Voice over Internet Protocol (VoIP) also referred to as Internet Voice and as IP Telephony is a technology that allows users to make telephone calls using a broadband Internet connection (high speed cable or DSL) instead of a regular (or analog) phone line. Some services using VoIP may only allow users to call other people using the same service, but others may allow users to call anyone who has a telephone number - including local, long distance, mobile, and international numbers. Also, while some services only work over a computer or a special VoIP phone, other services allow you to use a traditional phone through an adaptor.
Advantages claimed by VoIP advocates over POTS (Plain Old Telephone Service) include:
Convergence of data and voice applications
Support for telecommuting
Unified Messaging - email, voicemail, faxes, pages
Better support for call-centers
For businesses possible operational cost reductions come from reduced technical and management staff for one converged network rather than for two networks, reduced number of external vendors, reduced add, move and change costs, single help desk, and simplified chargeback. Firms with a number of geographically disperse offices make excellent candidates for cost savings. The choice for VoIP is easier when opening new offices where there has been no prior investment in traditional telephony.
Vendors contend that VoIP not only saves money on long distance telephone calls but enhances productivity. With VoIP multimedia conferencing, web-enabled call centers, real-time collaboration and the like become economical. VoIP offers centralized provisioning, management, technical support, billing and chargeback for all voice and data systems.
More advanced features are offered through IP Centrex (Central EXchange) and IP PBX (Private Branch Exchange). IP Centrex allows customer to have and use features that are typically associated with a PBX without the purchase of PBX switching systems. These features include 3 or 4 digit dialing, intercom features, distinctive line ringing for inside and outside lines, voice mail waiting indication and others. IP PBX is a private local telephone system that uses a IP telephone server to provide for call processing functions and to control gateways access that allows the IPBX to communicate with the public switched telephone network and other IPBX's that are part of its network. IPBX systems can provide advanced call processing features such as speed dialing, call transfer, and voice mail along with integrating computer telephony applications.
Given the fact that telephone networks were developed to support voice and Internet networks were developed principally to support text, we are not surprised that there are some aspects of Internet networks that make them less than ideally suited for voice communication.
The PSTN (Public Switched Telephone Network) is a “circuit-switched” network that operates by establishing dedicated connections, or “circuits,” between end points that remain open for the duration of each call and then shut down when the call ends. The charge for the call is generally a function of the duration of the call and the distance between the participants.
The basic process for VoIP is
|Convert analog voice to digital format by a codec (coder/decoder) according to various encoding standards Compress the digital data Packetize the data Signal or setup the call to locate and connect to destination Transmit Reverse the process on the receiving end|
An Analog Telephone Adapter (ATA) is a device that adapts or converts standard analog telephone equipment for use with VoIP. An ATA will have one or more telephone jacks to connect to the analog phone stuff and an Ethernet jack for connection to a LAN or broadband modem. Alternatively soft phones require only a computer to run on and a suitable headset or integrated microphone and speaker.
Issues surrounding VoIP
There are some known problem areas associated with VoIP which are described briefly below. The quality of service has been an area of concern that has been improving.
Latency is the amount of time delay between the initiation of a service request for data transmission or when data is initially received for retransmission to the time when the data transmission service request is granted or when the retransmission of data begins. Large latency values do not necessarily degrade the sound quality of a phone call, but the result can be a lack of synchronization between the speakers, such that there are hesitations in the speaker' interactions. Two problems due to delay are echo and talkover. If you watch CNN during interviews with overseas correspondents you see the annoying impact of time delay.
Jitter is the variance of interpacket arrival times as introduced by the variable transmission delay over the network. Removing jitter requires collecting packets (play-out buffers) and holding them long enough to allow the slowest packets to arrive in time to be played in the correct sequence, which causes additional delay. This technique can not eliminate server jitter.
Packet Loss occurs when packets are dropped under peak loads and during periods of congestion (caused, for example, by link failures or inadequate capacity). Packet loss causes voice clipping and skips, often resulting in choppy and sometimes unintelligible speech. Packet loss for non-real-time applications, such as Web browsers and file transfers, is undesirable, but not critical because of their retransmission capabilities. Approaches used to compensate for packet loss include interpolation of speech by replaying the last packet and sending of redundant information. Minor loss is tolerable and may possibly pass unnoticed. The listener can always request the speaker to repeat but this quickly becomes unacceptable if the loss is persistent.
Bandwidth Contention occurs when there are multiple users and/or multiple uses of the communication links. Administrators can assign a higher priority to voice communications which unlike text communication do not have loss detection and retransmission capabilities.
Voice quality is calculated by a measurement called MOS, or mean opinion score. This measurement is determined by an actual group of human listeners who rate the quality of audio on samples played to them. The MOS rating system is judged on a five-point scale where a score of 1 implies poor quality, and a score of 5 is excellent. Toll quality telephone service is generally granted a MOS score of 4.0.
Emergency Services such as 911 can be problematic in that with VoIP the caller's physical location is unknown and consequentially not broadcast to the emergency services' PSAP (Public Safety Answering Point). Enterprises can work around this shortcoming by assigning a physical location to each phone, and having that information transmitted to the PSAP. If the “phone” is moved to a different address, this information must be updated. The National Emergency Number Association (NENA) announced at the end of 2004 a voluntary agreement with the VON Coalition of VoIP providers to develop technical and operational methods for providing access to 9-1-1 services by users of Voice over Internet services.
Service outage occurs when there is a break in either power or broadband provider service. Traditional phone service continues in the event of a power failure.
Security problems related to privacy, unauthorized access, denial of service attacks, eavesdropping, disruption and so forth are similar to those find in normal Internet communications. Solutions such as encryption are available for some systems.
The cost advantage of VoIP is largely due to rulings by the Federal Communications Commission (FCC). This organization has worked to create an environment promoting competition and innovation to benefit consumers. Historically, the FCC has not regulated the Internet or the services provided over it.
On November 12, 2004, the FCC issued a historic decision and preempted the Minnesota Public Utilities Commission (MPUC) from applying its traditional “telephone company” regulations to Vonage's VoIP service. The FCC found that while Vonage's VoIP service resembled traditional telephone, there are fundamental differences between the two types of services.
- Vonage does not know where its users are located because service can be accessed over any broadband connection located anywhere in the world.
- The service requires the use of specialized software or customer premises equipment;
- The service combines voice with a suite of integrated features and capabilities; and
- While the Company uses telephone numbers, the telephone number is not necessarily tied to the user's physical location.
In reaching its ruling, the FCC applied Commerce Clause jurisprudence. Under this reasoning, a state regulation violates the Commerce Clause if:
1. It has the practical effect of regulating commerce outside of its borders; or
2. If it is excessive when compared to the local benefits of the regulation; or
3. In certain instances, commerce, by its unique nature, demands cohesive national treatment.
The FCC has organized an FCC Internet Policy Working Group to identify, evaluate and address policy issues that will arise as telecommunications services move to Internet-based platforms.
The regulatory classification of these services could affect any or even all of the following:
- Whether or not state and local taxes are collected, and how;
- Applicability of local exchange carrier access fees;
- Universal service fund contributions;
- Availability of 911 emergency services;
- Law enforcement capabilities under the Commission on Accreditation for Law Enforcement Agencies (CALEA);
- Requirements, or lack thereof, for regulatory oversight and reporting.
As with many technologies the emergence of standards is a prerequisite to investment and to widespread adoption. Two major standards bodies govern multimedia delivery over packet-based networks: International Telecommunications Union (ITU) and Internet Engineering Task Force (IETF).
The Internet Engineering Task Force (IETF), established in 1986, is a large open international community of network designers, operators, vendors, and researchers concerned with the evolution of the Internet architecture and the smooth operation of the Internet. It is open to any interested individual. The IETF is unusual in that it exists as a collection of happenings, but is not a corporation and has no board of directors, no members, and no dues. The IETF is not a traditional standards organization, although many specifications are produced that become standards. Every IETF standard is published as an RFC ("Request For Comments"), and every RFC starts out as an Internet Draft.
The actual technical work of the IETF is done in its working groups, which are organized by topic into several areas (e.g., routing, transport, security, etc.). The IETF holds meetings three times per year. The last meeting, IETF 61, was March 6-11, 2005 in Minneapolis.
The IETF working groups are grouped into areas, and managed by Area Directors, or ADs. The ADs are members of the Internet Engineering Steering Group (IESG) which is responsible for technical management of IETF activities and the Internet standards process. Providing architectural oversight is the Internet Architecture Board, (IAB). The IAB also adjudicates appeals when someone complains that the IESG has failed. The IAB and IESG are chartered by the Internet Society (ISOC) for these purposes. The Internet Society is an international, non-profit, membership organization that fosters the expansion of the Internet. One of the ways that ISOC does this is through financial and legal support of the other "I" groups.
On 24 May 1844, Samuel Morse ushered in the telecommunication age when he sent his first public message over a telegraph line between Washington and Baltimore. Many countries established international arrangements which would facilitate interconnection of their national networks. On 17 May 1865, the first International Telegraph Convention was signed in Paris by the 20 founding members and the International Telegraph Union (ITU) was established to facilitate subsequent amendments to this initial agreement. In 1885 the ITU began to draw up international legislation governing telephony. In October 1947 ITU became a United Nations specialized agency.
The International Telecommunication Union is unique among international organizations in that it was founded on the principle of cooperation between governments and the private sector. With a membership encompassing telecommunication policy-makers and regulators, network operators, equipment manufacturers, hardware and software developers, regional standards-making organizations and financing institutions, ITU's activities, policies and strategic direction are determined and shaped by the industry it serves.
The three Sectors of the Union - Radiocommunication (ITU-R), Telecommunication Standardization (ITU-T), and Telecommunication Development (ITU-D) - work today to build and shape tomorrow's networks and services. Their activities cover all aspects of telecommunication, from setting standards that facilitate seamless interworking of equipment and systems on a global basis to adopting operational procedures for the vast and growing array of wireless services and designing programs to improve telecommunication infrastructure in the developing world.
ITU-R draws up the technical characteristics of terrestrial and space-based wireless services and systems, and develops operational procedures. It also undertakes the important technical studies which serve as a basis for the regulatory decisions made at radiocommunication conferences.
In ITU-T, experts prepare the technical specifications for telecommunication systems, networks and services, including their operation, performance and maintenance. Their work also covers the tariff principles and accounting methods used to provide international service.
ITU-D experts focus their work on the preparation of recommendations, opinions, guidelines, handbooks, manuals and reports, which provide decision-makers in developing countries with 'best business practices' relating to a host of issues ranging from development strategies and policies to network management.
H.323 is an ITU standard that was originally created to provide a mechanism for transporting multimedia applications over local-area networks but has been extended to cover VoIP. It describes how audio, video, and data communications take place among terminals, network equipment, and services on IP networks. It does have an unnecessary amount of overhead but it is the most widely supported by VoIP equipment.
The H.323 standard describes four major functions of networked communications:
1. Terminals- telephones and PC equipment which connect end users to the H.323 network enabling two-way communication.
2. Gateways-designed for real-time, two-way communication between H.323 terminals on a network and other ITU terminals residing on a switched-based network or on another H.323 gateway. Gateways consist of a Media Gateway Controller (MGC) and a Media Gateway. The former is responsible for call signaling functions and the later is responsible for media-related functions.
3. Gatekeepers- provide address translation service, access control and bandwidth management. Gatekeepers are able to provide advanced services such as normally found in PBXs.
4. Multipoint control units (MCUs) - support multipoint conference communication. MCUs consist of a Multipoint Controller and an optional Mulitpoint Process. The former manages signaling and the later manages media mixing and switching.
SIP makes use of elements called proxy servers to help route requests to the user's current location, authenticate and authorize users for services, implement provider call-routing policies, and provide features to users. SIP also provides a registration function that allows users to upload their current locations for use by proxy servers. SIP runs on top of several different transport protocols.
SIP supports the following functionality for multimedia communication:
Real-time Transport Control Protocol (RTCP), an optional companion protocol to RTP, provides feedback on the quality of the data distribution being accomplished by RTP. RTCP enables administrators to monitor the quality of a call session by tracking packet loss, latency, jitter and other key VoIP concerns. This information is provided on a periodic basis to both ends and is processed per call by the media gateways.
Resource Reservation Setup Protocol (RSVP)is used by a host to request specific qualities of service from the network for particular application data streams or flows. RSVP is also used by routers to deliver quality-of-service (QoS) requests to all nodes along the path(s) of the flows and to establish and maintain state to provide the requested service. In order to efficiently accommodate large groups, dynamic group membership, and heterogeneous receiver requirements, RSVP makes receivers responsible for requesting a specific QoS.
VoIP Market Size
While the estimates of market size vary from analyst to analysts they all agree that usage of VoIP is growing dramatically.
In a VoIP industry report issued in January 2005 Halpern Capital estimated that the number of VoIP subscribers would grow from just over 1 million in 2004 to just over 16 million in 2008 and corresponding industry revenues would grow from under $400 million to nearly $4 billion. Halpern estimates the leading players Vonage, Cablevision and Time Warner Cable to have approximately 37%, 25% and 21% subscriber market share in 1Q05.
UBS Investment research pegs the number of telephony subscribers at 3.5 million at the end of 2004 and at 13.6 million at the end of 2008.
In-Stat/MDR estimates the number of VoIP ports in 2003 to be approximately 30 million and expects that number to reach 100 million in 2007. The corresponding revenue figures are $50 million and $140 million.
The Synergy Research Group reports that there are close to 8 million home users worldwide using VoIP to make phone calls over their broadband connections. By 2009, Synergy anticipates this number to grow to 58.9 million home users using VoIP to talk to friends and family around the world using broadband and VoIP technology.
According to Synergy the market for VOIP equipment sold to corporations and other enterprises, including phones, hardware and software, grew 78 percent to $3.07 billion in 2004, data, and is seen rising to $4.42 billion this year. By 2009, it should represent nearly $11 billion in sales. Synergy said Cisco's share of revenue from enterprise VOIP equipment stood at about 23 percent of the worldwide market at the end of the fourth quarter, neck and neck with Avaya, which was 24 percent. Nortel had about 13 percent. In Europe Alcatel and Siemens are major players.
According to Bill Simmelink, general manager of Texas Instrument´s VoIP business unit "TI shipped 50 million VoIP ports through 2003 and doubled that figure in the last year alone, becoming the first company to reach the milestone of shipping over 100 million VoIP ports, demonstrating the explosive growth of VoIP." TI claims to hold the largest share of the VoIP Customer Premise Equipment (CPE) market and has provided technology for more than 80 percent of all residential and enterprise VoIP gateways. The company also leads in shipments of high-density VoIP infrastructure solutions, owning 80 percent market share. TI ships its IP phone technology to four of the top five manufacturers, and, as the predominant supplier to the largest provider, owns a majority share of the IP phone segment. Products incorporating TI's technology are deployed by service providers throughout the world and power billions of minutes of VoIP calls every month.
VoIP Service Providers
The major telephone companies have entered the VoIP market. Verizon offers VoiceWing and AT&T offers CallVantage plans. They each offer a basic plan with a preset number of minutes and a premium plan with unlimited local and long distance calling with the United States and Canada. Users can pick the area code of their “phone” as well as features like call waiting, caller ID and home voice mail.
In November 2004 SBC Communications Inc. announced the launch of a residential VoIP service that will significantly expand the SBC IP service portfolio and give DSL customers a powerful new option for communicating with friends and families. The full-scale VoIP service rollout will take place in early 2005. It is preceded by a trial, now under way, in Los Angeles, Dallas, Chicago and San Antonio. The service will use IP technology and a DSL Internet connection to deliver not only voice calling but also other enhanced features, such as a Web-based portal and advanced call-management capabilities that make it easier for customers to manage their communications.
Alternate Service Providers
Vonage is a privately held company established in Edison, New Jersey in January 2001. Vonage has over 1,000 employees. With more than 500,000 lines in service, Vonage continues to add more than 15,000 lines per week to its network. Over 25 million calls per week are made using Vonage.
Residential Basic Plan - 500 minutes of local, toll and long distance calling throughout the United States and Canada for $15/month.
Residential Premium Unlimited Plan - unlimited calling throughout the 50 United States and Canada anytime, anywhere for $25/month.
Small Business Basic Plan - 1500 minutes of calling throughout the United States and Canada, including a free dedicated fax line for $40/month.
Small Business Unlimited Plan - unlimited calling throughout the United States and Canada, including a free dedicated fax line for $50/month.
Skype, the Global Internet Telephony company, was founded in 2003 based on peer-to-peer principles. The company offers free phone calls over a broadband connection between two members anywhere in the world. Skype was created by Niklas Zennström and Janus Friis, founders of KaZaA, the world's most popular Internet software, and has received investment from Tim Draper, Draper Fisher Jurvetson ePlanet, Index Ventures, Bessemer Venture Partners and Mangrove Capital Partners. The Skype Group is headquartered in Luxembourg with offices also in London and Tallinn. Skype's free software, which has just reached the 100 million download mark and boasts 35 million registered users. The free software runs on Windows, Linux, Pocket PC and Mac OS.
Skype gives away or licenses its proprietary source code to third party developers to create add-on applications. Developers get the source code by promising to either give their products away for free or provide Skype a share of the profits. About 1,000 programmers are working in this area on applications like voice-mail. For example, Connectotel has software that lets users exchange short text messages with cell phones. HotRecorder adds sound effects to Skype calls.
Skype's business model is to introduce its own premium service to its installed base. Even if only a small fraction of this customer bases opts for paid products or services, the company will do well. So far Skype has introduced three paid products: SkypeOut, SkypeIn and Voicemail.
SkypeOut lets subscribers make calls from the Internet to traditional phone network at abut 2 cents per minute. The firm has already signed up over one million users. There is a complementary service, SkypeIn, that lets subscribers obtain ordinary phone numbers in eight countries (US, UK, Denmark, Finland, France, Hong Kong, Norway and Sweden) and take incoming calls from standard and mobile phones for a flat fee of $13 for three months and $38 for one year. Normal long-distance charges apply, but calls are free for people who call in from the same area code. Subscribers can choose any area code, regardless of where they live, potentially eliminating some long-distance charges. Skype has acquired only 10,000 phone numbers so far but plans to increase that number and geographic coverage over time.
SyypeIn includes voice mail capabilities much like traditional voice mail in that users can record original outgoing greetings and receive messages up to 10 minutes long. In addition Skype stores voice mail messages so users can play them back even when offline.
The company is also moving forward with its Skype for Business offering, due out later this year. The capabilities will be similar to the offering for individuals but making the administration and billing easier.
Skype's costs are low because it relies on peer-to-peer network architecture to complete calls over the public Internet, with no need for expensive equipment or infrastructure on the back end. The company has about 100 employees.
The company has been hit recently with an unusually high number of complaints over billing and credit-card-related errors. In response, Skype ended its contract with an outsourced customer service provider and moved it inside.
Free World Dialup (FWD) was launched in November of 2002. Somebody who has broadband internet access, today, can visit the FWD website, download software and within a few minutes have a FWD Number assigned and be able to make and receive calls from all over the world using commercial hardware IP Phones (~$60). Once somebody is setup with their own FWD Number, they can may combined with a number of other service provides to get, for free, a US or International Direct-Inward-Dial (DID) number mapped to their FWD number. What this means is that the new customer can now start to receive direct-dial phone calls from traditional home phones and cellular phones. In addition, there are free “gateway” services available in many countries which offer the ability for two-stage dialing from a regular phone to someone's broadband FWD phone number. From inside of FWD, it is possible to place “toll-free” calls into the US, and “free phone” calls into the many other countries. These services are made available through peering agreements with others that connect to the FWD network.
CableVision reported over 250,000 subscribers at the beginning of December 2004 and had ramped up from adding 7,000 VoIP customer per week to 12,000 per week in January and February 2005.
Time Warner Cable reported over 220,000 phone subscribers (Digital Phone) in 27 states at the end of 2004 and a total broadband base of 3.9 million customers. Time Warner is adding about 12,000 VoIP customers per week.
Cox, which recently passed Comcast Corp. as North America's leading provider of cable telephony with more than 1.3 million phone subscribers, mostly using circuit-switched technology, announced its latest VoIP deployment plans early last month. Cox will extend its digital phone service to a total of at least 22 markets by the end of the year. Before plunging into the VoIP business at the end of 2003, the Cox rolled out circuit-switched service in 12 of its larger markets over the preceding six years. It now offers cable telephony to nearly two-thirds of the households in its territories. For the year, the MSO added 317,000 phone customers. In March 2005 Cox Communications and its primary vendor, Nortel Networks, have detailed plans to convert Cox's local telephone service from traditional circuit-switching to voice over IP.
Comcast has announced plans to provide VoIP services to 40 million homes by 2006. The company will conduct tests for VoIP in three markets this year, offering VoIP to half of the houses within their range of influence by sometime in 2005. With currently some 21 million cable television subscribers, and about 5.5 million broadband subscribers in that base, Comcast represents a formidable new entrant. It claims that 95 percent of its network will be able to accommodate the telephone calls by the end of 2005, Smith added. The service will cost $39.95 a month, when bundled with broadband or $59.95 standalone.
Internet Service Providers
America Online Inc. recently debuted its VoIP service offering. Subscribers to the VoIP service will get an adapter into which they can plug a traditional touch-tone phone and a broadband Internet connection. AOL offers several plans with introductory pricing.
A Local Plan with unlimited local and regional calls for US$13.99 per month for the first three months, plus $0.04 per minute for long-distance calls in the U.S. and Canada. After the first three months, the monthly rate will go up to $18.99.
An Unlimited Calling Plan including unlimited local and long-distance calls in the U.S. and Canada for an initial price of $24.99 per month for the first three months and $29.99 thereafter.
A Global Calling Plan with unlimited local and long-distance calling in the U.S. and Canada plus low international rates, priced at $29.99 per month for the first three months and $34.99 per month thereafter.
A special rate for new AOL customers, with unlimited local and long-distance calling in the U.S. and Canada plus the AOL Internet service over broadband for $29.99 per month for the first six months. After that, the monthly rate will go up to $39.99.
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--Contributing Editors can be reached by clicking here.