Internet telephony finally engages

The potential savings from using wide area networks (WANs) for Internet telephony and voice over IP (VoIP) have been dangled carrot-like in front of the corporate donkey since the mid-nineties but the technology has been slow to take off.

Immature technology, the rift between voice and IT departments, and the failure of CRM and unified messaging applications to gel with users have probably contributed to the slow uptake of combined voice and data systems. A survey by market-intelligence company Rhetorik in 2001 showed around 59 percent of respondents were nervous of VoIP because they didn't feel the technology was mature enough.

But the momentum may finally be building. Several large UK businesses have announced significant investments in IP telephony in the last year. Abbey National could be the biggest so far, with a current project to roll out IP telephony handsets to some 9,000 of its employees across 750 branches. High street retailer Allders, clothes designer Paul Smith and drinks company Diageo have all made serious investments in the technology.

"The market for IP technology in the UK is expected to be more than $100m. That's probably up from about $50m a year ago," says David Atkinson, Cisco IP development manager. "Most of the companies I talk to now say it's not a question of if they are going to deploy the technology, but when."

One of the reasons companies may have avoided combining voice and data networks is that the terminology can be offputting before you even get started on the technological issues. VoIP and Internet telephony are confusing terms -- probably due to more-than-liberal use of language by the marketing departments of some vendors

IP telephony describes technologies that use packet-switched connections to exchange voice, fax and other forms of information traditionally carried over the circuit-switched connections of the public switched telephone network (PSTN). VoIP, on the other hand, is a term used in IP telephony for a set of services for managing the delivery of voice information using IP. For example VoIP uses the real-time protocol (RTP) to help ensure that packets get delivered in a timely way.

The different IP transport mechanisms across the WAN can also be confusing. According to analyst Gartner there are three IP networks being used for voice:

Internet-based VPNs
Voice quality can suffer because of congestion and the number of router hops, so this is only an option for internal communications or when cost is paramount.

Network service provider VPNs
Service levels can be better controlled and service level agreements are offered but performance can be still inconsistent.

Enhanced IP networks employing Multiprotocol Label Switching (MPLS)
Gartner claims that 'high fidelity' VoIP will be offered by most network service providers during the next four years.

Recent research from analyst Canalys showed pure IP systems are accounting for twice as many customer premises telephony equipment shipments worldwide in the second quarter of this year compared to last. Although this is only an increase of around 3 percent to 6 percent, hybrid-IP equipment leads the way -- at 52.7 percent of the total -- and traditional voice-only PBXes coming in at 41.4 percent.

The halfway house of hybrid-IP solutions -- Cisco sells router cards that allow people with traditional PBXs to make use of their Wan for voice -- give businesses some of the benefits of converged telephony. These include reduced call costs and unified messaging, along with a promise of smoother integration with/migration from existing systems, says Canalys.

The fact that IP voice products have had time to mature is also playing a part in the increased uptake, says Cisco's Atkinson. "We have very low-end IP phones, so it's much more affordable than it was a couple of years ago. The whole industry is behind it and there is a lot more competition even from the traditional PABX manufacturers."

The costs of buying an IP telephony system are probably the same or slightly less than traditional PABX-based telephony but the cost of maintaining the system and moving users around over a five-year period are much less, says Atkinson. But he claims that as well as the cost savings, businesses should also be thinking in terms of the competitive advantage that integrated voice and data applications provide. "If you want to give people call centre applications or CRM or voice mail or unified messaging, it's a lot cheaper to do. Most companies will initially start off doing IP telephony, and run that for a year, and then go back and start looking at those other applications," says Atkinson.

But combined voice and data applications -- such as interactive voice response, speech recognition and automatic call distribution -- should be introduced to users slowly, according to analyst firm Gartner. "We don't expect enterprises to make huge leaps overnight toward totally new communication processes with IP telephony. This can be dangerous and result in user revolt," the analyst claims in its IP Telephony Can Revolutionise Business Communications report.

Service levels may mean that Internet telephony can compete with the traditional switched network as far as quality of service goes but cost is still the main motivating factor for a lot of enterprises. There are cost savings to be had from Internet telephony, but according to telecom analyst Ovum it depends on companies adhering to a specific calling pattern.

Companies that have most of their traffic concentrated within a country do not stand to gain much, Ovum claims, as incumbents are prepared to go a long way in offering discounts to keep their gold customers. Voice over IP VPNs really make sense for firms that make international calls from within an office to outside parties as these calls are still expensive over switched networks.

Uptake of IP voice applications over the VPN may be increasing but routing calls over the public Internet won't deliver the kind of quality required by businesses in the foreseeable future. "The closest thing you get to people routing calls over the Internet is perhaps remote-working over broadband. That's the only area in the corporate environment I have seen people actually use the Internet. The problem with that is because it is an ADSL network there is no quality of service. Ninety percent of the time the voice quality might be fine but some times the quality might break up which is why people generally use a WAN which has quality of service enabled and a service level agreement associated with it," says Cisco's Atkinson.

But the momentum is beginning to build for consumer VoIP where quality isn't so important. The take-up of broadband, although slow, combined with service providers offering free on-Net calling, and IP telephony software for PCs, is helping to push the technology, according to analyst Ovum. The majority of Yahoo! Broadband's customers in Japan have subscribed to its Internet telephony service. Also services like Apple's iChat, a service similar to Instant Messaging but with voice; and Skype, from the founders of file-sharing company Kazaa, which claims to be the first peer-to-peer VoIP system, are helping to drive consumer Internet telephony.

According to Ovum senior analyst Henning Dransfield, VoIP is like an iceberg at the moment; the market is fragmented but significant developments are happening under the surface unseen. "It would be folly to ignore a lurking presence under the surface -- icebergs have been known to sink many a ship."

Abbey National
Abbey National announced at the end of last year that is replacing its existing telecommunications networks with a BT MPLS IP-VPN service. A Cisco IP Telephony system will replace the telephony switches in its 750 branch offices. This equates to around 9000, Cisco IP phones. According to Abbey the service will allow branch offices to contact any other Bank location via an "on-Net" call, rather than make a call across the PSTN. The bank claims a further benefit will be the ease of call transfer between the Bank's call centres to branch office staff.

According to Cisco IP development manager David Atkinson it's probably the largest rollout in the UK. "Most of banks use a service called Featurenet 5000 where they buy telephones from BT. BT has a very large PABX which they run analogue circuits out of to the bank's branch and the branch just has the telephones. The bank pays so much per quarter. So as we roll out more converged networks to branches it makes sense to move from the Featurenet 5000 kind of service to a hosted IP telephony service," he says.

Diageo
Drinks company Diageo, which owns brands including Johnnie Walker, Guiness and Smirnoff, has bought in using an IP telephony system in its new global headquarters in London. It's using around 2,000 Cisco IP phones for combined voice and data applications such as XML-based phone directory integration and hot-desking, where a user can configure any phone as their own. "Internal mobility and rapid deployment of new services are just not possible with traditional networks," says Martin Benett, Group Network Architect, at Diageo.