http://www.nytimes.com/2003/01/06/technology/06VOIC.htmlFrom the New York Times --
Phone Calling Over Internet Is Attracting More Interest
By SIMON ROMERO
Phone calls over the Internet may finally be catching on.
When the technique was first used in the mid-1990's, Internet telephone
conversations were hailed as a way to make long-distance calls without
paying toll charges. The most zealous advocates predicted that the
conventional public telephone network would quickly become obsolete. That
has yet to happen, of course.
Despite the money-saving potential, sending voice telephone calls over the
Internet remains largely a niche service for technophiles and for people
seeking cheaper international communications like users of prepaid phone
cards, who may not even realize that their discount calls are bypassing
the regular phone network. Yet the technology is showing signs of
gradually expanding to a broader audience, a step that could eventually
mean wide-reaching changes in the telecommunications industry, if early
experiments by individuals and businesses are any indication.
Terence Chan, an employee at a Seattle technology company, for example,
uses a service called Free World Dialup to talk to his family in Hong
Kong. Free World allows Mr. Chan and his relatives to use equipment that
looks and sounds like regular telephones but enables users to call one
another and pay no fees beyond the rates for their fast Internet
connections.
"I was interested in Internet calling as a technological novelty," Mr.
Chan said, "but what really got me into it was the fact that it is free."
Among business users, meanwhile, Japanese companies appear to be leading a
migration to Internet calling. Organizations like Shinsei Bank and Tokyo
Gas have begun using it for internal communications and some external
calls. A recent survey by the Mitsubishi Research Institute showed that
more than 40 percent of Japanese companies planned to begin using Internet
calling in the next few years.
Internet calling currently accounts for more than 10 percent of
international calling traffic, with about 18 billion minutes worldwide, up
from 9.9 billion minutes at the end of 2001, according to the research
firm Telegeography.
"We expect a steady transition to Internet calling so that by 2010, nearly
all calls will go over the Internet," said Tom Evslin, chief executive of
ITXC, a company in Princeton, N.J., that is a leading carrier of Internet
calls.
To be sure, few people in the telecommunications industry expect an
overnight transition. Instead, analysts and industry executives foresee a
gradual transition over several years, similar to the way people switched
from black-and-white to color television.
A big factor is the billions of dollars that large local and long-distance
carriers have invested in conventional network equipment. These companies,
which still transmit the overwhelming majority of phone calls, will be
reluctant to mothball their systems anytime soon.
Still, numerous companies on the margins and even closer to the center of
the telecommunications industry are seeking to take business away from the
dominant carriers by offering cheaper Internet-based services.
One of them is Mr. Chan's provider, Free World, a company based in
Melville, N.Y. Free World gives its users five-digit telephone numbers
that enable them to communicate using special Internet phones made by
Cisco Systems, for which Free World users pay less than $300. If the
company can reach its target of 50,000 users by September, it plans to
start charging for add-on services like voice mail and conference calling.
Advances in technology and the use of faster network connections have
alleviated many of the problems that plagued early forms of Internet
calling, like noticeable delays between the time someone spoke a word and
the time the person receiving the call heard it. The sound quality is now
comparable to that of calls placed via the public telephone network.
These improvements have benefited companies that transmit international
calls over the Internet, providing the service to other companies that
sell prepaid calling cards to the public. The callers and the people they
call, who use regular telephones, typically cannot tell that the Internet
is carrying all but the first and last few miles of their calls; the
signals are routed through Internet gateways.
The big difference between calls that travel over the Internet and those
that use the regular telephone network is the underlying routing
technology. Although the public phone network has become highly
computerized in recent decades, it is still in many ways the equivalent of
stringing two cans together to allow sounds to travel from one point to
another: each conversation requires a single dedicated circuit. The modern
phone network's complexity lies in the way any two "cans" are able to be
temporarily strung together by software that routes calls through a
carefully designed system of thousands of switching locations.
The Internet, on the other hand, uses a crazy-quilt network to send and
receive information, whether it is in the form of voice calls, e-mail
messages or video conferences.
In each case, sounds, text messages or images are digitally broken into
tiny bits of information and disseminated over the network, using any
number of routes before all the packets of bits are reassembled at the
other end of the line.
Many network engineers say that if telephone networks were built from
scratch today, they would almost certainly be Internet-based.
The Net is believed to be more efficient compared with the dedicated
circuits of conventional phone networks.
Executives at some of the largest telecommunications communications
companies are planning to make Internet calling part of their business as
they seek efficient ways to route some calling. But they expect the
technology to catch on at a much slower pace.
"We have a very reliable telephone system that has worked well for many
decades," said Eric Rabe, a spokesman for Verizon Communications, the
nation's largest local telephone company. "We see an eventual movement
away from the traditional system, but right now it's mainly early-adopter
types."
As more calls are made through a mix of Internet and conventional methods,
pricing is likely to become an issue. Calls over the conventional network
especially long-distance calls have generally been priced on a per-minute
basis, while billing for Internet connections is more typically a flat
monthly fee. Either system could be changed, although the Bell companies
and other giant carriers have an interest in maintaining the pricing for
the conventional network.
In addition, governments in several developing countries, including
Panama, Kenya and South Africa, have sought to limit the use of Internet
calling out of concern that national carriers in those countries were
losing revenue to Internet-based systems. In those countries and
elsewhere, regulators could require that Internet calls be billed by the
minute or taxed.
Within this country, a potentially major force in Internet telephony could
be the cable television industry. Large cable companies are already
providing telephone service, with about 2.1 million local voice customers
as of June 2002, according to the National Cable and Telecommunications
Association. Though it is still a relatively new business, that number is
expected to grow as cable companies bundle local phone services with their
offerings of fast Internet service and digital cable television.
Other companies, mainly start-ups that have managed to survive the
industry's recent turbulence, have their own strategies. One such firm is
Vonage, a company in Edison, N.J., that offers flat-rate calling services
over high-speed Internet connections.
Vonage customers can use a regular touch-tone telephone for a service plan
that charges $40 a month for unlimited local and long-distance calling in
the United States. Vonage subscribers use an adapter that lets them
connect their phones to their high-speed Internet modems. Users also have
access to low-cost international calling plans.
Despite the attention on consumer-focused services like Vonage's, some
analysts say the real growth behind Internet calling will come from
business customers. But in this country, that will require the continued
growth of high-speed, or broadband, Internet services.
Tom Nolle, the president of the CIMI Corporation, a technology consulting
firm in Voorhees, N.J., says broadband penetration needs to climb to about
20 percent of the population from the current level of 10 percent for
Internet calling to begin to make sense to a large number of businesses.
Once that happens, companies can start to use Internet calling to
communicate between their own offices and customers and suppliers. Such a
trend, of course, would raise the competitive pressure on large local
phone companies like Verizon and SBC Communications, which so far have
felt minimal impact from Internet telephony.
Another source of pressure on the phone companies could be the growing
popularity of the form of wireless Internet access known as Wi-Fi. Several
start-up companies mean to provide Internet calling services via Wi-Fi
networks, using hand-held or laptop computers equipped with microphones
and earpieces.
"There's no reason why companies can't use P.D.A.'s to give employees in
the field a way to access their corporate telephone systems," said Raju
Gulabani, the chief executive of TeleSym, a company based in Bellevue,
Wash., that makes software for wireless Internet callong on hand-held
personal digital assistants, or P.D.A.'s. Intel's communications fund is
an investor in TeleSym.
As with any emerging technology, it is unlikely that all the new
approaches to Internet telephony will take hold. But one thing is clear:
Internet phone calls have emerged as one of the most creatively vibrant
parts of the battered telecommunications industry.
"There's been very little innovation in 125 years of the public telephone
network," said Jeff Pulver, founder of Free World Dialup. "Anything that
can be done to wrest influence from the large companies that have such
control over the way we talk to each other is a step in the right
direction."
Copyright 2003 The New York Times Company
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