Voice over Internet Protocol (VoIP) has been around for a long time. But despite plenty of commercial providers, the number of phones on old-fashioned TDM-based voice service has grown faster than the number on VoIP.
That could be set to change.
Consider the “Hub” announcement from Verizon Wireless , and the femtocell and fixed/mobile convergence plans of both Verizon and AT&T Inc. (NYSE: T). Paired with the acknowledged aging of most carriers' Class 5 voice plants, it looks to me as if we’re going to finally get the big players involved in moving voice to IP universally. The move won't be quick, but it's certainly starting.
The question is whether that's good or bad.
On the one hand, about two-thirds of all the world’s telecom revenues come from voice. At the same time, everyone now understands that advertising alone won't generate sufficient revenue to expand and sustain the Internet over time. To keep enough money coming in to support the Internet, there will need to be another revenue source.
The risk here is that in moving to VoIP in a big way, telcos and ISPs might focus on transporting voice traffic instead of working on voice services. Pressure to make the Internet fully reliable, like the voice network, and fully regulated, like the voice network, could turn the ISPs into telcos, and telcos into offering more of the same voice commodity they’ve been peddling for years. Not the best strategy.
Voice is in decline in revenue terms; cost management is why telcos are looking at VoIP in the first place. eBay Inc. (Nasdaq: EBAY) is rumored to be trying to sell Skype Ltd. , so it seems clear that just putting voice on IP doesn’t guarantee financial success.
Might we be smarter to ask whether the Internet could support what the telcos do see as a revenue future? That means looking at VoIP as maybe the first of many new services.
Which brings us to the problem of just how to make that happen.
In order to develop multimedia services that add voice, texting, Web searching, GPS and location, video calling, and other features to their networks, telcos use IP Multimedia Subsystem (IMS). The trouble is, IMS is the poster child for a walled garden -- a service architecture where nobody but the provider that offers the service can contribute features or add value or earn incremental revenue.
The Internet -- and any service, including VoIP, that runs over it -- needs a service-layer framework of its own that’s not secured in a walled garden fashion, but instead allows content and services to be more flexible.
To link service features together, telcos could turn instead to Web technology (Web services or Web 2.0). That requires a change in thinking on their part.
The telcos’ problem is that they have an unhealthy dependence on voice. The Internet's problem is a similarly unhealthy dependence on advertising. The alternative to advertising sponsorship of the Internet is paid-for services created on the Internet, services that people are eager to pay for.
VoIP, if it could become an Internet voice service and not a transplanted telco service, might be the cornerstone of such a service-focused program, and it could take the Internet out of its total reliance on ads or free stuff.
It all depends on how open telcos are to changing their approach, and whether they can agree with ISPs on a unified “service layer” for the future Internet.
— Tom Nolle, software engineer and founder of CIMI Corp.
But I don't think it's about technical issues right now. I'm pretty sure VZ and ATT are using VoIP for their backbone traffic.
The problem with going all out with VoIP is that they can't make money out of it. If they did go with it, they would have the World's most expensive room dividers (their TDM switches).
If they finally go all out with VoIP, how will they revenue from it? just like data?
IMHO, IPv6 won't solve the problem. You can achieve QoS in IPv4 networks. The lack of QoS is a business model issue and not a technology issue. If you have settlement-free peering and bill-and-keep you will never have QoS except within your own cloud on perhaps your own VPNs.
IPv6 could help VoIP in an addressing sense for sure, and if you could get around the business problems it might make QoS a bit easier to manage, but if you look at how IMS manages voice QoS today it works just as well with v4 versus v6, and I think we have to assume that current IMS-like voice systems are an acceptable benchmark for QoS for future services.
But the QoS point is a good one because it brings up another issue, which is that if the telcos create a QoS-capable network to carry voice, interconnect it, provide settlement on it among the partners, and all the other stuff they now do for standard voice, this new network would look awfully good for other applications like video. What happens to the Internet then?
An important problem preventing VoIP from reaching a trustworthy industrial service level is the lack of QoS in IP (v4) networks at the carrier and enterprise levels. IPv6 networks address this issue since it implements the QoS and insures the reliability of VOIP infrastructure. I think IPv6 is a "must" for VOIP services to develop.
Interesting points from both of you, and I agree that there is a risk that the telcos might end up coopting the shift to VoIP. I also agree that it's not something that can happen instantly. However, I think that there is a difference between a VoIP service that is linked to computing or in some way behaves differently from wireline in the view of consumers, and one that just plugs a black phone into a VoIP box like Vonage.
Verizon's Hub is, I think, a clear signal that the telcos are going to make a fixed-mobile convergence leap into wireline VoIP in 2009, aided by femtocells that both Verizon and AT&T are rolling out this spring. This isn't going to sweep the market, I agree, but it is the first step in transitioning off TDM. First, you use features to pull the people who aren't as price sensitive. Only when you can't create what I'll call "attractive" VoIP at a decent margin do you start to give people the hardware needed to make their current phones compatible with VoIP serivce. For sure this will take years.
What I'm concerned about is that the formulation of the way we build these new services won't take that long, and that the Internet isn't really participating in that process. That's what makes the risk this would become a new generation of IMS so large, and that the new services would be a simple IP transfiguration of good old PSTN.
You raise some good points in your article. You're absolutely right that carriers are reluctant to move to VoIP en masse, but I think reluctance is due more to customer resistance than concerns over the ability of the network to handle it or regulation. Despite the trend amond the younger generation to use wireless phones only, most consumers want to keep a landline. As the August 2003 east coast blackout made clear, only landlines can be relied upon to work in a power outage or emergency. There are also technical and operational challenges with ensuring 9-1-1 service interoperability with VoIP and wireless.
This isn't to say that VoIP doesn't has it place or can't be successful. Skype is enjoying an ever-growing subscriber base (eBay wants to unload it mostly because it's a poor fit with the rest of their business, not because it isn't making money) and Vonage might still do well if it can get its costs under control.
Thanks for interesting and informative article. You pointed out correctly that telco need a huge change in mentality to bring real change to the voice industry and for the betterment of internet too. But do you think it is going to happen so easily and smoothly. Of course the benifts like you pointed out are going to change the internet and make it a free world but i fear if telco can feel the same.
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