. Assuming regulators continue their current favorable strategy, the clear winner will be the consumer.

Ofer Gneezy is president and CEO of Burlington, Mass.-based VIP Calling Inc., a wholesale provider of global Internet protocol (IP) telephony services. He can be reached at +1 781 229 0011.