RTX comments VoIP outlook

All communication will be based on IP

Few people question the fact that all telephone communication is going to be data and packet based and the switched network will be replaced by Voice over IP. The only question is when. There are many indications that the quick adoption of VoIP will take everybody by surprise. Forrester is somewhat more conservative and estimates that it will take 17 years before VoIP has replaced switched telephony traffic 100%.

Low cost telephony is the killer application of today

In the below figure we have identified 6 typical end-user VoIP segments within mobile and fixed line telephony. The largest segment is that of the pricefocused customer. This segment represents approximately 30% of all customers, who will churn from their existing telephony supplier as soon as they get a cheaper alternative, assuming that the product and services are convenient to use.

Effective business processes, cost reduction and mobility are the driving factors of tomorrow

The mobility and work smarter segments, shown below, account for approximately 30% in total. VoIP will in time offer greater

mobility world wide, as you can take your telephone number and unified messaging box (fax, email, voice mail, video, SMS/MMS) with you and connect it to any IP connection, wired or wireless. Cost reductions stem from the fact that IT departments no longer need to configure the telephony system every time an employee changes office. Efficiencies are realized as customers calling in are automatic connected to an individual employee who has all the customer details on his/her screen prior to answering the call.

VoIP is for broadband only

VoIP only makes sense using a broadband connection. Today broadband penetration in many countries is large enough to run VoIP. Leased Lines, ADSL, CATV (Cable TV), Optical Fibre are successfully fighting to make broadband much more of a commodity. With broadband comes the possibility to combine data and voice using the same infrastructure.

VoIP technology is mature

VoIP technology is now nearly mature and the quality is for many segments acceptable, even though issues such as quality of service and latency have not been completely. Furthermore there are now also solutions to provide emergency calls in case of power outages.

The traditional telcos have most to loose

It is common sense that the Incumbent Local Exchange Carriers (ILEC) are not going to force the VoIP market. The cost reductions in the infrastructure will not come close to their lost revenue on subscriptions and PSTN traffic when apartment house households suddenly start to share a single broadband connection and churn their individual PSTN subscriptions. This scenario is a nightmare for incumbents and the majority have chosen to close their eyes to this scenario. But many ILECs have wisely started implementing VoIP in their infrastructure and thereby save 20-30% in efficiency costs, according to Enskilda Securities.

The alternative Telco has most to win

The Competitive Local Exchange Carriers (CLEC) have realised that it is very difficult for them to make a positive business case for taking over the broadband and PSTN relationship. They have now realised that they need to focus on getting VoIP revenue elsewhere and have let go of the broadband and PSTN subscription.

Internet telephony providers are dominating VoIP

Internet telephony providers originating from 100% Internet focused .com services have been established for many years. Since 1996, Net2Phone.com and Delta3.com have been offering VoIP calls from any computer to any telephone number in the world. Delta3.com was the first Internet telephony solution to provide inbound and outbound calls connecting any phone number worldwide. Skype is probably the most popularnewcomer in the VoIP market today, providing free VoIP voice PC-PC. Since the launch in August 2003 the Skype software has been downloaded more than 7 million times. All Internet telephony providers are likely to follow the same strategy, using a free product to acquire a critical number of customers, and chargeable telephony products when, for instance, calls are connected to the PSTN infrastructure. At the moment it seems that these operators are winning market share, as they become an alternative to the incumbent telephone operator providing cheaper and even better services to the end user. For instance, Telio in Norway has just launched Internet Telephony in Norway offering flat rate voice cheaper than the subscription fee of the incumbent Telenor. One of the more appealing applications is a mobile service, where the end user during a normal telephone call at home is able to transfer the ongoing call to his mobile phone.

Go with the mainstream standard SIP

As is always the case, new technological proprietary solutions and the dedicated interests of the major players in the telecom market have so far dominated VoIP technical specifications. Now however it seems that SIP is taking over the momentum from H.323, and is now supported by major players such as Cisco, Microsoft etc. SIP, SOAP, and SIMPLE or “Triple S” as Forrester calls it, are individually mportant but combined they will fuel the communication middleware software that combines live communication, data and business processes.