VoIP is ready for prime time

In the early days connecting to a telephone line with a modem required a tool kit, alligator clips and a great deal of innovation and engineering skill. To say the least it was not easy to communicate digitally while on the move via fixed telephone lines--and mobile phones were not around to provide an easier alternative.

When visiting companies, I would often receive blank looks if I asked if I could connect my computer to their telephone network. I remember taking the screws out of a public call box (or two) and dismantling hotel junction boxes to get at the wiring. I also remember having to explain my actions to managers, police and security guards. Thankfully having a phone company ID card seemed to work everywhere, even if I was on a different network. After a while sockets started to appear on telephones and the process became considerably easier. This was followed by local area networks and the provision of RG45/CAT5 connections that allowed considerable speed increases.

The next biggest innovation was the arrival of the mobile phone which, when connected to my laptop, revolutionized the way I worked. At last I could get online at airports, coffee shops, hotels and lobbies all over the planet--but at great expense. I have literally spent tens of thousands of dollars on getting my laptop and computer online from remote locations.

Further significant advances were brought about by the arrival of text and instant messaging (IM) as well as voice messaging. But most recently the arrival of voice over IP (VoIP) has turned the entire economic model upside down--and yet again changed the way I operate.

For the last few months I have been experimenting with Skype in particular for voice connections when I travel. During the last six weeks, all of my telephone calls--Skype-to-Skype, Skype-to-mobile and Skype-to-fixed line--have been via a headset and my laptop computer. I've connected to the internet via wired or Wi-Fi LANs in hotels, office buildings and restaurants.

In short: my mobile phone bill has plummeted from $500 a month to less than $10 a month. The number of times I have had to use my mobile phone in the US during the past two weeks can be counted on the fingers of one hand. For the most part it is people calling me on my mobile that dominates my usage. My outgoing calls are now few and far between. The prevalence of low-cost or free Wi-Fi across the US means I am at most paying for a local telephone call in the destination country.

My evaluation of VoIP is very simple: it either works or it doesn't--it is strictly binary. It either has a quality of service that far surpasses the telephone network or it is so poor it is unusable. Either way the economic impact for my company and many others is profound. I've purchased headsets for all of my children and colleagues and asked them to move to VoIP. Early this morning in Cupertino, California, I had four conversations back into the UK at zero cost.

Here's one change I've noticed. Because VoIP calls cost nothing, or almost nothing, they become a connection and not a call. I just open up a channel and use it much like an intercom or a casual conference call. And because of the voice quality, there is great intimacy and connection. It seems to re-enable those emotional bits normally thrown away by the restricted bandwidth of the old telephone. All in all VoIP makes communication far more effective than standard phones for all levels of social and business exchange.

At last the telephone companies and mobile operators are realizing the nightmare in which their future income from phone call minutes related to time and distance is under real threat. A combination of high billing system costs, static (or rising) provision and services costs, severe competition and an unwillingness of customers to pay is severely cramping their style. It is unfortunate indeed that they have long been aware that their 200-year-old model was going to collapse but took limited or no action.

The value for fixed and mobile operators is now in services. Unfortunately neither has seen fit to invest in sufficient numbers of services that interest users.

To be blunt, VoIP is going to hurt the industry. The really big question is: who is going to support the wired, fiber and wireless infrastructure for global data communication if the money is taken out of the industry by services based on VoIP and others that charge nothing? The answer is not 100 per cent clear but for sure there is no free lunch. We will have to pay--one way or another.

The most likely outcome is consolidation down to a very small number of operators under a regime of tight profit margins. At the same time the local loop/last mile may fall prey to a new breed of wireless operation, augmented by a raft of new companies offering bundled services.

But before all of this happens each customer must decide whether the quality of service for VoIP is good enough for them. I just hope it migrates toward the "five nines" (99.999 per cent) quality we have enjoyed from the telephone network and not go in the opposite direction.

Dictated in the garden of The Marriott Hotel in Cupertino, California, and despatched to my PA via their free LAN. Draft received in the lobby of the Westin St Francis Hotel in San Francisco the next day via a free Wi-Fi service. Revised over coffee and despatched to silicon.com within the hour.

biography
Peter Cochrane is a co-founder of ConceptLabs CA, where he acts as a mentor, advisor, consultant and business angel to a wide range of companies. For more about Peter, see: http://www.cochrane.org.uk/. He writes a regular column for silicon.com that is archived here.