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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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JANUARY 6, 2004
Finally, 21st Century Phone Service [Page 2 of 2] AUTOMATED REMINDERS. Businesses already are finding creative ways to use VoIP. Health-care providers are writing software that integrates patient scheduling with the IP phone. When a patient calls in, the system can identify the person and automatically bring up relevant information such as his or her preferred physician, date of last visit, and the week's available appointments. The system can also be designed to automatically dial the numbers of patients who have appointments the next day and leave automated messages reminding them to come in. One health insurer, which prefers to remain anonymous, uses VoIP in a virtual call center staffed by nurses that it has hired across the country. It gives each one a laptop that's connected to a single location via IP telephony. When a call comes in, it rings on the laptop of whoever is on duty. The nurse puts on a headset and answers the "phone" to dispense advice. This system means the company doesn't need a central call center, and it can hire nurses in areas where salaries are lower. Many companies are looking at VoIP right now for strategic reasons. Robin Gareiss, principal research officer at Nemertes Research, says that's because it's time to upgrade their PBX systems, or private branch exchange networks. Most companies bought new PBX equipment in 1998 and 1999 in anticipation of Y2K, and that equipment has now depreciated and is due to be replaced. Before they act, chief information officers want to make sure that whatever they buy prepares them for the years ahead. "CIOs know [VoIP] is the wave of the future, and they don't want to buy equipment that could hold them back," says Gareiss. CHEAPER CHANGES. Ultimately, however, VoIP's lure boils down to money. Calls within the enterprise, whether it's the San Francisco or Singapore office, are "free" except for the cost of providing Internet bandwidth. Even bigger savings come from simpler network management. It's no longer necessary to have engineers running separate phone and data networks since with VoIP all such traffic is carried over one set of pipes. Nasdaq estimates that it has cut $40 million off its $100 million annual network cost by using VoIP to consolidate its 15 networks into one. Corporations also save money on so-called moves, adds, and changes (MACs) of phones within their offices. According to a Nemertes survey conducted last July, those polled spend an average of $119 every time they add or move a phone, or change a number. On average the surveyed companies perform 0.87 MACs per employee per year. Once IP telephony is implemented, these costs drop. Instead of the one to two hours required for a PBX MAC, IP telephony MACs take about 15 minutes and cost from $2.31 to $2.81, according to Nemertes. Money that stays in corporations' pockets is money the phone companies never get. Thus, the effects of VoIP will fall on everyone from PBX equipment providers such as Avaya (AV ) and Nortel (NT ) to long-distance giants AT&T, MCI (MCI ), and Sprint (FON ). But it's the Baby Bells, which until now have enjoyed captive consumers, that are likely to be hit hardest. WILL THEY CANNIBALIZE? In testimony before the Federal Communications Commission on Dec. 1, UBS Warburg telecom analyst John Hodulik estimated that local voice and related service generate approximately 60% to 65% of the Bell companies' revenues and at least 75% of their profits. As VoIP becomes pervasive, Hodulik warned, "it will be extremely difficult for the carriers to replace these profits through sales of new services such as DSL [digital subscriber line broadband service] and long distance, as these products typically produce lower margins." (See BW Online, 9/8/03, "Time to Rewrite the Rules of Telecom".) To make up for the shortfall, the phone companies are pushing managed VoIP services to large business clients and Vonage-style services to consumers. But even some insiders are skeptical that the incumbents can pull off this strategy, if only because it takes brave CEOs to aggressively cannibalize their own businesses. Martin Geddes, a telecom industry veteran and the author of the Web log Telepocalypse, fears that the incumbents have no real commitment to VoIP and instead aim to undermine startups by dominating the VoIP market, then slowing its evolution: "Expect to see products that are deliberately short on service and performance, and that give VoIP a bad name," he wrote in his Web log on Dec. 11. "This is a marketing struggle, not a technology battle, and anything goes." Over the long term, however, it's usually impossible to keep a good technology down. VoIP can now match the quality and reliability of traditional phone networks. And its advanced services are likely to entrance phone customers, who will relish both the low cost and fancy features VoIP offers. The transition will be difficult for the already-beleaguered phone carriers. But for their customers, it could be a dream come true.
 By Jane Black in London
BW MALL
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