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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 Internet telephony promises far more sophisticated features and much lower prices. It also promises to upset the telecom power structure In the 127 years since Alexander Graham Bell discovered a way to "talk by electricity," phone calling has changed relatively little. True, the world today is awash in advanced services such as call waiting and caller ID, and of course cell phones. But those are minuscule advances compared with the technological evolution -- in much less time -- seen in aviation, agriculture, medicine, automobiles, and most other industries that are basic to American life. This could be the decade that phones finally make their move. Voice over Internet protocol, or VoIP, sometimes pronounced "voyp," could be the transformative technology that will redefine the phone and the way people use it. With VoIP, calls are transferred in digital packets over data networks instead of over circuit-switched copper wires. This means any corporation with a network or any individual with a $30-a-month broadband connection can make calls without paying the phone company. Moreover, once voice is on the Net, it becomes just another piece of information that can be manipulated in many more ways than traditional phone calls can -- which should lead to rapid innovation and improvement in voice communications (see BW Online, 11/11/03, "Why the Bells Should Be Very Scared"). BEYOND GEEKS. The implications for the phone industry are, to put it mildly, jarring. The decoupling of voice calls from their traditional networks will loosen the hold of incumbents such as Verizon (VZ ), SBC (SBC ), and BellSouth (BLS ) on the $200 billion telecommunications market. With VoIP, customers will be free to provide their own networks or jump to new providers -- including cable-TV companies or startups such as Net2Phone (NTOP ) and Vonage. VoIP has been around as long as the Internet. But until recently, it was the province of geeks and college kids who had more time on their hands than money. Now, VoIP is reaching a tipping point. For instance, it's no longer necessary to make calls over your PC using an external microphone -- though that device is coming back into vogue with services such as Skype, which enables simple PC-to-PC calls. People who prefer a more traditional experience can skip Skype, created by the architect of the Kazaa peer-to-peer music service, and use a normal-looking phone costing as little as $100. Since its launch in April, Vonage, a leader in VoIP for consumers, has attracted 85,000 customers, who pay from $15 to $35 per month. "SENSE OF WOW." Corporations are catching the bug, too. Chicago-based Nemertes Research recently surveyed 42 companies, 70% of which have revenues of more than $1 billion. It found that nearly two-thirds are using IP telephony, and an additional 20% are running trials of the technology. It's no wonder that in December, AT&T (T ), Qwest (Q ), Cox Communications (COX ), and Time Warner Telecom (TWTC ) each announced aggressive rollouts of VoIP service (see BW Online, 12/11/03, "Telecom's Altered Landscape"). "Voice over IP gives customers a sense of wow," says Cathy Martine, the AT&T senior vice-president who's spearheading Ma Bell's VoIP rollout to the 100 top U.S. markets for both business customers and consumers. "Wow" hasn't been used to describe telecom since the 1950s' advent of the furry pink Princess phone. But the inherent flexibility of the Internet protocol may at last make that word appropriate. Unlike traditional phone networks, which are centrally controlled and require expensive alterations to offer new features, the Internet runs on open standards. With VoIP, "you can develop new features as fast as you can write [programming] code and see if they work in the marketplace," says David Isenberg, an independent telecom consultant who spent 12 years at AT&T's Bell Labs. In short, no more waiting on sclerotic telecoms to deliver innovation. LIMITLESS HORIZON. The features that Vonage and other VoIP providers already offer are impressive, solving as they do many of the challenges of both mobile workers and consumers. Take unified messaging, a feature that lets customers retrieve voice mail the usual way by phone -- or by listening to an audio file that has been sent to their e-mail account or stored on the Web in a password-protected area of the provider's site. This helps if you're on the road and is also a convenient way to share need-to-know information with multiple colleagues or family members. Sophisticated call forwarding will at long last end the annoyance of having to call several numbers to locate someone. With VoIP, calls can be sent to several phones at once, sequentially or simultaneously. So if you aren't home, the call will go to your cell phone. If you don't pick up there, it will forward to your office or your PC phone. You can answer it wherever is most convenient -- or least expensive. If you're overseas and your cell phone and PC phone both ring, you'll use the PC and avoid roaming charges or spotty service. The features that could appear next seem limitless. As soft phones -- ones that transmit calls through a microphone over the PC -- become more popular, the lines will blur between voice and data. Want to make a call? Just open the contacts file in your e-mail program, click a name, and put the call through. "Phones have been limited by their interface," says Jeffrey Citron, chairman and CEO of Vonage. "Once you connect a phone to a keyboard, life gets a lot easier."
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