Net Telephony
Streaming Magazine August 2000

John Silliman Dodge

Mr. Watson, come here, I want you! These are the first words that Alexander Graham Bell spoke into his new, new thing, the telephone. Considering the occasion he might have uttered something more inspirational like, "That's one small sentence for a man, one giant blab fest for mankind." But the poor guy had just spilled acid on his pants and probably wasn't thinking in sound bites.

We've come a long way since Alex. Fast forward to the year 2000 and the state of Internet Telephony, also known as Voice over IP. Today about 15 million people make calls over the Net compared with 5 million last year. Roughly 2 dozen companies offer long distance service, either free, ad-supported or significantly cheaper than the alternatives. The combined revenue of Net talk providers is expected to grow at a compound annual rate of 200% a year, from $208 million in 2000 to $16.5 billion by 2004, according to the International Data Corp., a research firm in Framingham, Mass. That's decent performance for a five year-old technology.

Today with a computer, a Net connection, a headset and some software you can talk to anyone anywhere on the planet for as long as you like, often for free. Well, technically for free. The price for this all-you-can-eat buffet is jitters, echoes, distortion, delay and other sonic strangeness. People can put up with roughly 250 milliseconds of delay before it becomes annoying. Echo is less tolerable; 50 msec is about all we can handle. And there can be a tin can tonality to Net phone calls. And sometimes bandwidth limitations and network congestion can make you sound like a robot on a martini binge. And you may have to click on or listen to advertising, or fill out surveys and profiles so marketers can target you more precisely. And if you're a corporate user and your company has a firewall, you're out of luck. Ditto for Mac users; it's a PC-centric world. But I'm not complaining because hey, it's free.

Originally Net telephony was a computer-to-computer transaction only. Today the majority of products don't require the recipient to be on a PC. You initiate the call from your box and it goes out over the Internet to a gateway near the callee. From there, your call travels over regular phone lines. Sometime in the future the Net will transport every phone-to-phone call and you won't even be aware of it. The call goes over the local public switched telephone network, or PSTN to the nearest gateway server, which digitizes the analog voice signal, compresses it into IP packets, and moves it onto the Internet for transport to a gateway at the receiving end.

Why is all this happening? Price for openers. Digits are cheaper to transport than atoms and they travel more efficiently. Plus it's more efficient to operate a single integrated network for voice, data, audio and video. Among other factors, better compression rates and the elimination of silence in speech (over half of all voice transmission is space) make packet telephony at least five times more bandwidth efficient and less expensive than switched circuit telephony. We're also in a cycle of deflation. The floor is falling from under plain old telephone service. Imitating the trend in digital storage costs, advances in fiber-optic capacity are dropping the wholesale cost of carrying a call 40% a year. How far away can the bottom be when the cost of billing for a long distance call exceeds the cost of providing it? Still, the traditional phone companies charge a premium because for the time being the market will bear it. At least until technology catches up. Once quality and convenience issues are successfully addressed, you can expect the entire global telecommunications network to flip the switch and go packet-based.

That's the Net phone backstory. If you';re ready to see what all the fuss is about, here's what you need to get started: a relatively new computer with a good connection. The faster the better. A high speed processor. And as usual, more RAM equals a better experience. You need a sound card plus a microphone and speakers or a headset. And finally, you need the Net phone software itself. Check out any one of the following companies, then pick one and start talking.

Firetalk offers free unlimited calling world-wide, unlimited conference calling, instant messaging, voicemail, forums, virtual auditoriums for large scale virtual meetings, voice chat on any website, and web touring-users can synch their browsers and talk while they surf. This might be good for talking with your remote Web design team. Like most of these programs, Firetalk requires all users to run the same software.

Mediaring provides free PC-PC calls, budget PC-phone calls, and fun services including Voizmail. Users go to Mediaring's site, record a voice message and enter the recipient's email address. Like an e-greeting card, the recipient gets an email with a link to the site which contains the voice message. Why not just pick up the phone? I don't know, but I applaud any effort to sonify the Web.

Dialpad has the distinction of not requiring a software download. This is a good thing. Their Java-based web-to-phone service requires users to complete a 2-page registration form. You're good to go from there with free, unlimited calls in the US.

Net2phone is the current industry leader with partners like AOL, Yahoo!, Compaq, Prodigy, RealNetworks and Netscape. AT&T, after unveiling its own Web-based voice products, is leading a coalition to invest $1.4 billion in Net2Phone. While their PC to PC calls are free, PC to phone calls cost 3.9 cents a minute for calls within the US and as little as 5 cents a minute for calls to the US from any other country.

Phonefree offers free PC-to-phone calling to and within the United States, worldwide PC-to-PC voice calling over the Internet, integrated PC based voice mail, video calling and video mail and file and picture transfer.

ITXC is a new class of ITSP, or Internet Telephony Service Provider. Dubbing themselves the "service provider's service provider," ITXC serves traditional telephone companies, new competitive carriers, portal companies, ISPs, prepaid calling card companies, call back companies, and newly formed Internet telephony service providers like the ones listed above.

This is an extremely dynamic space. By the time you read this there will likely be new companies, new services, and new rates. And there's an interesting political swirl around Net telephony, always an indication that traditional business feels threatened. For now there's a nice spread between the cost of circuit and IP-based calls. In part that's because the FCC has postponed dealing with the touchy issues of tariffs and taxation, as Congress has done with Web commerce. (Mustn't stifle baby during the formative years.) But it's only a matter of time before the scent of money proves irresistible to legislators. It's their nature after all.

Today, one could argue that this whole thing is a solution in search of a problem. Regular telephones are convenient and their use is getting cheaper all the time. Alternately, the public Internet is unmanaged, unreliable, and prone to congestion at rush hour. It's hard to envision any quality of service unless and until Net telephony runs on one of the managed IP backbones. Still, it's hard to ignore the trends: we're seeing projections of 15% of long distance traffic in 5 years up from 1% today.

The ultimate objective of Internet telephony is dependable, high-quality voice service, the same kind we expect from the phone company. Clearly, we're not there yet. But looking farther out, with its support for computer-to-telephone calls, telephone-to-computer calls, phone-to-phone calls, PC-to-fax and an array of other communication services, Net telephony represents a significant step toward the integration of voice and data networks. The real story, once again, is the Internet itself. It's proving to be the ultimate transmission mechanism for anything that can be digitized, including all telecommunications.