Momentum builds for carrier-grade IP telephony

Years of kicking the tires of voice over IP (VoIP) technology in labs and network trials may finally pay off for the carriers and multiple-system operators (MSOs) that invested in this technology early on, then waited for the market to catch up. The end of 2003 and early 2004 heralded a flurry of carrier announcements. Regulatory policies or, more specifically, the lack thereof have catapulted VoIP issues such as termination costs and access fees to the top of the Federal Communications Commission's agenda.

While the momentum among service providers publicly is just getting underway, VoIP technology promises to change the complexion of some markets quickly. In 2002, international VoIP traffic reached more than 18 billion minutes, about 10.4% of the world's international voice traffic, according to market researcher TeleGeography (Washington, DC). Last year, international VoIP was projected to account for about 25 billion minutes, or 12.8% of total PSTN international voice traffic.

Meanwhile, international VoIP carriers such as ITXC and iBasis are growing rapidly, becoming among the larger operators worldwide according to TeleGeography analysis, partly because they carry traffic for other long-distance service providers. In some cases, end users may not even realize their calls are carried long-distance over the Internet, rather than on traditional voice networks.

In January, wholesale carrier Level(3) Communications (Broomfield, CO) announced it was expanding its termination services internationally, as part of a further push into the VoIP market. An early proponent of VoIP, Level(3) launched a Voice over IP (3) Voice Termination service in December 1999, terminating calls in the United States for PTTs, interexchange carriers, MSOs, and other companies. Carriers such as Deutsche Telecom are using Level(3) to terminate international IP calls in the U.S.

Level(3) executives describe these services as carrier-grade IP telephony. "You've got to differentiate between the old, 'I hook up my PC to your PC and communicate over the open Internet with our headsets,' and what we are doing today," says Level(3)'s Dennis Kyle, vice president of voice transport services. "The IP protocol is simply another protocol—no different than others that we have in play today. It's still supported by SS7 signaling, so you still have the full carrier-grade capability associated with a call. The protocol happens to be IP-based, so it does bring to mind you and I talking on our PCs with all the latency and jitter that is associated with that. That extreme is at the far end of the spectrum, and I think that is why the carriers are coming out so strongly for it."

Explains Kyle, "It's a protocol that allows the transfer of data, then allows a handoff that is IP in nature as opposed to TDM in nature, and what you can do with that handoff is very different than what you can do with a traditional TDM handoff and that's where the difference lies. You and I are still calling from our home phone number originating on the PSTN, but it comes into Level(3), and we convert it into IP to wherever it is going to go."

In the Level(3) network, this conversion is handled using softswitch technology—a term the company coined—which uses a server-based platform and specialized software to convert TDM voice into IP packets. Softswitch technology enables a much lower cost structure.

Call centers are very interested in VoIP technology, partly because of a set of multimedia (text and video) capabilities enabled by the IETF session initiation protocol (SIP), which many carriers, including Level(3) as well as Internet telephony and 3G wireless phone manufacturers, are evolving toward a common standard.

"Because it's IP, you've now got seamless computer telephony integration, as opposed to two different data streams, so now everything can be linked together," says Kyle. "And then with the SIP capability, which is very different from the old ITU H32.x, you can do neat things. For example, you are talking to a call center in Dallas and they say, 'We've got to transfer you to tier two support,' which by the way happens to be in India. They will take that call and drop the part of the call that is connected to Dallas, resend it to India, and you now have one call as opposed to two traditional telephony calls—one into Dallas and one that is linked to the Dallas call going to India. You are essentially taking the expense and chopping it in half, literally."

There are definite economies with VoIP technology, but the belief prevalent among many people that it will enable free calls in the near future is a misnomer.

"I think there will be some price compression; I don't think it will be huge," says Kyle. "Most of what the marketplace is focused on is added features and functionality to what we do today. If you were to do a comparison between our 800 product on an IP basis and on a TDM basis, there really isn't a difference on price, but it's like being able to buy a car with twice the horsepower and twice the features for the same price."

That's because carriers can create and control applications using SIP, making enhancements or changes within their own time frame. "The technology and the applications are flexible. They can dream up whatever service application they want and essentially, they can build that in-house, and they can combine our telecommunications products as the foundation for their application," says Matt Wilson, voice services product manager at Level(3).

VoIP, and more specifically SIP, also represents one of the telecommunications industry's first open standards, points out Wilson. "Moving forward as these carriers develop new applications, we are much closer to bringing those to the marketplace than the closed proprietary model that used to prevail in the industry. If you think of the old TDM marketplace, in the last 20 years, the innovations have really been call waiting and caller ID, and other than that you really haven't seen any outstanding applications come out of the space because it was so labor-intensive to work in a proprietary environment like that. With everyone saying, 'Okay, let's go to VoIP. SIP is going to be the foundation, let's build off of SIP,' some of the changes we've seen are pretty amazing."

Many carriers are seemingly on board, revving up their marketing and publicity machines. "I would characterize it as a footrace at this time to deliver the best set or suite of products in the marketplace," says Kyle.

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