VoIP: Are we ready yet?

When Inchcape Motors needed to replace some of its outdated PABXs as part of a major overhaul of its technology systems in 22 Subaru dealership sites across Australia, VoIP was up to the task.

Inchcape's IT manager David Starr says voice over Internet protocol was a catalyst for other technology implementations that have transformed some of the company's business processes.

'We've rolled out IP telephony amongst all our sites and at the same time moved to thin client technology. We get better utilisation of our bandwidth throughout the whole company and use less staff to get better support of both data and voice networks.'

Starr says the company also benefits from the ease and quickness with which they can make changes and modifications to both systems.

The groundswell

IDC telecommunications analyst Susana Vidal says the shipments of IP PBXs and IP phones grew by 30 percent in Q2 2004 compared to Q1 2004.

Some fear the gathering momentum behind VoIP will damage the industry like other hype cycles before it.

Internet communications company Freshtel's CEO Michael Carew says this year is the first year the public has really become aware of VoIP. 'Also, the ADSL and the dial-up industry is aware that to add additional revenue to their market – which has been diminished through all the discounting that's been going on in the past 12 months – that VoIP is a great add-on product,' he says.

Until now, the impetus for business deployment of VoIP has largely been the need to replace equipment that has reached the end of its life. IDC says for government agencies, VoIP's appeal was cost savings and also integration with other things like Outlook or Lotus Notes.

'You can get your voicemail on your email, instant messaging, and we're starting to see some more integration of VoIP with CRM-type applications,' says Vidal.

Mobile communications company Mobile Innovations' CEO Ilkka Tales says the company has seen a stronger takeup of VoIP in businesses in the past 18 months and now that is spilling over to the consumer market as well. He says it is mainly early adopters at this stage, and it will be a while before Australia sees the same VoIP penetration among consumers as Japan, which has more than four million consumer VoIP customers. Even the US is lagging behind Japan, with only about 400,000 consumers using VoIP, he says.

The VoIP business is a buoyant one for Cisco, says Peter Hughes, general manager for advanced voice technologies. 'We actually call it IP communications. We believe IP telephony or voice understates what it actually provides for businesses.'

The benefits

The cost benefits of VoIP are now being taken over by what IP telephony can offer besides pure voice, according to Vidal. 'By this I mean applications, and integration with the enterprise applications and connection to remote offices for remote users.

'The argument for VoIP gets much stronger when you're not just replacing your old voice networks, but seeing what else can it offer,' she says.

Hughes concurs: 'What we're really starting to see now is the next phase of what IP communications really brings, like centralised administration and control, new capabilities like personalised services … and also what we're calling rich media – such as video, instant messaging, unified messaging and call centre applications.'

Following Subaru's VoIP installation, Starr says customers have simpler, more individual and timely service, and from an IT manager's perspective, he finds it easier to maintain and find where faults are.

'Some of the other things that have flowed out of that since then is we're using a lot of wireless technology. We're actually running the IP phones over a wireless network. So now when we wire up a new building, we only put cable to those desks that will have people sitting at them for more than 80 percent of the time. With everybody else, we give them a wireless IP phone or Tablet PC and they can roam around,' Starr says.

Subaru has already started experimenting with employees working from home. 'If you put an ADSL or a broadband service into their home, and put their PC on the end of that, and put their IP phone software into their PC, they are actually an extension of your corporation and don't have to dial into the public switched networks. A whole lot of those things come into play when you start looking at VoIP,' Starr says.

Mick Regan, convergence chief architect for Nortel in the Asia Pacific, says people are now looking for what else IP telephony will give them productivity-wise, not just a new handset with a nice colour screen. One of the key things they are starting to see now is mobility through wireless, he says.

Tales says one of the attractions of VoIP is that it's a very flexible and scalable standard. 'It's an open standard so we have access to a worldwide development community – so we can bring products to market very quickly.'

He says cost savings of up to 40 percent on the normal telephone bills are commonplace.

Robbie Kruger, business development manager for Avaya, says VoIP has operational efficiencies, where people can manage their technology from a centralised location, so you do not have to manage 10 remote islands. 'You're also consolidating what used to be separate voice and data people, so now you're having only one support group that looks after the one environment.'

He says the markets where VoIP is going ahead include government, education, health and private industry, and lately the financial markets. 'Pretty much across the board,' he says.

National carrier Agile Communications' managing director Simon Hackett says the economical thing about Internet access is it produces a distant-independent form of communication. You don't pay any more whether your bytes are going across town or across the world.

He says this is particularly alluring for consumers. 'Using voice over broadband you can look forward to your cost of voice becoming similarly independent of distance.

'For Telstra it's potential downturn. For them it's really a question of when they start losing more and more of their long distance call income. It will be a catalyst for changing their cost model,' he says.

IDC research shows we can expect the total VoIP market to grow at an annual rate of 43 percent for the next five years. 'The majority of all telephony in the future will be IP telephony, so this figure might be conservative,' Vidal says.

On the VoIP services side, this part of the market is expected to grow more than 60 percent this year compared to last year, Vidal continues. On the equipment side of the VoIP market, Cisco was in the lead with more than 40 percent in Q2 2004, followed by Avaya and Nortel, she says.

Issues and challenges

Kruger says VoIP got a bad rap initially because there were a lot of players who dabbled in it with no experience in IP telephony. 'They brought solutions to the market that were unreliable and didn't meet customers' requirements. So basically they damaged all the other vendors' IP solutions and the reputation of the technology itself. Everybody was a bit cautious.'

Cisco's Hughes says there have always been issues with VoIP, but often not technology issues. 'They're most often issues like internal governance issues, reluctance to change, investments that are not written down in a technology, or the skill sets within the partner community. It's often a combination of things, and I think the technology issues have been resolved enough now to everybody's satisfaction.'

Debate about the degree to which the VoIP industry should be regulated is also coming to the fore, as fears that over-zealous regulation will smother VoIP.

Carew is part of a VoIP forum trying to get all the heads of the VoIP industry together. He says the aim is have all the major players together to show a united front to the Australian Communications Authority (ACA) and try to get some form of standard going for VoIP, he says.

'Currently there are a lot of players in the VoIP industry going out with their own ideas and I think the industry will be all over the place for the next six to 12 months – at which point the standards will come in and level the industry out a bit,' Carew says.

Establishing a forum will also assist many in the channel and ISPs understand the VoIP industry a lot better, he says.

'The ACA is going to play a big part in VoIP in the next six to 12 months in relation to regulation and how the VoIP market is going to operate,' Carew says. 'It will change the industry depending on whether Telstra has a big hand in what's going to happen or whether the VoIP players get together and help figure out the direction of VoIP. It's very easy to destroy an industry by not understanding it. [We need] a united front to the ACA, and not have a hundred individual hands popping up saying, “What about me”.'

Another issue with VoIP, according to Tales, is that there is no quality of service standard for the internet in Australia. 'Not all ISPs have a quality of service plan on their internet that prioritises voice so you find at peak hours, voice is just treated like normal data. With some providers it may get blocked on the routers whereas with others, voice travels through as a priority,' Tales says.

Nortel's Regan says there are still issues to resolve with emergency services and VoIP, and there will always be security issues. 'Once you start putting intelligence in the handset you open the door for security aspects but we're constantly working on that.'

One other challenge stems from people's desire to be more mobile at work but still retain a single handset. 'Not only do they want to roam around in the office but they want to start moving outside the office as well and they want a seamless crossover going in and out,' Regan says.

While IP telephony allows you to do that, where do you draw the line if you go outside the building? he says.

'If you take three steps outside the office and have half-hour conversation, who actually picks up the cost of that? Does the cost belong to the telco or does it belong to the office?' he asks.

Home VoIP and broadband

For VOIP in the home, broadband is the only way to go, according to Agile. 'One of the reasons VoIP gained an early perception of not working too well is people tended to stuff it down pipes that weren't big enough,' says Hackett.

Hackett says of the one million broadband users in Australia at the moment, he expects to see at least 10 to 15 percent of those people using VoIP in one way or other over those broadband links within the next year. 'That's 100,000 people at least, so it's going to get interesting,' he says.

He says Vonage.com in the US is the poster child for voice over broadband (VOB). 'They are a VOB provider with a vengeance, and you can expect to see their model [adopted] here.'

VoIP for the home market has to be extremely simple to the end user, otherwise frustrations will turn them away.

Dr Neil Roodyn, who has trialled 'engin' Voice Box VoIP at home, says his technical background made set-up easy, but he has no doubt that installation will get more straightforward as home VoIP products are constantly refined.

Mobile Innovations, the parent company of engin, says the Voice Box allows home users to make calls to, and receive calls from, any landline or mobile phone over their broadband internet connection.

Roodyn decided to try home VoIP when he moved into a new apartment. He has Unwired broadband and engin's VoIP.

'You can actually just go to Dick Smith and buy a Voice Box. It's a physical little box that plugs into your broadband connection and you can plug a phone into it. It costs about $150 for the Voice Box, then more for whatever phone you want to buy. It can take just a normal landline phone, like the ones you get from Telstra,' he says.

'With Voice Box it doesn't matter if your computer is switched on or not. [You] just have to have an internet connection. My call cost are so reduced it's incredible.'

Carew says VoIP in the home must mimic the normal telephone system as much as possible, because the general public does not want to have to configure modems and ports.

'One of the problems with SIP (Session Initiation Protocol) is if you go out and sell someone a device with a big list of instructions and they find they can't do it themselves, they have to ring a tech centre. They'll get told to do XYZ and if the modem breaks down, who's going to go out and fix it? That's been a problem: trying to refine customer care and looking after [home VoIP] clients.'

Channel

Cisco's Hughes says there's money to be made in VoIP. 'It's been a learning curve both for the partners and Cisco. The partners are making more money and better margins than they used to. It's not just the margins they make out of selling a Cisco router, switch, a call manager and a phone; it's the margin they get out of the applications and the services,' he says.

And as for whether IP telephony is ready to do everything its supporters want it to do? 'One of the positives now is that everybody's moving to an open standard, SIP. SIP is 20 percent open for interpretation and 80 percent standard, whereas the old standards were the reverse,' says Regan.

'SIP will really help drive IP telephony but it currently doesn't have all the features and functions that we require. They'll be here within two to three years time,' he says.

Carew cautions channel players to observe closely the VoIP market over the next three to four months because it will change dramatically in what the providers are offering the channel.

'Be wary of jumping in too early without taking the time to look at all the players in the industry and what suits your model best. Because if you tie yourselves up to long-term deals and high-priced equipment, in a few months time you could have wasted your resources.'

Carew advocates going to forums, knowing the market backwards and evaluating the rollout plans and long-term strategies of the providers before partnering with them.

Peter Spiteri, marketing manager for Emerson Network Power, says one sweet spot the channel may have overlooked is power protection for VoIP customers.

'From a power protection point of view, IP telephony is going to create a very strong demand for critical power protection. If you've got both voice and data running over the same network, and you lose your network, then you've lost everything.'

The company says users demand the same high level of reliability for IP telephony and its converged voice/data/video applications as they demand from the conventional phone systems that IP telephony replaces.

'Accordingly, IT managers must provide the much higher level of power protection available only through the use of double-conversion online UPSs,' the company says.

Spiteri says channel partners can make margins of around 25 percent on these UPSs.

IDC's Vidal says it may be two to five years before we get to the stage where any communication device will be plugged into the IP network, and it will largely depend on how committed vendors are to ratifying the standard.

'When you have all the software and devices SIP-enabled then any device will be able to talk to any other device,' Vidal says.

That will be when VoIP really flies, Kruger says, because then you can write whatever business application you need around that voice environment and tailor it for a business' requirements.