The Internet has seeped into the games we play, the clothes we buy, and the publications we read. Now it's set to dramatically alter one more facet of our lives: the people we call.
Plain Old Telephone Service is about to get a digital makeover in the form of Voice Over Internet Protocol (VoIP), the technology that transforms phone calls into packets of data that can be carried over the Internet at low cost. VoIP has been around for the better part of a decade, but it's only now that the technology is starting to click, thanks to somewhat clearing regulatory issues, improved phone call quality and the fact that major players are making big investments.
The technology is "hot as a pistol," said HBS professor Tom Eisenmann, leading a panel discussion on VoIP's impact in the communications industry.
Many small and large cable TV services already offer Net phone service, and now the telecom heavyweights are wading in. In recent announcements, Verizon, AT&T, and BellSouth have announced plans to bring VoIP products to market, AT&T as soon as this quarter. Regulators are not far behind: By the end of 2004 the FCC plans to have a strategy in place for overseeing Internet phone service.
The adoption curve, market researchers say, will be led by corporations seeking to save big dollars in long-distance calling and operational savings, with consumer rollouts not far behind.
But why now? What has happened to take this technology off of industry hold?
These days, the regulatory environment, while still somewhat murky, is more carrot than stick, said Fred Kemmerer, vice president of business planning and integrated network solutions at Lucent Technologies.
There's also the group effect, added Peter Briscoe, founder and CEO of Convedia, which supplies media processing platforms to telecom service providers. "The big guys are realizing they have to get into VoIP. Increasing competition is encouraging growth in this field," he said.
More prevalent and sophisticated technology is a factor as well. The increase in broadband penetration will improve transmission quality, said John Rega, CFO of Vonage, a company that offers consumers local and long distance phone plans over VoIP.
Follow me
In addition, Session Initiation Protocol, or SIP (the touted successor to the current technology used to support VoIP) will provide the added value of "follow me" services that can determine a user's location and make it possible for others to know where to reach them.
"Features and functions will become the differentiating factors," said Eric Bruno, vice president of market and offer management at Verizon. You may be able to monitor home phone calls from work, for example, or send an incoming call to a different voicemail box. The lower cost of long distance, particularly for international calls, should appeal to consumers as well.
VoIP's increasing reliability and scalability—as well as the economic benefits that come from consolidated networks—also add to its growing appeal in the enterprise arena.
But moving from a traditional telephony system to VoIP can be risky when an increasing number of functions are dependent upon a single technology, warned Saied Seghatoleslami, vice president of product management and development at Avaya, a provider of communications networks and services to business.
"Operational reliability becomes even more critical," he said. "Adopting VoIP is not like moving from a car to a faster car. It's like going from a car to a helicopter—there are new ways of killing yourself." 