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 VoIP set
to revolutionize communications?
EDITION DAY 09
of December, 2003
NEW YORK — When
friends and family dial Tom Tribolet’s Phoenix number, the phone rings in his
home in Argentina.
It’s not simple call forwarding, but a rapidly emerging
technology that allows this retired veterinarian to make or receive calls with
his local phone number anywhere he has high-speed Internet access.
‘‘When I
pick up the phone here in Buenos Aires, I have a live phone in the United
States,’’ said Tribolet, 64, who now trains race horses. ‘‘This is a wonderful
way to be able to keep in touch with my two sons and their families and my other
friends.’’
Analysts say the technology, called VoIP or Voice over Internet
Protocol, will upset the dominance of traditional phone companies and could
revolutionize communications, signaling an end to calls over the copper wires
people have used for more than a century.
With this future looming,
regulators and telephone and cable companies are scrambling to be part of
it.
‘‘Voice over IP is going to be as important and have as much impact as
the telephone itself,’’ said Jeff Kagan, an independent telecommunications
analyst based in Atlanta. ‘‘It’s one of those disruptive technologies that’s
going to change everything in the business.’’
The incursion of Internet
calling into the telecommunication industry has so far been small, with about
130,000 home phone subscribers. In comparison, there are about 166 million
residential phone numbers in the United States and an additional 150 million
cell phone numbers.
However, the number of Internet phone users is expected
to jump next year as more companies offer the service.
The technology
converts speech into packets of digital information that speed over the Internet
and are reassembled into a voice on the other end. Many companies offering the
service promise an experience no different than making a traditional phone
call.
A leader in this nascent industry is Vonage Holdings Corp., a private
company based in Edison, N.J. Vonage began offering its Internet phone service a
year ago, and has grown this year from 7,500 customers to more than
76,000.
One of those thousands is Tribolet, who pays $34.99 for unlimited
calling in the United States and Canada and a host of features ranging from
traditional call waiting to voice-mail messages delivered to his e-mail.
He
and other Vonage customers use a phone adapter supplied by the company to link
ordinary phones and fax machines to the cords from a cable or DSL Internet
connection.
Vonage and similar Internet services can call traditional
residential phones, using part of the existing phone networks. Calls between
people using the Internet on both sides might skip the traditional phone system
entirely.
Vonage customers can transfer their existing phone numbers or have
their choice of local area codes for a new number.
About a quarter of
subscribers chose local numbers that don’t match their geographic area, said
John Rego, Vonage’s chief financial officer. He said this uprooting of local
numbers is going global, with the company expanding its operations into the
United Kingdom and Switzerland.
‘‘If you’re living in Manhattan you could
have a U.K. phone number,’’ he said. ‘‘Phone numbers don’t mean the same to us
in our world.’’
The technology, which enjoys cheaper rates and freedom from
the regulations that apply to phone companies, is yet another challenge for the
regional Bells — BellSouth Corp., SBC Communications, Verizon Communications and
Qwest Communications. The industry giants already duel with cable companies over
broadband subscribers and struggle to adapt to more people ‘‘cutting the cord’’
and leaving landline phones for cellular service.
Sensing that the best way
to beat the coming threat is to join in, the Bells are rolling out their own
Internet calling services. Most of them, as well as AT&T Corp., already
provide some type of Internet phone service for business customers.
Qwest and
Verizon say they want to have widely available Internet calling services for
consumers next year.
The analyst Kagan said that while companies like Vonage
are growing rapidly, they don’t threaten phone companies in the long
term.
‘‘I don’t think they are going to be the leaders,’’ he said. ‘‘They’re
the ones who are forcing the change.’’
Instead, he said, cable companies are
the greatest challengers to the communications industry, and ‘‘if we go out a
few years the cable companies and the phone companies start to look a lot alike
to the customer ... because of voice over IP.’’
That convergence has already
begun.
Cablevision, serving more than 3 million subscribers in and around New
York City, began marketing an online calling service last month to its more than
1 million high-speed Internet customers.
Time Warner Cable, with about 11
million customers in 27 states, launched an Internet phone service in Portland,
Maine in May and now has more than 8,000 customers there, said spokesman Keith
Cocozza. Four out of five of those customers transferred their traditional
residential phone numbers to the new service.
The company has also begun
offering the service in Raleigh, N.C., and plans to expand to all the states
where it has cable service.
Other cable companies have similar
plans.
Cocozza said Time Warner is voluntarily paying government fees
associated with a traditional phone service.
The question of whether or not
such fees should apply to phone calls on the largely unregulated Internet hangs
over the new technology and leaves the government pondering what role it should
play.
Some of the fees, which phone companies often pass on to customers, go
to a $6 billion program to subsidize phone and Internet service for schools and
poor and rural areas. Other payments fund 911 services.
The Federal
Communications Commission held a forum last week on VoIP and announced the
formation of a task force to study the technology and recommend how regulators
should proceed. It could take a year or more for the agency to devise a new
policy.
FCC Chairman Michael Powell warned that the government should avoid
stifling the emerging technology, saying ‘‘services such as VoIP should evolve
in a regulation-free zone.’’
BellSouth spokesman Joe Chandler said his
company agrees there should be minimal regulation of the new Internet phone
technology, but ‘‘that approach should apply to all providers.’’
The FCC is
also weighing whether law enforcement should be able to trace Internet calls and
how online calling should interact with public safety systems.
Traditional
phone providers and Internet phone services from cable companies can
automatically tell emergency operators the origin of a 911 call, since the
service is linked to a subscriber’s home.
For Vonage and other VoIP
providers, 911 is a work in progress. The same technology that allows local area
codes to be used around the nation and the world makes it complex to pin down a
caller’s location.
Vonage’s Rego said his company’s full 911 service is about
18 months away.
Without clear guidance from the FCC, several states are
looking to regulate the budding technology. Buta federal judge in Minnesota
dealt that effort a blow in October when he ruled that Vonage was not subject to
that state’s regulators, who wanted the firm to register as a phone
company.
Internet telephone calling technology began about decade ago but
initially was only used by tech-savvy experimenters willing to endure technical
problems, poor sound quality and calls only between two online computers. The
speed limits of dial-up modems in the years before broadband also made the
technology more of a novelty than a convenience.
While start-ups like Vonage
fight with the telephone and cable giants for subscribers, other Internet
efforts are under way to make all phone calls free.
Skyper Ltd., a Swedish
company founded by the creators of the file-sharing program Kazaa, gives away
software that lets some Windows users make free high-quality phone calls over
the Internet. Any two people who have the software, an online connection and a
headset can call each other.
There have been more than 3.4 million downloads
of the ‘‘Skype’’ program, according to the company Web site.
‘‘The line that
comes into the home today is a phone line. The line that comes into the home
tomorrow is going to be a broadband line and everything in the house is going to
plug into it,’’ Kagan said. ‘‘It’s a ’Star Trek’ future. It’s where everything
is connected.’’
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