Lucent Technologies Monday announced the availability of Phase Two of DEFINITY IP Solutions, bringing customers Voice over IP to the desktop via Lucent's industry-leading DEFINITY business communications servers, and further extending Lucent's support for business applications over packet networks.

Together with Lucent's world-class and market-leading messaging, mobility and customer relationship management (CRM) applications, Lucent's robust IP capabilities provide a full set of communication options to help businesses improve efficiency and lower costs while evolving to meet the demands of e-business. DEFINITY IP Solutions joins a number of products Lucent has developed to help businesses enhance their networks to take advantage of IP applications, including IP Exchange Systems, Intuity Voice Messaging, Cajun Campus LAN Solutions, CentreVu Internet Solutions and CentreVu IP Agent.

This latest addition to the DEFINITY portfolio reinforces the company's commitment to communication choices, providing enterprises with the flexibility of moving voice, video and data traffic over the Internet, intranets, extranets, public-switched networks and ATM.

DEFINITY IP Solutions is available as an easy upgrade for existing systems and is available for all new DEFINITY Enterprise Communications Server (ECS) and DEFINITY ProLogix Solutions servers. Lucent is demonstrating DEFINITY IP Solutions across its DEFINITY product portfolio here at VoiceCon2000.

"This is about real-world solutions with intelligent network migration and options to support e-business, while continuing to give enterprises the most reliable communications in the industry," said Angie McGuire, president, Lucent's Enterprise Communications Systems. "Lucent Technologies is delivering on its promise to continually evolve its DEFINITY servers to support new technologies, and through its Quality of Service capability, making VoIP real for customers for whom reliability is critical." More than 90 percent of Fortune 500 companies have DEFINITY servers in their networks.

Hundreds of customers have installed Phase One of DEFINITY IP Solutions -- its IP trunking capability -- in production packet networks, and JetBlue Airways and University of Maryland, College Park are now among a growing number of enterprises benefiting from the packet network support of application-rich solutions -- including customer reservations and IP voice messaging -- provided by DEFINITY IP Solutions at the desktop. In addition, DEFINITY IP Solutions leverages enterprises' investments in existing voice and data networks, business applications, people resources and training, while bringing the DEFINITY servers' unparalleled reliability, scalability and robust features and applications to their packet networks.

New York-based JetBlue Airways, a start-up airline specializing in low fares, is the first company to implement Lucent's CentreVu IP Agent, a CRM software solution enabled by DEFINITY IP Solutions. CentreVu IP Agent helps enterprises take full advantage of their data networks by delivering call signaling and phone features to an agent's PC through an IP connection. Now, agents working at home can provide the same high level of customer care that they can in a traditional call center environment with lower cost of ownership.

"We felt that, by starting out with a fresh approach to communications technology, we had a chance to set new standards for the airline industry," said Frankie Littleford, JetBlue's director of reservations. "Our president worked for another airline that used remote call center agents, and he knew they were highly productive and happier employees. Their job satisfaction translates to our customer relationships. Advanced technology is helping to make our new approach to serving customers happen."

University of Maryland, College Park, a leader in the development and application of information technology, has been using DEFINITY IP Solutions for the past eight months. After an easy software upgrade to the university's existing DEFINITY ECS and DEFINITY ProLogix Solutions servers, staff members in six of the university's buildings have been sending their voice conversations and voice mail across University of Maryland's data network.

"The DEFINITY IP phones are functioning well," said Mark Katsouros, the university's telecommunications automation specialist. "They have good sound quality, are easy to use, and the administration of moves, adds and changes is as simple as it has always been."

Katsouros believes the cost savings associated with DEFINITY IP Solutions is a major advantage. In the near future, he expects to use the technology to provide voice and data service to a new building. As a result, he'll save money because he won't have to run both copper cables for voice and ethernet for data connections to the new building.

"Voice as data will make it possible for everyone to deal with one infrastructure rather than two," said Katsouros. "The bottom line is money." Product Description

As one of the largest locally owned real estate agencies in the Pacific Northwest, with more than $1.6 billion in sales, Prudential Northwest Properties (PNP) of Portland, Ore., understands the balancing act agents must perform to deliver the prompt phone and in-person responsiveness customers demand. To maintain its leadership, the firm realized last year it needed to do even more to ensure its 750 sales agents and employees never missed an opportunity to make a sale.

Previously, each of PNP's 18 branch offices and headquarters facility in Oregon and southwest Washington had its own non-integrated private branch exchange (PBX) phone system. These legacy systems could not efficiently transfer calls between branches. They also lacked basic call-handling features, like voice mail and call forwarding, forcing the company to purchase standalone services at additional expense. To remove these barriers to prompt communication and to streamline customer service, PNP wanted to unite its offices into a single voice infrastructure.

In addition to providing its employees with corporate-class call-management features, the company wanted to launch an advanced unified messaging system. By using this system to integrate landline and cellular phone calls with fax, e-mail, voice mail, pagers, and wireless personal digital assistants (PDAs) and laptops into a seamless network, the real estate company could guarantee a fast response to customers.

PNP learned that a voice-over-Internet-protocol (VoIP) solution could save thousands of dollars in toIl charges between offices. IP telephony would allow the company to deploy unified messaging, as well as advanced, find-me/ follow-me capabilities. Furthermore, unlike traditional phone systems, an IP-based telephony solution could interface with the company's customer relationship management (CRM) database, giving employees near-instant access to customer data.

"Voice-over-IP technology was the key to dramatically improving our productivity and profitability," says Sean McRae, vice president and chief information officer of PNP. "By integrating every possible method of contact with all available customer data, we can guarantee that our agents connect to customers faster and more efficiently than their industry peers."

KEEPING PACE WITH GROWTH

PNP wanted an IP solution that would integrate well with its existing data infrastructure, was simple to install and manage and, most importantly, was easily expanded to keep pace with rapid growth.

After reviewing IP telephony products from several vendors, PNP chose a voice-over-IP system from 3Com, based on 3Com's VCX V7000 IP telephony and SuperStack 3 NBX networked telephony solutions. Both of these systems support session initiation protocol (SIP), a carrier-class, open systems messaging standard that would streamline the company's migration from PBX phones and allow it to introduce advanced, media-independent, multi-user services.

Today, PNP's telephone system consists of a single VCX system in its new Clackamas, Ore., office and four NBX systems in its four largest offices. Powered by 16 3Com SuperStack 3 Switch 4400 switches, which provide highspeed connections to the corporate WAN and prioritize voice traffic, these solutions deliver unified messaging and advanced telephony features to the agency's 750 employees.

At the network core, a 128-port 3Com SuperStack Switch 7700R--with built-in security, quality of service (QoS) and bandwidth management--prioritizes voice traffic at Gigabit Ethernet speed, while linking critical network systems, such as servers and WAN routers. In Clackamas, a 3Com Router 5009 with advanced QoS, and congestion- and traffic-management capability distributes voice and data traffic to PNP's WAN.

The company plans to replace aging routers in other offices with additional 3Com routers as needed. The solution also relies on a 3Com SuperStack Firewall, which protects the company's entire data infrastructure from intruders, while allowing employees to access the phone system securely from their home computers through a virtual private network (VPN) tunnel.

"We're measuring ROI, not just in telecom costs saved but in customer satisfaction as a result of our improved ability to work faster and handle calls more efficiently," says McRae. "Our sales grew roughly 15% in 2003, and while it's hard to say exactly how much of that is attributable to the new communications technology, many of our high-sales agents insist their productivity has improved considerably since it was installed."

PNP worked with a 3Com network consultant and its longtime reseller, Verizon, to deploy its new voice solution. First, the implementation team preconfigured and installed the core and edge devices. Next, they configured and staged the VCX server and NBX chassis to ensure a rapid deployment.

TRAINING WAS PRIMARY CHALLENGE

Once the servers and switches were racked, PNP connected four T-1 lines and began to assign employees their new extensions and direct dial numbers. As a result, the company was able to replace the legacy telephone systems in each branch in a matter of hours. The VoIP systems are managed as part of the WAN.

In the real-estate business, we can't be out of touch for even a moment, so we took a cautious approach to ensure a fast, error-free cutover," says McRae. "With everything preprogrammed, it was virtually plug-and-play, with minimal onsite configuration."

Setting up 450 3Com IP handsets and 300 additional phantom extensions with voice mail was simple, McRae offers--the primary challenge was user training. With each of 18 offices using a different legacy system, PNP's IT staff had to train employees at each branch individually--an investment of three to four days per branch.

In addition, the implementation team discovered, mid-deployment, that one large office was wired with Category 4 cable rather than the recommended Category 5 cable. With no room in the project budget to rewire the entire site, the firm was forced to use the existing infrastructure. While it is achieving satisfactory voice quality nonetheless, PNP now knows it needs to ensure every branch-office LAN has enough bandwidth to support voice traffic without packet loss.

Today, PNP's sales professionals and employees enjoy maximum mobility while remaining in contact with buyers, sellers, mortgage brokers and other agents. Unified messaging forwards calls to their mobile phones of homes, delivers faxes electronically to their PDAs and computers, alerts them to incoming messages via pager, and turns e-mail into voice mail with a text-to-speech function.

Moreover, with built-in, find-me/follow-me notification, incoming calls also generate alerts to employees' voice mailboxes and pagers. Automated attendants direct calls on evenings and weekends and route customers to specific offices and departments, while features such as call forwarding and hunt groups send calls to their proper destinations during business hours.

SAVINGS MOUNT UP

In the agency's home services department, which helps new homeowners find the goods and services they need to settle in, a CRM package called Clientele sends caller ID information to employees' computers. The employees can then look up the customer's information in the company's Microsoft Outlook sales database and determine the likely reason for the call.

In addition to boosting performance, the networked telephony system is saving PNP thousands of dollars in telephone fees and maintenance costs. Furthermore, because the IT staff can manage the phone system as part of the larger network infrastructure, the company is saving significant amounts on outsourced maintenance.

The VCX solution, which can scale to accommodate tens of thousands of users, will eventually support many of the branches now connected to smaller NBX systems, McRae says, as well as those the company opens in the future. This will enable PNP to create a single call center to manage all call traffic for its smaller offices over the WAN.

PNP uses its new 7700R core switch to manage two secure virtual LANs: one exclusively for private network traffic supporting core business applications ranging from VoIP to internal e-mail, and one for a DMZ supporting Web servers and publicly available applications. This will further protect the quality of voice transmissions while also blocking unauthorized access to customers' sensitive financial records.

Cable operators are finally doing more than stepping into the VoIP waters and quickly retreating with a scream.

Really.

They all say so.

Every big MSO will at least trial VoIP this year, and many will roll out service with "black phone" offerings that duplicate the incumbents' circuit-switched features while undercutting the price. There's little chance cable subscribers will see any of the gee-whiz VoIP elements that vendors have been hyping for the past decade--at least until MSOs prove they can reliably duplicate a service that's been around for over 100 years.

"Right now they're selling a cheaper bundle than the RBOCs," said Michael Harris, president of analysis firm Kinetic Strategies. "The question over time is how that becomes more interesting."

The other question is how much time cable operators have until they must spice things up. The ILECs are preparing residential VoIP offerings that include advanced IP features. At the same time, companies like Vonage--a voice ASP (application service provider)--are taking free rides on cable's broadband infrastructure with low-priced VoIP services that please customers and pull phone dollars out of cable coffers

The five big MSOs--Comcast, Time Warner Cable, Cox Communications, Charter Communications and Cablevision Systems--will all do VoIP this year, and smaller players--Insight Communications, Armstrong, Adelphia Communications and Liberty Media--will explore ways to make voice a part of a video and high-speed data bundle.

"VoIP's a killer app," said Jimmy Schaeffler, chairman, CEO and senior research analyst at The Carmel Group. "It's a great technology. It can do nothing but work, which begs the question: Why wait?"

Some critics have been putting that question to Comcast, the nation's biggest MSO. A VoIP pioneer, Comcast will likely be among the last to push into packetized telephony rollouts on a large scale. That's partially because the company needs more time to digest the huge AT&T Broadband infrastructure--including a large circuit-switched voice business--that it acquired in 2002. Those customers do not fit into its vision, and Comcast has curtailed any further marketing efforts to that base as it prepares for full VoIP service targeted for 2005. The company will offer VoIP in four markets in 2004--Coatesville, a Philadelphia suburb where the company is already running trials, Indianapolis, Connecticut, and parts of Massachusetts.

"We are very hopeful that VoIP is going to be a way that telephony can be a profitable business line and a good bundle," said Brian Roberts, Comcast's president and CEO during a presentation to the Citigroup Smith Barney Entertainment Media & Telecommunications Conference in Phoenix in January. "Should that be the case, I think we're ready to keep going and really accelerate the footprint where we offer telephony."

That's not a cautious message if you see it from Comcast's perspective of what VoIP means as a piece of an overall cable offering, said Steve Craddock, Comcast's senior vice president of new media development. Comcast wants to deliver an integrated IP-based unit that folds into its other video entertainment and data services. The unit would include SIP (Session Initiation Protocol)-based features like follow-me and data integration around which Comcast can build a suite of services leveraging existing high-speed data networks.

"Black phones can't do any of that," Craddock said. "People want to have instant communications. This thing is very smart; it finds you, it determines what devices you have available to you that people can get you on."

While it might pop up here and there in trials, it won't be common to Comcast subscribers in 2004.

Partnering Up

Time Warner Cable, AOL Time Warner's cable group and the nation's second-largest MSO, takes a position about 180 degrees from Comcast. The New York City-based behemoth is partnering with Sprint and MCI to "aggressively enter the voice business," according to AOL Time Warner Chairman and CEO Richard Parsons, speaking at the Citigroup gathering. "By year-end we expect to offer voice in almost all our systems."

That's a big advance from the single operation the company has rolled out in Portland, Maine, and it depends heavily on help from telco partners.

"We're providing a variety of services to them [including] interconnection [and] all types of CLEC telecom services that are part of a carrier-grade service, ranging from E-911, ordering numbers, providing operator assistance, directory assistance, really making sure that it's the same kind of service they would get from their original home provider," said John Overy, Sprint's business development director.

It will be a black phone service that costs about 20-percent less than what the ILEC offers. "Down the road the thought is to provide advanced services that will be very competitive and hard to match. First of all, let's make sure it's reliable and carrier-grade," Overy added.

This type of cable-telco relationship would have been heresy just a few years ago; today the two share a common opponent: the ILEC. Sprint wants to widen its wireless base; Time Warner wants to add a third piece to its video and data offerings.

"We're drawing on our expertise plus long-distance assets and, in the future, wireless capabilities to enable cable companies to compete in a meaningful way against the RBOCs," says Overy. "We see it as a win-win for both companies."

Competing against the ILECs was once relatively easy: A service provider would come in with a cheaper, albeit less dependable, second-line deal with similar or better features than the incumbent, and cherry pick high-end customers and features, leaving the incumbents with skeletal primary line service. That formula still works for companies like Vonage, which runs on both telco and cable broadband infrastructure.

While this is only making a small dent in a huge telco business, it's been enough to drive the incumbents to slash prices and develop their own bundled packages, including DSL and wireless.

Full Steam Ahead

Meanwhile, the cable industry inexorably moves into the telephony space, led by Cox Communications. The Atlanta-based MSO was among the first to dip into voice with a carrier-grade circuit-switched service that critics claimed would become an albatross when VoIP developed. VoIP's here--Cox is rolling it out in Roanoke, Va., with plans to expand into other unnamed territories--and the company still uses those switches.

"We can serve telephone customers with our circuit switch in the core and actually do a distribution via IP," says Bill Dame, Cox's director of network switching. "We're just taking our circuit-switched gear, running it through a media gateway and converting TDM circuitry over to IP and distributing it through our local Internet backbone."

The investment that the doomsayers called a burden is, in fact, a blessing. Cox uses switches to deliver primary line service--mostly in Arizona, although an Atlanta-based switch is handling the Roanoke VoIP business--and will continue to do so until it fills them up and moves completely to IP.

"This hybrid scenario allows us to fully utilize all the capacity that we have, and nothing goes to waste," Dame said.

Another large MSO is also gearing up to aggressively pursue VoIP after a year-long quiet period to work out some internal organizational issues. St. Louis-based Charter Communications, Microsoft co-founder Paul Allen's broadband piece, "deviates significantly from our cable brethren [in that] we actually anticipate offering two services: a pure primary line replacement that we'll file as a CLEC and a voice-enabled high-speed data service," said Mark Barber, the MSO's telephony vice president.

Charter's second offering vaguely resembles the VoIP service that Cablevision Systems is rolling out to about a million high-speed data customers in metropolitan New York markets. Cablevision's OptimumVoice, though, is intended as a full-service phone line that uses the high-speed data network while Charter's is a "PC-to-PSTN voice-and-video calling option [that] won't support inbound calling," said Barber, who called the service "very similar to what Vonage does--a best-effort service that we feel if you're trying to present it as a primary line replacement is problematic for the customer."

Charter "sees the need to aggressively deploy telephony services" and is willing to talk partner with anyone--"AT&T, MCI, Sprint, KMC, Vonage, Net2Phone, you name it," said Barber. The MSO has been serving about 2500 VoIP customers since 2002; by the end of this year it expects that number to be 50,000.

Still Making Plans

Other, smaller cable players have less solid VoIP plans for 2004. Insight Communications is hampered by a partnership it made to use AT&T Broadband's CBR (constant bit rate) infrastructure. That deal ran afoul of Comcast's reluctance to invest any more in the switches or to pursue any more customers. Adelphia is clearing away an industry-rattling scandal involving the company's founder, and adjusting to a headquarters move from Coudersport, Penn., to Denver, including a whole new management team.

Liberty Media, which has no U.S.-based cable operators, has rolled out commercial VoIP service in its Puerto Rican cable operation using a turnkey solution from Net2Phone, a company in which Liberty has a financial stake.

Yet another small cable operator, Western Pennsylvania-based Armstrong, is in VoIP with a service called ZoomPhone. Armstrong and Advanced Cable Communications have embraced Vonage, much to the displeasure of some more parochial cable industry members who see Vonage as a threat.

"A lot of companies are going to determine what they think is their best strategy," said Dave Wittman, Armstrong's cable marketing director. "We've had a pretty good experience so far."

A pretty good experience is about the most any cable subscriber should expect this year if the local MSO approaches with a voice service offering. In 2005, however, things might get more interesting as advanced VoIP features begin to creep into the mix.

   

One of the key changes ongoing in telecoms is that a rising number of users buy their services from a company that is not a telco. Almost any company with a recognized brand is considering adding telecoms services to its mix, usually by leasing capacity on a cellular network under an MVNO (Mobile Virtual Network Operator) deal. And more radical options are opening up for these virtual telcos--creating their own networks using a technology such as WiMAX, and delivering voice services via VoIP; and then even pursuing the last mile and triple play bases with broadband wireless as an alternative to telco DSL. In some cases, we may even see non-telcos buying up spectrum to create fully controlled alternative networks. Against this background, why then is Microsoft being so coy about its plans for voice over IP?

Microsoft has been aggressive behind the scenes of the broadband wireless surge. Like Intel, it supports any trend that will stimulate usage of PC-style devices (including Windows phones) and support the open IP model, which places the balance of revenue and profit in favor of the device maker rather than the operator. It has put considerable weight behind stimulating Wi-Fi usage with a range of functionality incorporated into Windows and has cutting edge activities in mesh networking. Although, unlike Intel, Microsoft has not yet used significant investment dollars to promote Wi-Fi and WiMAX--perhaps still smarting from the failure of its multibillion dollar gambles on broadband wireless operators at the turn of the century--it has been a key lobbyist, along with Cisco and Intel, for additional unlicensed spectrum to be opened up in the US and Europe.

In this context, its moves into VoIP seem positively timid on the wireless side, especially when compared with eBay's acquisition of peer-to-peer VoIP pioneer Skype for up to $4bn. The giant recently announced the purchase of a small, two-year old VoIP technology company, Teleo of San Francisco, as a step towards launching voice services under its MSN brand and so keeping up with similar moves from the other major portals, Yahoo and Google. The move is highly logical in terms of the battle between MSN and these rivals, but it could go so much further, taking Microsoft into the world of telecoms services. Yet it stated categorically, when questioned about the Teleo acquisition, that its VoIP strategy does not extend to offering full telco services or a phone-based voice product.

This is an odd decision. As major operators shift towards convergence models that integrate wired and wireless services using IP, a strong phone-based VoIP platform could enable Microsoft, at last, to make significant inroads for Windows-based handsets. Even in the cellular-only world, companies like Verizon are looking to offer VoIP over their EV-DO networks and there will be a race to provide attractive handsets and operating software for such services--a race that Microsoft, in contrast to that for the conventional cellphone market, could enter almost at the starting gate, just behind Nokia rather than miles behind.

HESITANT ABOUT WINTEL

Microsoft could go a step further, launching full wireless phone services--voice and data--under its strong MSN brand and so helping to promote its broader objective of making the all-IP model ubiquitous. If the Wintel approach to life is to survive, it has to be translated to the handset--as that becomes, in its future forms, the key end user device--and to ubiquitous communications. Intel and Microsoft both know this well, but so far Microsoft is being more hesitant about taking the actions to support the theory.

Of course, it is possible that Microsoft regards the fight with Google, which increasingly focuses on communications facilities such as instant messaging, as the first stage in a war that it will later take to the telcos. And it will naturally be wary of threatening the incumbent operators too much as it still seeks to gain their approval for its Windows Mobile handsets. But like most players in the telecoms world, IP is forcing some hard choices on Microsoft. We believe it will never gain the share that its business plan requires in cellular-specific handsets, but has a better chance in converged and mobile IP devices. These products are a threat to the conventional cellcos, but they are increasingly being forced to embrace them, and Microsoft has an opportunity to create a platform for them--as it is doing with France Telecom.

But it also needs to put VoIP services on to handsets as well as PCs if it is to stay ahead of Google and finally see off Skype. Internet providers have to become telcos, because in the future few people will buy internet access as a standalone service.

Initially, Teleo will be used to enhance the voice capabilities of MSN instant messaging, allowing Microsoft Messenger users to place phone calls to people listed in their electronic address books. MSN will also integrate Teleo's technology with its local search function, enabling subscribers to locate and call local businesses such as restaurants. This is part of the long term MSN strategy to use the subscriber's electronic address book as the basis for competing in other services, with this address book unifying different communications offerings such as Hotmail email, Messenger, Spaces and upcoming functions such as presence.

That is an experience being repeated at many businesses, according to Bryan Van Dussen, a Yankee Group analyst. "VoIP is going to be an evolutionary development," he says. "There are some new systems, but they are relatively small installations, small deployments that are tested and tested."

According to a Yankee Group survey published in April, 35% of enterprises are currently evaluating VoIP but haven't budgeted for it. Another 24% have deployed VoIP at one or more locations. Some 19% have budgeted for the technology. Just 13% say they do not have VoIP and have no interest in it. The other 9% expect to install VoIP within a year or two.

However, most existing installations involve IP-enabled PBXs in campus or corporate settings, says Van Dussen. Eventually, he figures corporate CIOs will be compelled by the success of these limited initiatives to push for wider deployments. But integrating VoIP in the corporate WAN isn't easy because network managers have to precisely catalog current and future data applications; insure sufficient bandwidth; make sure the large data packets coexist with smaller voice packets at network ingress points; and ensure consistent, stable voice performance across te WAN. He doesn't see wider VoIP deployments occurring until well into 2006 and beyond.

In a recently issued Yankee Group report, Van Dussen sees service providers playing a key role in mitigating risk and improving performance of VoIP implementations. "Even now, just about 10% of corporate voice traffic is going over the WAN," he says. "Carriers have to deliver the management services because corporate managers are going to insure voice is going over a private backbone. Brand is going to be a huge factor."

Van Dussen says service providers like Equant, Global Crossing, MCI, AT&T and a host of others are gearing up for the VoIP world because they are gambling that revenue from hosted and network services will offset the loss of traditional voice revenue. "VoIP is coming. It's the end game," he says. "The carriers are selling Quality of Service and bandwidth as managed services that generate a revenue stream.."

BellSouth Latest To Offer VoIP Business Services

BellSouth has become the latest service provider to launch a VoIP business initiative, offering an internet-based telephone service for businesses to replace traditional central telephone lines.

The BellSouth Centrex IP Service, marketed initially throughout the company's southeastern United States service area, uses VoIP to allow business customers to operate a variety of phone, fax and computer data and voice services. A similar service for non-Centrex customers is expected be rolled out in June, according to Mark Kaish, vice president of next generation solutions for BellSouth. The carrier might expand its VoIP initiative nationwide later this year.

"We are taking more of a consultive approach here," says Kaish. "When you really talk to customers, they want to know what their (VoIP) migration path is." BellSouth's approach allows customers to piggyback VoIP services on their legacy Centrex systems if they don't want to go totally VoIP. This provides customers multiple options as they build converged voice and data networks, Kaish adds.

While IP PBX vendors duke it out for market share in the converged LAN/WAN arena, a recent analyst report warns not to count out a certain software vendor from Redmond.

A report from IDC identifies Microsoft as a potential force in the enterprise telephony market in the coming years, as the company moves forward with its strategy for converging voice, video and chat applications into its PC and server operating systems, as well as its Office applications. Meanwhile, some voice-over-IP (VoIP) vendors are partnering with Microsoft to make their equipment and applications work together.

"We're not talking about every Microsoft server potentially becoming a PBX," says IDC analyst Tom Valovic, who wrote the report on Microsoft and the VoIP market. He says that as Microsoft pushes deeper into the market for collaborative applications - such as software that uses Session Initiation Protocol (SIP) to facilitate multimedia conferences - telecom vendors and IP PBX companies trying to build the same types of systems could butt heads with the software giant.

Many IP PBX vendors, such as Alcatel, Mitel and Nortel, are basing their gear on SIP, which is considered to be the next-generation protocol for voice, video and instant-messaging traffic. In addition to setting up and transporting voice and video calls, the protocol can identify information about clients - whether they're on a phone, videoconference station or a PDA using e-mail, for example. SIP also brings presence capabilities, letting end users know who's online when, and how others can be contacted.

For years Microsoft has had computer telephony features embedded in its operating systems in products such as NetMeeting, an H.323-videoconferencing application, and Exchange Conferencing Server, for managing data, voice and videoconferencing.

Windows XP brought along Microsoft Windows Messenger, which turned some heads in the telecom community for its use of SIP.

Speculation about what Microsoft will do in telephony grew when company representatives began showing up at industry events such as Voice on the Net (VON), and later when it announced development of its Real Time Communication (RTC) Server, code-named Greenwich. RTC, renamed Live Communication Server 2003, is due out this fall. The server will act as a control node for managing conferences among SIP clients.

Jasomi to reveal firewall for VoIP

One VoIP equipment vendor getting a jump on the trend is Jasomi Networks, which will debut a product at this month's VON show in Boston that can enable any standard SIP-based phone to use Microsoft's Live Communication Server to make a call.

The product, called PeerPoint 3.0, is a network appliance that can act as a firewall for VoIp, helping SIP-based traffic securely traverse corporate firewalls to reach an IP PBX. PeerPoint will help translate the version of SIP used on most industry-standard IP phones into the dialect that Microsoft's SIP server speaks, according to Jasomi President Dan Freedman.

Freedman says Microsoft's SIP is carried over the TCP layer in IP packets, while most SIP implementations use User Datagram Protocol (UDP) as the transport layer. Using TCP lets only Windows Messenger clients, and other SIP clients configured to run SIP on TCP, use a Microsoft SIP server.

While Microsoft Live Communication Server could be configured as a SIP-based call control node, industry watchers say it's unlikely that Microsoft will get into the enterprise telephony business.

"I don't see Microsoft selling phones," IDC's Valovic says, adding that IP telephony vendors likely will seek partnerships with Microsoft to enhance their offerings.

Avaya, Cisco, Nortel and Siemens all make IP PBXs that run on Microsoft Windows servers. Many vendors also now offer products on platforms such as Linux and Sun's Solaris, partly in reaction to fears about Microsoft server stability in light of recent Internet worm and virus events.

Siemens recently launched its OpenScape strategy to incorporate SIP-based applications with its line of IP telephony gear. The German PBX maker is partnering with Microsoft to deliver this.

NEWPORT BEACH, Calif. -- Mindspeed Technologies Inc. (NASDAQ:MSPD), a leading supplier of semiconductor solutions for network infrastructure applications, today announced that Vierling Communications GmbH is shipping its voice-over-IP (VoIP)-enabled GSM wireless gateway Ecotel VoIP based on Mindspeed's Comcerto processors.

Vierling's Ecotel VoIP wireless gateway allows enterprise customers to provide cost-effective connections between their IP telephone systems and mobile radio networks. The gateway also enables mobile users to access the Internet, e-mail and fax services. The Ecotel VoIP system delivers two to eight GSM mobile radio channels and is based on the session initiation protocol (SIP).

"We combined Vierling's expertise in mobile radio gateways for conventional telephone networks with Mindspeed's Comcerto integrated VoIP system solution to develop the world's most advanced GSM gateway for VoIP environments," said Anton Gloeckner, product manager for Ecotel VoIP.

"We are pleased that Vierling selected our Comcerto voice processors for its innovative Ecotel VoIP GSM wireless gateway," said Steve McClure, executive director of marketing for Mindspeed. "Vierling's mobile radio gateway system is another example of the expanding market opportunity for our system-on-chip Comcerto voice and data processing solutions."

Mindspeed's mixed-media Comcerto processing platform integrates an application control and signaling processor with a real-time media-stream processor to provide a deterministic architecture capable of scaling from data-only applications to full packet telephony capabilities operating on hundreds of voice channels. Comcerto processors can also be combined with open-source software applications to provide developers with an embedded platform for creating a wide variety of new services and capabilities.

About Mindspeed Technologies(R)

With headquarters in Newport Beach, Mindspeed Technologies Inc. designs, develops and sells semiconductor networking solutions for communications applications in enterprise, access, metropolitan and wide area networks.

The company's four key product families include high-performance analog transmission and switching solutions, multiservice access products designed to support voice and data services across wireline and wireless networks, T/E carrier physical-layer and link-layer devices, and ATM/MPLS network processors.

Mindspeed's products are used in a wide variety of network infrastructure equipment including voice and media gateways, high-speed routers, switches, access multiplexers, cross-connect systems, add-drop multiplexers and digital loop carrier equipment.

To learn more, visit the company at www.mindspeed.com.

About Vierling

Vierling is a telecommunications supplier based in Ebermannstadt, Germany, offering customized communications and test equipment for companies of all sizes. Vierling's products range from GSM and 3G gateways, GSM phones, alarm generation systems and remote control technology to complete portable and stationary test solutions for telecommunications and data networks. In addition, Vierling's Production division specializes in development and manufacture of electronic subassemblies, devices and systems for companies of all industries. The Vierling Group has about 250 employees and generates annual sales of about Euro 30 million. Vierling Communication SAS is Vierling's subsidiary in Plaisir, France (near Paris). By sales partners, Vierling is represented in more than 40 countries worldwide. For further information visit: www.vierling.de.

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This press release contains statements relating to Mindspeed, and our future results, including certain projections and business trends, that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results, and actual events that occur, may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: market demand for our new and existing products and our ability to increase our revenues; our ability to maintain operating expenses within anticipated levels; our ability to reduce our cash consumption; availability and terms of capital needed for our business; the ability to attract and retain qualified personnel; successful development and introduction of new products; obtaining design wins and developing revenues from them; pricing pressures and other competitive factors; order and shipment uncertainty; fluctuations in manufacturing yields; product defects; and intellectual property infringement claims by others and the ability to protect our intellectual property, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information

Voice calls that by-pass the PSTN are clearly a threat to incumbents. If alternative operators use IP infrastructure to deliver long-distance calls to their customers, or enterprises themselves elect to piggy-back voice on their data network, then it all adds up to lost revenue for the PSTN operator.

The people that have got the most to lose from VoIP are the slow-moving incumbents sitting on obsolete [circuit-switched] equipment," says lain Milnes, president of US-based Zultys Technologies, a company that produces boxes that enable IP telephony and other service features for enterprises.

Henning Dransfeld, a senior analyst with Ovum, also highlights the VoIP attraction that can exist in the corporate space, purely on the level of having lower call charges than the incumbent can offer. "Where there's little or no competition for national voice services, and [PSTN] prices are high, it can make sense for companies to build out their own data network and run voice over it," he says. "There's a case in France where a retail bank has done exactly that by using equipment from Alcatel. They've already connected 200 branch sites and will eventually contact 2,000. Because a lot of their sites are in rural areas, France Telecom is the only supplier so the customer can't negotiate prices down."

However, Dransfeld notes that this trend is far more prevalent in the Asia-Pacific region where PSTN calls are high. And on the global level, where there can be as many as five to six suppliers on one route, the argument for putting voice over an IP VPN--simply as a means to lower international call bills--becomes less compelling.

The VoIP opportunity

Yet 'forward-thinking' telcos do not see VoIP as a threat but rather as an opportunity to enhance their product portfolio. "We think that any reduction in PSTN revenue will be more than offset by having a platform that can offer additional services," says Joe Aibinder, product director, VoIP, with AT&T. In September this year, AT&T announced that it would offer VoIP as an option on its managed VPN service--all based on its MPLS platform--for US-based multinational companies by 2004. On-net calling will be available to more than 40 countries worldwide with off-net pricing to be negotiated with customers on an ad hoc basis.

AT&T has already announced that its network is compatible with IP PBXs from Cisco and Avaya, with more vendor announcements to follow later. "We're not forcing customers to migrate immediately [to IP telephony] as we can route traffic over IP with legacy PBX equipment as well as offer IP LAN telephony via IP PBXs," adds Aibinder. "We can let customers develop at their own pace."

The challenge to AT&T is that large enterprise users, with their own in-house expertise, may want to run and manage their own networks, therefore limiting the revenue opportunity. That's why it's gearing up to make service provisioning as easy as possible, which makes for a good customer experience and increases the attraction of outsourcing.

"Our goal is to have a global network operating on the same release of software for routers and provisioning systems, enabling services to be consistent in every region we operate, and for them to be flicked on as and when required," says Aibender.

Delivering services on one platform, with VoIP as one element--albeit an important one--is also the approach of Milnes at Zultys. "We do not sell VoIP as such, but solutions." This summer, Zultys launched its MX250 box which sits on the customer premise and offers IP telephony plus a range of features, such as remote VPN access, IM, presence, video conferencing and chat functions. It can support up to 250 users, with remote workers enjoying corporate intranet access over an internet connection as well as having the same extension number on their IP telephone at home as they do at work. "By offering presence management, operators can see who is available in the organisation for incoming calls and so can route them more efficiently and professionally," adds Milnes. "It's just one of the ways that this solution can increase productivity and efficiency."

How keen are enterprise users?

Cisco may say that the TDM-based PBX is a dead instrument, but it's the extensive presence of such legacy equipment that still poses a barrier for VoIP adoption in the enterprise. However, according to Andrew Rufener, director of technical field marketing at Thrupoint, this point of resistance is weakening. "Most of the decisions on VoIP adoption are being taken now as their traditional PBXs have come to the end of their life cycle," he says.

Thrupoint positions itself as a bridge between IT departments and business strategists (CFO and CEO level) for both service providers and the enterprise--it's also a Cisco Strategic Alliance Partner. For the enterprise segment, the majority of its business comes from the financial services market. "Although it's hard to quantify the business benefits for using a converged IP infrastructure to business customers, enterprises can get 20-30 per cent savings [in hardware and operations]," says Rufener. "There is, however, still a tendency [by enterprises] to see VoIP as a replacement for traditional telephony rather than working out what the strategic advantages can be. IT departments may understand the technology but are not fully aware of the business benefits."

A new survey of enterprise customers from Deloitte & Touche Technology concludes that by 2006, more than two-thirds of Global 2,000 companies will begin deployment of VoIP technology.

The poll, involving responses from 131 enterprises in North America, Europe and Asia, also found that approximately 26% of the participants already have deployed desktop VoIP, although only one-third offer the technology to all employees.

Cost reduction seems to be the main attraction to enterprise users: 84% single it out as the main driver.

The Deloitte study also finds that VoIP has the potential to transform other operations within the enterprise, including call centers, offshoring operations and telecommuting tools. One other optimistic note: 79% of current VoIP users say they are either mostly or highly satisfied with the VoIP technology they have deployed.

Tony Kern, deputy managing partner with Deloitte's technology and telecom practice, says the survey shows that initial misgivings about VoIP largely have disappeared because the technology has become more reliable and is being integrated more easily into other enterprise applications.

"There is obviously more involved here than just cost," Kern notes. There are a lot of collaborative tools and ways to integrate VoIP technology into other enterprise applications, such as the customer support system, which also provide benefits."

Kern adds that reducing the cost of internal and external calls, as well as the lower capital investment needed for VoIP implementations, is helping focus enterprise executives on the usefulness of VoIP.

The Deloitte survey is being released at a time when VoIP seems to be gaining real traction in the enterprise space, and service providers are becoming more proactive in moving beyond simple commercial VoIP applications, SBC, for example, recently signed a deal for a large enterprise VoIP deployment at Ford Motor Co. involving 50,000 IP phones. SBC plans to step up its enterprise push.

Bank of America recently decided to install 180,000 Cisco Internet phones in 5,800 locations over the next three years. Integrator Electronic Data Systems Corp. will help in that installation. Boeing also recently opted for a VoIP deployment.

This in part reflects the increasing comfort executives have with the technology. "The initial performance of desktop VoIP was generally poor, with voice quality significantly inferior to that from existing analog systems," says Kern. "However, the offering has improved markedly with the falling price of VoIP equipment, rising call quality, improving functionality and the growing experience of service providers."

EXECUTIVE INVOLVEMENT

Kern adds that while it has great potential, VoIP technology should be applied sensitively because it also has great potential to disrupt large organizations. A flawed installation, for example, can basically paralyze a large business by crashing both voice and data communications.

The report recommends that at least four top "C-level" executives--the CEO, CFO, COO and CIO--become involved within each enterprise implementation to insure that any VoIP deployment goes smoothly, and that the benefits are maximized across the organization. For example, Kern notes that the COO likely would oversee the integration of VoIP into other customer applications, while the CIO would focus on integrating the voice and data networks.

"VoIP may eventually become a standard communication technology that does not require a moment's thought," Kern says. "But today it still requires careful consideration." The new systems, skills and equipment that are required also involve significant investment, deployment efforts and training, he adds.

IF YOU MAKE A LOT OF LONG-DISTANCE business calls, you probably already know you can save by routing them over the Internet using VoIP technology. How would you like VoIP savings on your cell phone, too?

Boca Raton, Florida-based i2 Telecom International (www. i2telecom.com) has a new device (patent pending) that hands off cellular calls to its VoIP network, so you can save the roaming and long-distance charges still levied under many cellular plans. Its InternetTalker MG-3 saves still more on calls to Canada, Mexico or overseas, where cellular carriers still levy steep charges.

About the size of a CD case, the $109 MG-3 connects to a traditional or IP phone line on one end and the router for your broadband connection on the other. It's not unlike the analog/digital converters distributed by all VoIP service providers, letting any phone connect to their broadband networks. But MG-3 has the added benefit of routing cellular calls over the Interact. One prerequisite is that caller ID be activated on all the phones involved.

In a typical usage scenario, you might use your cell phone to call overseas or a domestic number off your carrier's network not that you can really tell which numbers are off-network, of course). Instead of dialing directly, you call the home or office line with your MG-3. Using caller ID, the device determines that the call is from an authorized phone and switches you onto i2Telecom's VoIP network. Now you dial the long-distance number and are connected at a much lower price than cellular rates.

How much lower? Rates for some of the more popular international destinations include about 3 cents per minute to the United Kingdom instead of the $3.90 per minute typical of straight cellular calls, says i2 Telecom senior vice president Rick Scherle. Per-minute charges are roughly 3 cents to Mexico City instead of 55 cents, 5 cents to China instead of $4.20, and 21 cents to India instead of $4.20.

You'll still log minutes on your cellular plan during prime time. But i2Telecom's clock starts only if a call leaves the Internet and travels over the traditional phone system. Monthly rates for domestic calls start at $11.95 for 300 off-network minutes or $16.95 for 500 minutes; you can also negotiate plans based on your company's calling patterns.

MG-3's installation and configuration were brief and intuitive, and it works well with various office telecom equipment like PBXs and key sets. The device recognizes incoming calls from up to three cell phones of any type, and, like most VoIP devices, calls between MG-3s in branch offices or key employees' homes are completely free.

There are still boundaries between different telecom networks, but an SUV-size hole gets punched in them every day.

Inter-Tel this week is scheduled to unveil new IP telephony phones and software aimed at helping users bridge the legacy telephony/VoIP gap while deploying advanced applications to desktops.

The Inter-Tel 8690 is a Windows CE-based IP phone that could help corporations deploy IP telephony applications such as presence management and integrated voice/chat applications at end-user desktops via an IP handset.

The new device can intemperate with legacy Inter-Tel PBX hardware and new Session Initiation Protocol (SlP)-based IP PBX platforms from the vendor or other makers. The company also is releasing a new version of its communication and presence management client software for the phone, which could help end users better control how they are contacted via phone, e-mail and instant messaging.

The 8690 IP phone most noticeably differs from past Inter-Tel handsets in that it has no buttons on the handset. All interfacing is done via a 6.4-inch LCD touch screen on the device, which can display a number pad, and other touch-screen menus and "soft buttons" that can be controlled with the touch screen. The phone can run in a proprietary protocol mode, for interacting with Inter-Tel's Axxess and InterPrise IP PBX platforms. It also can be configured with a standards-based SIP implementation, letting it act as a SIP agent attached to SIP-based gateways and call servers.

The 8690 includes a three-port Ethernet switch, for connecting PCs to a LAN through the phone. The phone also can be powered via 802.3af power over Ethernet, or Cisco's proprietary PoE technology. (Cisco also offers 802.3af Power-over-Ethernet gear.) Its device also has a full-duplex speaker phone and USB headset connection port.

The phone runs on the Win CE operating system, which is used for PDAs, handhelds and other small devices. The phone run Win CE applications, along with an embedded version of Inter-Tel Unified Communicator presence management client.

The Unified Communicator is client software that can interact with any Inter-Tel IP PBX or PBX (via a digital/IP gateway). The software tracts the availability of co-workers online and displays a list of who is available by what means. The client can tell if end users are available by phone, e-mail or IM software. The software also can be used to initiate a call, e-mail or chat session. Previously, Unified Communicator software was available for PCs and PDAs with wireless and softphone technology.

The Inter-Tel 8690 competes with high-end LCD/touch screen IP phones from Avaya, Cisco, NEC and Mortel. The phone is scheduled to be available this quarter for $2,500.

Winning product: Avaya's IP PBX platform, featuring its S8700 Media Server and Communications Manager Software

Since awarding the 2002 Best of the Tests Award, we've changed how we assess products that fall under the convergence umbrella. Rather than use a single, broad test to provide a little insight on many product aspects - particularly the IP PBX systems and VoIP gateways that anchor most VoIP deployments - we're testing these products multiple times, honing in on a specific feature set each time. The result is a series of stories that provide a deeper analysis of the products from many angles.

Our choice for the top convergence product for 2003 - Avaya's IP PBX platform featuring the S8700 Media Server running Communications Manager software - was a top performer in our IP PBX management review (wwwnwfusion.com, DocFinder: 9839) and placed in the top three in our test of how well-equipped these systems are for supporting teleworkers (DocFinder: 9840). A third test, not used in this judging, looked into VoIP analysis tools.

Our IP PBX management test focused on how each vendors' collection of management wares addressed real-time monitoring, phone configuration, reboot time, quality-of-service (QoS) configuration, event and alarm notification, and trend reporting tasks. The Avaya tool suite - comprising the Avaya Site Administration command-line-like interface, a customized SNMP element manager called Multi-Service Network Manager, the VoIP Monitoring Manager and a third-party call-accounting package from Veramark - was a clear winner in its ability to mark events, notify managers of events, and generate trend and activity reports. Avaya also got high marks for its well-managed implementation of VoIP encryption.

In our test of how well IP PBX systems can accommodate teleworkers, Avaya's product set proved to deliver excellent mobility and call routing.

Specifically Avaya offers great soft phone setup tools for optimizing voice quality and integration with Microsoft Outlook and slick, real-time call-routing capabilities among business, soft, cell and home phones.

"Avaya had a plan, a sound and multifaceted plan, for leading its TDM-legacy enterprise customers, as well as 'greenfield' customers, into the world of VoIP," says Ed Mier, a Lab Alliance partner. "Based on our testing throughout 2003, we have found Avaya's IP-telephony equipment to work very reliably, supporting one of the richest feature sets, and with management capabilities that are evolving in concert with the industry's transition to IP telephony."

Product UPDATE

Since we tested this product - once in May and again in November - Avaya has upgraded its Communications Manager software and IP PBX operating system with improvements in encryption, Enhanced-911 support, and features for extending PBX functionality to cell phone users, Avaya also announced the 88500 Media Server, a Linux-based call processor with support for up to 3,200 phones.

Watch this space: Continuing with our targeted approach to IP PBX testing, we'll examine how vendors equip their products with built-in security features and look at VoIP-specific firewalls. Also on the testing docket are Session Initiation Protocol (SIP)-based phones and wireless IP telephony devices. As the exclusive media sponsor of the NetWorld+ Interop labs, we'll also have direct access to the SIP-based interoperability test aimed at uncovering issues that arise when many VoIP components - telephones, soft phones, IP PBXs, public-switched telephone network gateways and services, automatic call distributors, and voice mail systems - have to

YOU LIKED THE PRICE CUTS. NOW comes part two: VoIP innovation. The Packet8 Desktop VideoPhone from internet phone company 8x8 lets you see and hear calling partners.

Full-motion video calls have arrived--some 40 years after Bell Labs introduced its Picturephone and long after we tired of visiting it at Disneyland. The Packet8 Desktop VideoPhone is available on 8x8's website (www.8x8.com) and through large computer retailers online and off for $299, or $499 for two (all prices street).

It's not one of those kludgy computer video solutions we've seen before. And it doesn't require special, per-minute service charges since 8x8 isn't a traditional phone company delivering video over the traditional phone network. VideoPhone is a creature of the new, unregulated phone network So while arguably it's the first, it won't be the last such device we'll see.

A broadband connection of at least 128Kbps is needed for real-time video and voice quality, says Bryan Martin, chair and CEO of 8x8 in Santa Clara, California. The Packet8 phone is definitely a convenient way to get "just like being there" video. Plug it into an Ethernet port on your broadband router, dial an activation code, and you're in business. It finds its own IP address, can be used across an office LAN, and is easily moved to other locations and connected to a TV or large LCD. It doesn't cost much more than most office phones. In fact, except for a barely noticeable camera and a 5-inch active-matrix LCD, the VideoPhone looks like any office deskset.

You'll need a Packet8 calling plan, which starts at $29.95 per month for unlimited calls to any North American number and unlimited free calls to other Packet8 subscribers worldwide. Most of the VideoPhone's calling features--from voice mail to three-way conferencing to call forwarding--are delivered via the calling plan, not the phone. Reception is great: clear audio and crisp, full-color images on an LCD that's just the right size.

Internet users have long wanted easy and inexpensive ways to talk to other users without costly hardware or expensive software. In the beginning, Internet delivered voice programs sounded like a bad walkie-talkie conversation in a tin can. Since that time the technology and quality have improved greatly. For the past few years high-quality commercial versions of VoIP software have been available, but most of these typically required large capital investments, required high-speed connections or were too complex for the average user. Times have changed ...

Voice components for Microsoft's MSN Messenger, AOL Instant Messenger and Yahoo Messenger arrived in the last year, and new programs like Skype have also entered the picture, providing users with lots of free or low-cost choices for easy to use VoIP software. Typically users with fast connections are pleased with the performance of these applications, frequently equating talk quality to that of a cellular phone. While voice quality improved, some key weaknesses remained. For example you could only make calls to other Internet users who are using the same software program, and you couldn't receive incoming calls from land or cellular-based users.

Times have changed. Now most of the leading packages allow users to make calls to land and cellular-based phones using their services for a very modest fee, some support voice mail functions and allow users to conduct multi-user conference calls, and soon Skype will launch a service to allow land and cellular-based phones to call Skype users. All of these enhancements will continue to move VoIP phone services much closer to widespread acceptance and use among the general public.

What does all of this mean for libraries? Like cellular phones, the VoIP technology provided by programs like Skype is not tied to a particular location, so users can take the ability to communicate with them to the library, needing only a computer, their software and password to access their phone services. While this is great for home users, are you as a library or school ready for these users in your facility? What are the policy implications of users talking on the phone in your facility? What is the impact on bandwidth, will these programs slow down Internet access for others in my building? What type of technical provisions would you need to make to allow these services (or to stop their use)? These are all questions that libraries will need to begin answering in the not too distant future.

Toshiba America Information Systems, whose Digital Solutions Division holds a prominent spot in the SMB (small-to-midsize business) phone systems market, has announced two new IP phones in advance of its first native IP phone system.

Toshiba's IPT2010-SD and IPT2020-SD phones work with the current Strata CTX switch, a PBX that can be IP-enabled through optional IP line-side and trunk-side interface cards. The new phones will work as extensions, similarly, to the soon-to-be-announced Strata CIX, a native, SIP-controlled IP PBX.

Feature sets will be familiar to veteran users of Toshiba Strata phones, including voice mail, direct extension dialing and transfer. The addition of IP extensions gives enterprises more flexibility in moving workers between on-premises and off-premises locations, and allows any remote worker to enjoy full on-premises functionality over a broadband link. This remote function supports casual virtual call center applications, in which the sales support or other expertise that callers seek can be found in geographically dispersed locations.

Remote extensions also allow enterprises to consolidate PSTN (traditional public switched telephone network) lines at headquarters, because that is the point at which extensions gateway onto the public switched network. By the same token, calls made on IP phones through the CIX or IP-enabled CTX will show call recipients the caller ID of the enterprise, no matter where that IP extension may actually be connected.

The IPT2010-SD and 2020-SD are 10- and 20-button sets, with two-line-by-24-character displays, speaker phone and Power-Over-Ethernet (PoE) compliance. This brings the phones under the same UPS protection serving the network. When hooked up to the upcoming CIX, the phones will exchange voice packets directly over the LAN in a peer-to-peer configuration, reducing overall IP bandwidth consumption compared with PBX hub-and-spoke traffic.

Toshiba's historical sweet spot is in the 40-to-100-user category, according to Christopher Labrador, vice president of the Product Management Telecom Division, but its phone systems support up to 670 ports and can be networked over traditional lines or IP. The IPT extensions are currently available through dealer channels, and the CIX's announcement is imminent; pricing information is not yet released.

Technology Editor Ellen Muraskin can be reached at ellen_muraskin@ziffdavis.com.

Check out eWEEK.com's VOIP & Telephony Center at http://voip.eweek.com for the latest news, views and analysis on voice over IP and telephony.

TELECOMWORLDWIRE-8 June 2006-Mitel IP phones leverage Texas Instruments VoIP technology - claim(C)1994-2006 M2 COMMUNICATIONS LTD http://www.m2.com

IT technology company Texas Instruments Incorporated (TI) (NYSE:TXN) and Mitel, a provider of IP communication solutions and applications, announced on Wednesday (7 June) that Mitel's new series of IP phones are based on TI's leading Voice over Internet Protocol (VoIP) technology.

According to the companies, Mitel's new 5330 and 5340 IP Phones leverage TI's TNETV1050 IP phone solution. They reportedly feature a large 160x320 graphics display with 24 or 48 self-labeling, multifunction, programmable keys. The 5330 and 5340 IP Phones are full-duplex, hands-free speakerphone systems with support of Wideband Audio Handsets.

The new Mitel telephones are enabled through TI's single-chip TNETV1050 solution that combines the key processor, communication and peripheral functions. Programmability of the TNETV1050 enables customers to support a number of IP phone implementations with full duplex speakerphone capabilities, including support for three-way conferencing, and low bit rate and wideband codecs. In addition, the TNETV1050 offers IP phone and PC connectivity to the Ethernet LAN, and a USB interface, the company claims.

With nearly every new semester, students, faculty and staff are on the move, switching dorm rooms, classrooms, laboratories and offices. In addition, colleges and universities continually build new facilities, creating challenges for personnel who support the academic institutions' network infrastructures.

Such is the case at Wittenberg University, Springfield, OH--a nationally recognized college for the liberal arts and sciences. Wittenberg responded to the challenge, deploying IP telephony to meet its continual need for maximum flexibility on campus.

"IP telephony will speed up the relocation process and streamline operations, while adding greater voice capabilities for our end-users," says Joseph Deck, Wittenberg University's director of computing services.

To support its 2,100 fulltime students, Wittenberg built out an extensive network infrastructure. The Ethernet-based LAN consists of a collapsed backbone with dedicated fiber to each of its 27 buildings. For desktop connectivity, the university uses 10/100 switched Ethernet to users.

To maximize design versatility, Wittenberg leverages virtual LANs (VLANs) extensively. Some of the switches feature trunked ports with native VLANs and voice VLANs. Users can leverage their computers to collaborate and communicate from almost anywhere on campus. The extensive use of VLANs has given Wittenberg the ability to easily add, subtract and change the status of users on the LAN.

To expand the capabilities of its voice system. the university installed IP telephony. First, Wittenberg's Computing Center went live with an initial deployment of 30 Cisco 7960 IP phones (www.cisco.com), with five of its Catalyst 3524-PWR XL switches in two buildings. Another Catalyst 3524-PWR XL supports the company's Call Manager software, as well as its Unity voice mail and unified messaging. In addition, the installation includes one AS5300 Access Server and one VG200 Voice Gateway. The system is secured by Cisco's PIX520 Firewall and one 7206 Router, which is used as an internal firewall.

Today, Computing Center personnel use IP phones for all their calls. The installation has delivered the capabilities and the dependability Deck expected. Voice calls are made as reliably as using analog phones. Moreover, the software has made the addition and deletion of users and devices intuitive, quick and easy.

Wittenberg recently tested a key application of IP telephony: IP-based conference calling. "The board of directors was very pleased with the clarity of the call and the ease of use," says Deck. "This feature will be widely used in the future."

Deck expects the system will enhance collaboration and productivity by allowing easy conference calling at the touch of a button. Users can listen to their e-mail over the telephone, check voice messages from the Internet and forward faxes to any fax machine. Students and personnel also will enjoy integrated caller ID and an easy-to-use directory service.

Wittenberg plans to construct several buildings over the next few years, which will feature Cisco IP phones. Eventually, IP telephony should entirely replace the school's analog system.

As the system continues to roll out, Deck expects to integrate IP technology with the campus' extensive wireless network. As a result, students will be able to use computing devices, such as hand-held computers, to make IP calls, and access their e-mail and voice mail from anywhere on campus. "Students are always on the go," says Deck. "With this capability, their location just won't matter anymore.

"Eventually, IP telephony will be a technology that almost every college will implement," concludes Deck. "We're just getting to that future a little bit before the others."

IPtimize is moving beyond its data services roots with a managed VoIP offering that gives small businesses a choice of using IP phones, softphones or their existing analog handsets.

Called Voice Pilot, the service is designed to let customers start on a small scale before committing to it, says JeffVeres,COO of IPtimize, a privately funded start-up whose management team consists of telecom industry veterans from carriers such as Cable & Wireless and Qwest.

With three options to choose from, users of IPtimize's new service can turn their PCs into phones by adding software and headsets, use Cisco or Polycom IP phones, or hook their current phones into the IP network via a terminal adapter. The company says it is considering other IP phone options that cost less.

Customers with broadband Internet connections from a different provider can buy the new service.The IPtimize voice service would be supported off an Ethernet switch connected to a WAN router.

The company provides a call attendant console for receiving and transferring calls to other extensions. The equipment supports three- and four-digit dialing and other PBX features that are extendable to phones in remote offices. So a home-officer worker with broadband could connect an IP phone and become another extension on the business phone network, Veres says.

IPtimize is making its initial push for sales in Denver, where it is based, but Veres says the company will expand its efforts across the country.

Business customers pay $50 per month per user for the managed service, and that comes with unlimited local and long-distance calling in the U.S.

The service is similar to IP telephony offerings from Vonage in that it lets customers use their current Internet connections to tie into the voice carrier's network. A major difference is that IPtimize resells its service from wholesaler New Global Telecom. That means if there is trouble with the service, New Global Telecom will deal with it even though the customer has signed a contract with IPtimize.

Ford Motor Co.'s decision to pay SBC $100 million to deploy and manage a network of 50,000 VoIP phones is being touted by the carmaker as a money saver as the carrier plays up its entry into the heavyweight division of VoIP vendors.

The Ford deal is believed to represent the second-largest such deployment in the U.S., behind only Boeing and its 60,000 VoIP phones.

The contract is huge for SBC, which has many managed VoIP customers but none with more than about 10,000 phones, says Brian Buffington, executive director of managed services at SBC.

"It's a big VoIP deployment in itself, but this is only a small part of Ford,"says Mark Winther,group vice president and general manager for worldwide telecom at IDC. This deal only covers Ford's southeastern Michigan offices. When Ford adds in its national and international offices the deployment could be huge, he says

The immediate benefit is going to be efficiencies in cost and operations related to moves, adds and changes," a Ford spokeswoman says. The car manufacturer would not comment on how many other carriers it considered before selecting SBC.

SBC will have a "large team of folks but we can't say how many" and will manage the network from within Ford's facility Buffington says. SBC was reluctant to offer details about Ford's deployment.

SBC is providing Ford with a customized version of its PremierServ-IP Telephony Advantage platform, which is based on Cisco gear.

"In the case of Ford, it is such a large installation we'll have network engineers and technicians on-site," Buffington says. SBC will fully manage the installation, which includes VoIP phones in 110 offices in southeastern Michigan and Ford's headquarters in Dearborn, Mich. The carrier also will manage and monitor the network daily.

SBC is using Cisco CallManager clusters to support the phones. The clusters will be deployed in centralized data centers managed by the carrier. Ford is using SBC's GigaMan metropolitan Ethernet service to connect multiple locations to its data centers.

The VoIP system uses a proprietary Cisco technology called Survivable Remote Site Telephony (SRST) on the routers deployed at Ford's remote sites. If the router detects the IP link is down, SRST automatically contacts the CallManager at the data center over the public switched telephone network, therefore maintaining connectivity. This lets users avoid downtime simply because they might have lost IP connectivity

As Cisco's CallManager currently does not support the IETF'S Session Initiation Protocol (SIP), the phones that Ford initially will deploy are based on Cisco's Skinny Client Control Protocol, which is a proprietary version of the ITU's H.323 standard. Cisco says Ford is interested in SIP and plans to use products based on the specification in the future.

Ford has used SBC Centrex services since 1986,so the company does not have a large staff of telecorn experts, Buffington says.

The VoIP deployment, which is expected to begin within the next couple of months and stretch into 2007, will be used with the Centrex service for some time.

Network World Senior Editor Phil Hochmuth contributed to this story.

Zultys Technologies this week will launch five Session Initiation Protocol-based IP phones with an array of feature combinations for various deployments.

The phones, all under Zultys'ZIP 2 brand, include two devices aimed at desktops, with graphical LCD screens, data encryption and speakerphones. The other three are basic-feature IP phones.

The phones operate with Zultys' MX250 or MX 1200 line of SIP-based IP PBXs.The phones also can work with other IP telephony gear that supports SIP

The ZIP 2x1 and ZIP 2x2 are targeted at business desktops and are capable of displaying GUI-based interfaces. The phones also include screen menus and encryption of voice and SIP signaling traffic.The 2x2 model can be powered via 802.3af Power over Ethernet (PoE) and includes a two-port Ethernet switch for connecting a PC and phone to the LAN via a Category 5,5e or 6 network drop.

The ZIP 2+,2P and 2x2L phones have text-only LCD displays and do not support encryption. Users looking for a basic-feature phone with FbE support can choose the ZIP 2P Like the ZIP 2x2, the 2x21 includes a dual-port switch for linking a PC and phone but does not include PoE support.

The ZIP 2 phones join Zultys'4x4 line of IP phones, which include four-port Ethernet switches and support up to four lines for conference calling.

The new ZIP 2 phones probably will be the IP endpoint of choice going forward at one Zultys site Canby Builder Supply in Portland, Ore.

The 80-employee building supply company uses the Zultys MX250 IP PBX and ZIP 4x4 phones.

"The 4x4 phones are nice, but they're kind of overkill for what we need,"says Alan Churchill,director of MIS for Canby He says the pricing of the ZIP 2 series - $150 to $230, depending on the model is also attractive. (The average price for an IP phone in 2004 was about $320, according to IDC.)

Zultys competes with small-office IP PBX vendors such as 3Com, Altigen, EADS Telecom and Sphere, and larger vendors with small-office VoIP wares, including Avaya, Cisco, Nortel and Siemens.

TeleMatrix announces an economical and user-friendly means to upgrade TeleMatrix branded analog guestroom telephones to the latest SIP VoIP compatibility. Hotels no longer need to worry about investment obsolescence. The Marquis IP VoIP analog adapter fits on any model of the popular Marquis hospitality telephones. Analog deployments are easily retrofitted in the field, and new installations are available for a fraction of the cost of proprietary VoIP phones. TeleMatrix is the leader in hotel telephone communications technology, always striving to lead by example; this latest VoIP innovation continues its long line of industry firsts.

TeleMatrix[TM] Marquis Series has become America's favorite hospitality family by consistently producing reliable, durable, inventive products.

With over 16 years experience and 5 million telephones installed worldwide, TeleMatrix has market proven manufacturing, testing and pre/post service techniques. Constantly looking from the telephone's eye-view we have pioneered most of today's hospitality end-point communication innovations.

TeleMatrix announces an economical and user-friendly means to upgrade TeleMatrix branded analog guestroom telephones to the latest SIP VoIP compatibility. Hotels no longer need to worry about investment obsolescence. The Marquis IP VoIP analog adapter fits on any model of the popular Marquis hospitality telephones. Analog deployments are easily retrofitted in the field, and new installations are available for a fraction of the cost of proprietary VoIP phones. TeleMatrix is the leader in hotel telephone communications technology, always striving to lead by example; this latest VoIP innovation continues its long line of industry firsts.

TeleMatrix[TM] Marquis Series has become America's favorite hospitality family by consistently producing reliable, durable, inventive products.

With over 16 years experience and 5 million telephones installed worldwide, TeleMatrix has market proven manufacturing, testing and pre/post service techniques. Constantly looking from the telephone's eye-view we have pioneered most of today's hospitality end-point communication innovations

Extreme Networks this week is expected to launch a LAN edge switch designed to simplify deployments of wireless LAN access points and IP phones, using an emerging standard protocol for device discovery.

Extreme's Summit 400-24 combines features such as centralized WLAN switch management and configuration, and Power over Ethernet (PoE) and 802. IX technology to help streamline the deployment of secure WLAN and VoIP networks.The switch also uses the emerging Link Layer Discovery Protocol (802.IAB), which can let the switch discover and configure endpoints such as IP phones and WiFi access points on the fly.

Music instrument retailer Guitar Center is in the middle of corporate-wide deployment of Extreme's previously released 48-port version of the Summit 400. The switches will support Extreme WLAN access points the company is putting into its stores, around two per store in 150 locations nationwide.

"We depend a lot on wireless for inventory control," says Robert HiIl1IS director for Guitar Center. He says the store uses bar-code reading guns from Symbol Technologies, which let data be uploaded to a central database via Wi-Fi.

The benefit of the Summit 400 series is its use of thin access points, Hill says.'This is where the industry is moving towards. I like the idea of having thin [access points] and switches all rolled up into a centrally managed console."This lets IS staff distribute wireless and LAN security rules from its Thousand Oaks, Calif., headquarters without having to touch hardware in the stores.

In the near future, Hill says, Guitar Center also might move its network of 3Com NBX IP PBXs - which support voice for all stores - onto the Extreme Summit 400 switches. However, those systems now run on recently bought 3Com SuperStacks, which are "working fine," he says.

The Summit 400-24 has 24 triple-speed Ethernet ports and four Gigabit uplinks (fiber or copper). Stacking ports on the back of the switch lets boxes be daisy-chained in a stack, with 20G bit/sec of bandwidth between switches.

The switch supports 802. IX authentication, which forces end users to authenticate at the port level. This provides greater security for wired or wireless end users. The Summit 400 also provides WLAN switching capabilities, such as support for thin access points, centralized access point management and fast-handoff support for roaming between access points on different subnets.

New to the Summit 100 box is the recently ratified IEEE 802. IAB standard.This technology is similar to Cisco's Discovery Protocol, widely used on all-Ciscobased LANs, when; switches, routers and IP phones can discover each other over Ethernet.

Gear supporting the 802. IAB standard will be able to store this data, as well.This lets a switch or other piece of equipment be "aware" of its neighbor. Having gear that learns such information as QoS parameters, PoE power settings and other configuration data from other gear could help reduce the amount of footwork required for large IP telephony rollouts.

Extreme plans to roll out support for 802.IAB for the rest of its switch line in the spring.Extreme says that its IP telephony partner Avaya will introduce 802. IAB support on its IP phones, IP PBXs and gateways later this year.

The Summit 400 competes with switches that combine wired and WlAN switching capabilities,including gear from Airespace (now Cisco), Aruba Networks, Foundry and Trapeze.

The Summit 400-24 will be available in April for $4,500.

Plug-and-play Power over Ethernet (PoE) midspan solution ensures continuous power to remotely connected devices and systems when used in conjunction with UPS. Installed in wiring closet, 24-port, 10/100 Mbps hub resides between Ethernet switch and connected equipment to provide up to 15.4 W of 48 Vdc per port. Rack-mount unit offers Web-based SNMP management option for remote control and auto-sensing algorithms for non-powered device protection.

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New Plug-and-Play PoE Hub Conveniently Powers Cisco and other Edge Devices

Costa Mesa, Calif. - May 16, 2005 -- In its ongoing mission to bring the highest level of availability to today's converged networks, MGE UPS SYSTEMS INC., the technology leader in providing unsurpassed power protection solutions to computer data centers, telecommunications and industrial operations, has announced the launch of its new Power over Ethernet (PoE) midspan products (also known as power hubs). The new devices ensure continuous power to remotely connected IP telephones, wireless LANs, Bluetooth access points and IP-powered video surveillance and security systems, when used in conjunction with an MGE Uninterruptible Power Supply (UPS). PoE integrates power and data onto a single CAT 5/5e and 6 cabling infrastructure, eliminating the need to install separate electrical wiring and power outlets - thus saving time and money. MGE is the first UPS vendor to offer this combined power solution for converged networks.

Commonly installed in the wiring closet, MGE's 24-port, 10/100 Mbps midspan resides between the Ethernet switch and the connected equipment to provide up to 15.4 Watts of 48-volt DC power per port as defined by the IEEE 802.3af standard for end devices. IP telephones typically consume about 3 to 5 Watts, while wireless LAN access points and IP security cameras can consume as much as 10 to 12 Watts. IP phones and other compliant devices from manufacturers such as Cisco, Nortel, Mitel, Avaya, Siemens, Sony, Alcatel and others are fully supported without modifying the existing active network equipment and wiring. By pairing the midspan with an extended run time MGE UPS, Voice over IP (VoIP) phones can realize up to five nines of reliability. Use of the combined midspan and UPS solution greatly enhances overall Quality of Service (QoS) for the entire network including remotely located resources.

"In today's Voice over IP applications, Quality of Service is the name of the game. Our new Power over Ethernet midspan products, when combined with our UPSs, help to level the playing field with conventional switched telephone networks," commented Brad Amano, market segment manager for MGE UPS Systems. "Instead of having smaller UPSs with every powered device, our PoE midspan and UPS solution now provides power to distributed IP equipment - reducing costs, maintenance and UPS overhead. In addition, there's no need to install an additional Ethernet switch to provide Power over Ethernet functionality. This saves on installation costs and preserves the existing infrastructure. Overall, our combined plug-and-play PoE midspan and UPS solution is a win-win for VoIP and wireless LAN customers."

The new 19-inch rack-mount, 1U high midspan features advanced auto-sensing algorithms for non-powered device protection. In addition, the midspan is also available with a Web-based SNMP management option that remotely controls the midspan and gathers essential telemetry. The remote management provides immediate alerts, responds to changes to the IP phones in the field and enables remote devices to reset. The units feature front panel LEDs to indicate system status as well as supply to RJ45 ports. For increased management capability, MGE's Enterprise Power Management software automatically detects the connected midspan and provides instant status and alerts.

MGE's midspan units feature a two-year warranty and meet UL/cUL, CE, FCC part 15, class B with FTP cable standards and approvals. Available now, the midspan units list for $1199. The SNMP version lists for $1499.

About MGE:

MGE UPS SYSTEMS, INC. is a world leader in providing high quality power solutions that increase power availability and system uptime to PCs and enterprise-wide networks, mission-critical telecommunication systems, and industrial/manufacturing processes. MGE's comprehensive line of products includes Uninterruptible Power Supplies (UPSs), inverters, rectifiers, power management software, active harmonic conditioners, and surge suppressors that provide MGE's customers with end-to-end infrastructure solutions. With its Total Quality Management and MGE PowerServices(TM) programs, supported by a network of 900 service specialists in 170 centers worldwide, MGE's customers are assured of the highest-level of quality and service throughout the complete life-cycle of their installations.

With U.S. headquarters in Costa Mesa, Calif., MGE is able to deliver the latest in innovative solutions around the globe. To learn more about MGE's power protection, conversion and distribution solutions, visit MGE's Web site at: www.mgeups.com/us.

Bringing Skype-style IP communications to ISVs and OEMs, software engine employs VoIP API that provides scalable multipoint capabilities, security, and ability to connect corporate and government users typically located behind their own firewalls. Product also provides options for data collaboration and multipoint video. Along with multiple audio components, package also includes coder/decoder (codec) suite and record and playback capabilities.

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New VoIP Technology Brings Skype-style IP Communications to ISVs and OEMs that Seek to Integrate Highly Scalable Multipoint Conferencing Into PC Desktop Applications

SAN DIEGO, Sept. 15 / -- WiredRed(R), a technology leader in real-time communications software, today announced the availability of its next generation software engine for PC desktop multipoint VoIP. The next generation VoIP application programming interface (API) delivers the audio clarity and fluid experience of point-to-point communications available in consumer services, such as Skype, to commercial vendors that seek to include the same capabilities in commercial-grade products and services. WiredRed's new API provides highly scalable multipoint capabilities, security, and the ability to dynamically connect corporate and government users that are typically behind their own firewalls. It also includes options for data collaboration and multipoint video that are generally not available in consumer services.

The new audio components include microphone set-up wizards, a suite of VoIP codecs, adaptive noise cancellation (ANC), acoustic echo cancellation (AEC), automatic gain control (AGC), voice activity detection (VAD), optimizations that properly handle discontinuous transmission (DTX), sample rate conversion (handling multiple participants at differing sample rates), jitter filter management, and mixing and bridging for multipoint VoIP conferencing. The coder/decoder (codec) suite includes G.726, G.711 and a library of additional industry standard and proprietary codecs. Additional components include record and playback capabilities. The implementation of the audio components can be standalone, or in combination with WiredRed's Real-Time Routing Platform, often used to connect multiple ad-hoc users behind their own separate firewalls into a conferencing application.

The Skype acquisition by eBay, Inc., has made the fast growing adoption of desktop VoIP impossible to ignore," said Steven Peltier, WiredRed CEO. "As adoption of consumer and point-to-point VoIP grows, so will the need for multipoint conferencing. That's where we come in. WiredRed is among the few vendors that can deliver multipoint VoIP and video capabilities to OEM manufacturers and online service providers."

PC audio and VoIP technologies have been available since the late '90s, but the technology's adoption has grown dramatically over the last two years. In particular, Skype, one of the most popular consumer VoIP services, has grown from less than 5 million registered users in Q1 2004, to more than 54 million members in 225 countries and territories worldwide.

WiredRed is a communications technology developer, focused exclusively in the area of multipoint, real-time communications software. The Company's technology has been applied to several commercial applications, most recently VoIP and video conferencing. The technology is unique in three respects. It has the ability to route, or successfully connect several users behind separate corporate and government firewalls. It provides a complete two-way experience (full-duplex) between multiple parties, whereby all parties can talk and be seen at the same time. Lastly, it offers a superior audio and video experience. The latter refers to the software's ability to synchronize multiple parties in real-time and its ability to handle large variations in bandwidth between dispersed users.

Prior generations of WiredRed's multipoint VoIP and video API have been incorporated into soft-phones from one of the world's largest PBX manufacturers, online games for consumer team play, and online conferencing and video service providers.

Price and Availability

The new multipoint API is available now under developer and OEM license agreements. For pricing and additional information, please contact WiredRed directly, at +1-858-715-0870, www.wiredred.com, or sales@wiredred.com.

About WiredRed

WiredRed Software is a technology leader in real-time communications. More than 3,500 commercial and government organizations use WiredRed's award-winning e/pop software and related software development kits (SDKs) to meet their real-time messaging, web, VoIP and multipoint video conferencing challenges.

For more information visit the WiredRed web site at http://www.wiredred.com/ or contact the company directly at sales@wiredred.com or +1-858-715-0970.

e/pop and WiredRed are registered trademarks of WiredRed Software. All other marks are property of their respective owners.

Suited for Wi-Fi phones with multimedia and telephony capabilities, BCM1161 integrates ARM9(TM)-based CPU, analog voice codec with direct microphone and speaker interface, as well as interfaces for 262k color LCD display and USB 2.0. Single-chip solution provides polyphonic ring-tone support, 2 Megapixel digital camera, voice record/playback capabilities, and video clip record/playback ability. Telephony support includes 3-way conferencing, speaker phone, and hi-fi voice capabilities.

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Second Generation Mobile VoIP Processor Chip Provides the Industry's Most Highly Integrated Solution for Multimedia Voice and Video Applications

BOSTON, Fall 2005 VON Conference & Expo, Sept. 19/ -- Broadcom Corporation (NASDAQ:BRCM), a global leader in wired and wireless broadband communications semiconductors, today announced a new second generation mobile Voice over Internet Protocol (VoIP) processor designed specifically for Wi-Fi(R) phones that feature advanced multimedia and telephony capabilities. This single-chip VoIP processor enables a compelling new class of multimedia voice and video applications such as video streaming, digital cameras, video conferencing and data connectivity, all not available from the typical cordless phones used in homes today.

Home entertainment products are evolving to embrace the new digital revolution. Radios, portable tape players, VCRs and TV sets are now being replaced with MP3 players, CD players, DVD players and HDTV sets. On the other hand, the home telephone has changed very little to date and has not taken advantage of many new multimedia technologies as of yet. Today's Wi-Fi phones are beginning to leverage the convergence of VoIP and WLAN, enabling the handsets to not only provide leading edge performance and features, but also to interoperate with new home entertainment appliances. To enhance VoIP phones, Broadcom chips feature advanced compression techniques (such as BroadVoice(TM)32) for a superior audio experience.

"The performance and voice quality achieved through our BroadVoice32 technology allow phone calls to be near CD-quality," said Patrick Sullivan, Vice President and General Manager of Broadcom's VoIP phone products. "This provides a significant differentiator to those service providers who offer VoIP service when compared to traditional phone service."

Announced today is the Broadcom(R) BCM1161 -- a second generation mobile VoIP processor that focuses on low-power and advanced multimedia and telephony functions. The BCM1161's advanced multimedia features include polyphonic ring-tone support, a 2 Megapixel digital camera, voice record/playback and video clips record/playback. A variety of telephony features are also supported by the BCM1161 including 3-way conferencing and speaker phone support, and high-fidelity voice capabilities through the use of Broadcom's BroadVoice technology. The new single-chip integrates an ARM9(TM)-based CPU, analog voice codec with a direct microphone and high-output speaker interface, 262k color LCD display interface and a USB 2.0 interface.

"Selecting Broadcom as the supplier for our Wi-Fi phones was an easy decision due to its product breadth and leadership position within both the VoIP and WLAN markets," said Larry Lee, Vice President of the DataCom Business Unit of Wistron Neweb. "The BCM1161 mobile VoIP processor platform has allowed Wistron Neweb to develop a high-quality product with good voice quality, range, battery life and support for the latest security and QoS standards."

To reduce customers' time-to-market with new product designs, Broadcom has developed the BCM91161 Wi-Fi VoIP phone reference design. The BCM91161 includes Broadcom's xChange(TM) VoIP software suite, Session Initiation Protocol (SIP) call signaling stack, WLAN OneDriver(TM) and a LinuxOS-based board support package, including all necessary drivers and software development tools. This kit is available today to developers as a wireless IP phone handset with a comprehensive hardware reference design support package.

Availability

Broadcom's BCM1161 mobile VoIP processor is available today and will be offered in next-generation Wi-Fi phones from leading ODMs such as Alpha Networks, Moimstone and Wistron Neweb. Demonstrations for the Broadcom reference design as well as ODM partner products will be shown September 19th through 22nd at the Fall VON 2005 Conference & Expo (Boston Convention and Exhibition Center).

About Broadcom

Broadcom Corporation is a global leader in wired and wireless broadband communications semiconductors. Our products enable the convergence of high- speed data, high definition video, voice and audio at home, in the office and on the go. Broadcom provides manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices with the industry's broadest portfolio of state-of-the-art system-on- a-chip and software solutions. These solutions support our core mission: Connecting everything(R).

Broadcom is one of the world's largest fabless semiconductor companies, with annual revenue of more than $2 billion. The company is headquartered in Irvine, Calif., with offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at 1-949-450-8700 or at www.broadcom.com.

Broadcom(R), the pulse logo, Connecting everything(R), the Connecting everything logo, BroadVoice(TM), OneDriver(TM) and xChange(TM) are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Wi-Fi(R) is a trademark of the Wi-Fi Alliance. ARM9(TM) is a trademark of ARM Limited. Any other trademarks or trade names mentioned are the property of their respective owners

MultiVOIP(TM) SS SIP survivability server provides basic features of centralized IP telephony system to remote locations during IP network failures. It also provides gateway functionality by bridging Public Switched Telephone Network to IP network, connecting up to 8 analog trunks. Also able to connect analog phone and fax machines, product has all features needed to provide basic IP telephony to smaller offices during WAN failure.

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MINNEAPOLIS, September 19/--- Announcing SIP Survivable Voice and Fax over IP MultiVOIP Gateways

For a company implementing IP telephony, a network failure can cut off branch offices and cause major headaches. Solutions like installing IP PBXs in each office would solve the problem, but their expense can defeat the cost-cutting purposes of implementing IP telephony. What is needed is a cost-effective way to provide headquarters IP PBX capabilities to remote offices via a WAN with built-in survivability if the WAN fails. Multi-Tech(R) Systems, Inc., a leading data communications and telecommunications company based in suburban Minneapolis, is announcing a SIP Voice over IP (VoIP) server that does just that.

The patent-pending MultiVOIP(TM) SS SIP survivability server provides the basic features of a centralized IP telephony system to remote locations during IP network (i.e. WAN) failures, and also provides gateway functionality by bridging the Public Switched Telephone Network (PSTN) to the IP network by connecting one or more analog trunks. The MultiVOIP SS will also connect to analog phone and fax machines.

As enterprises invest in IP enabled PBXs, they face the dilemma of what to do for cost-effective survivability and local access at remote offices," states Chip Harleman, Vice President of Sales and Marketing for Multi-Tech Systems, Inc. "When a network failure occurs, remote office IP phones can register with the MultiVOIP server, be it local or remote via a different IP network, and have some level of operability. Our new MultiVOIP SS survivability server has the features needed to provide basic IP telephony to smaller offices during a WAN failure, and to bridge the PSTN to the IP network by connecting up to eight analog trunks."

Shipping immediately, the MVP210-SS two-port model sells for an MSRP of US$999, the four-port MVP410-SS for US$1599 and the eight-port MVP810-SS for US$2599.

Multi-Tech Systems is an ISO 9001:2000 certified global manufacturer of telephony, Internet and device networking products connecting voice and data over IP networks. Multi-Tech Systems has over 60 U.S. patents and numerous international patents. Contact Multi-Tech in the U.S. at +1-800-328-9717 or +1-763-785-3500, via fax at +1-763-785-9874, EMEA at +44-118-959-7774, via fax at +44-118-959-7775, at http://www.multitech.com

Matching carrier-grade voice quality is a unique challenge to the voice over IP (VoIP) services being introduced in today's market. With everything moving toward IP, can this medium be used to actually create a carrier-grade service?

A true carrier-grade service includes reliability, availability and scalability; in a VoIP environment, add in security, manageability and interoperability. The additional factors are necessary as the voice transmissions are carried over network links in conjunction with data services. Voice-grade services must have the continuous available capacity from the beginning to the end of the conversation. Latency, loss and jitter can all affect the quality of the voice service.

In a typical IP packet carrying data only, transmission through the network is fairly simple. The data packet is formed, sent and received. Small delays or retransmissions are accepted. Voice traffic, however, cannot tolerate errors. Voice packets need a mechanism to move at a higher priority so that their transmission is, in effect, guaranteed. Today, this is accomplished by setting the quality-of-service (QoS) bit in the IP header.

All IP headers have a type-of-service (ToS) byte, more recently defined as the diffServe code point field. QoS refers to a set of parameters for both connection-mode (TCP) and connectionless-mode (IP) transmissions, which provide for performance in terms of transmission quality and availability of service. It encompasses maximum delay, throughput and priority of the packets being transmitted.

In IP transmissions, there is no actual circuit-the packets are routed over a network to the receiving workstation. If the call is to be placed outside of the network, the conversation will still be routed to the point that the PBX or gateway puts the call on the packet-switched telephone network (PSTN).

ADDRESS FRAMEWORK CONSTRUCTION

To build QoS into a voice system, first address construction of the framework. Applications and appliances must be able to set and understand the QoS bit, or recognize the other transfer mechanisms if using another standard.

Applications called traffic shapers work much like a traffic cop. They will slow "less important" traffic and allow priority movement of datagrams that have a higher priority. The problem with these applications, however, is that they offer a single point of failure in a network. They also may have issues with scalability for networks over a certain number of devices.

Routers and Layer 2 switches that understand this bit will provide both redundancy and, in the near future, multicast abilities. In Layer 2-type switches, IEEE has developed two standards (802.1p and 802.1q) to address QoS.

A Layer 2 802.1p-compliant switch has the ability within the MAC layer to group LAN packets according to their traffic class. Of the eight classes that network managers map to their specific applications, priority seven is generally used for router-to-router communication and path information within the network. VoIP, videoconferencing and other delay-sensitive applications will use values five or six. These switches also must understand multicast traffic.

LAN administrators must determine the settings of these bits in their applications. With new Layer 3 switch and routing capabilities, this task can be done on an address level within the router tables, reducing or eliminating the need for traffic shapers and complicated mapping tables. The 802.1 q standard allows network administrators to break up larger LANs into smaller segments, or virtual local area networks.

Another means of identifying QoS is through setting the diffServe bit. The first bits of the ToS byte or diffServe code point field in the IP header are set using one of three per-hop behavior mechanisms. A hop is defined as packet movement from one forwarding point to another (router to router, router to switch).

The advantage of this bit is that all Layer 3 devices throughout the Internet, including routers and Layer 3 switches, understand it. It will allow traffic to travel via various paths until it reaches its destination. All routers and switches within the given paths must adhere to this setting and forward the packets accordingly.

Session initiation protocol (SIP) is an application-layer protocol to overcome the limitations of H.323 QoS and diffServe. H.323 operates in a connectionless mode, where no end-to-end session or "circuit" is created for the duration of the conversation. SIP handles setting up the sessions and encompasses user location, availability, redirection and multiparty abilities in Layer 7 of the OSI protocol stack. Further, it allows VoIP gateways, PBXs and other communication systems devices to interoperate, making it far more scalable.

This protocol has less overhead, as it reuses the same header information from HTTP. Also, as it is connection-oriented multicast, unicast and other connection-dependent conversations are more reliable than they would be with dependency on QoS only. Name mapping and redirection are built into the protocol, making having one URL possible.

The Megaco/H.248 standard, which is expected to replace the media gateway control protocol, specifies specific protocols for all devices and divides the gateway functions into subcomponents. This standard also allows for devices to function with "clocked" type devices found in the PSTN to provide more affordable call-switching techniques.

To make your VoIP network ready, first determine your requirements, the health of your network and infrastructure, the vendor with whom you will be working, and the priorities of your applications on your network. There may be a need to replace older electronics, due to any lack of intelligence and antiquated technology.

Other key factors to consider are whether your systems are open enough to allow a variety of phones for later connections to the network. A call to the phone service provider is advised to find out what VoIP services they are planning to offer in the near future. The latest trend on the carrier side is to become an Ethernet local exchange carrier, which would eliminate your need to supply the gateway to the PSTN. If they plan to offer this service, find out what standard they will be supporting prior to making a decision.

In order to realize cost savings, what steps should you take? Terminations, cabling runs and labeling should be compliant with all of the appropriate standards. A protocol analyzer or network analyzer can point out potential problems. Also make sure that your cabling meets today's standards.

Next, examine your electronics and the general health of your traffic patterns. Make sure that your electronics will understand QoS, diffServe or whatever mechanisms used by your VoIP system. Get rid of unnecessary protocols that are using up your bandwidth. Finally, and most importantly, monitor your service after it is in place.

For more information from Siemon: www.rsleads.com/401cn-258

Carrie Higbie is network applications market manager for The Siemon Company. Watertown, Conn. She has more than 20 years' experience in the computer industry, holds several certifications, and has taught related topics at the collegiate level and within the industry.

It was only a matter of time before Wi-Fi and VoIP met up and joined forces in your business. They've come together in the form of Session Initiation Protocol phones. This very flexible protocol has become a top choice for VoIP applications. Chances are, if you have a VoIP setup, it already includes SIP protocols. Theoretically, you can plug any SIP-enabled VoIP phone into your SIP-based VoIP setup.

The newest of those phones is the Zultys (www. zultys.com) WIP2 wireless IP phone, a full-featured phone with voice encryption, paging and three-way conferencing. WIP2 includes everything you'd expect in a high-end VoIP phone, and it lets you prowl around the premises using the Wi-Fi capability. Pricing hadn't been set as of press time. Like the WIP2, ZyXEL's $230 (street) Prestige P-200W (http://us. zyxel.com) is 802.11b-compatible. There are a few small trade-offs, though. Expect your talk time to be limited to about four hours, and remember, you can only talk when you're within range of a Wi-Fi access point. In other Wi-Fi and VoIP news, Vonage (www.vonage. com) has tested a Wi-Fi handset that works with its service and should be available by the time you read this. Look for more Wi-Fi VoIP phones to hit the market as demand builds.

At the Consumer Electronics Show (CES) in Las Vegas this month, there was a whole area dedicated to the various small-fry companies jumping into Voice over IP (VoIP) telephony—an area largely pioneered by Vonage—and offering all-you-can-phone service for $29.95 a month. A slew of telephone adapters modeled after the Cisco 186 has also appeared, making everything cheaper and cheaper. Offers of unlimited phone service for $9.95 are cropping up too, as is the re-emergence of computer-to-computer IP-to-IP phone systems. There are problems arising, though, because most people are still running on phone-company wires and we have a more and more flaky Internet.

Before I go on with this argument, I want to start by saying I do not want to hear about how one or two readers out there have these VoIP systems and they work flawlessly. I have had good experiences intermittently too. But all too often, the network simply hiccups and you sound like you are on the worst sort of cellular connection.

I have complained about this before, but now that VoIP telephony is blossoming, I'm getting too many phone calls from people using it. These chats always sound the same:

Phone rings. ME: Hello? Caller: Is this John Dvorak? ME: Yes. Caller: …I, I'm Clyde Dunm… calling for Wlfen Comp. ME: What? Caller: Hi, I'm Clyde Dunn, calling for Wolren Computer. ME: Hi, Caller: …… ME: Hello? Caller: Yes. ME: What? Caller: Did you get the sample we sent you? ME: What was it? Caller: A ME: A what? Are you on one of those Internet phones? Caller: Yes, why? ME: Call me on a real phone and I'll tell you.

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What makes this worse is that entire companies have hooked up to these things, with the same results. I'm always amused when a call center in India has one of these systems and it's so overloaded that you can't understand a thing, since the sound is so muffled.

I know that if you're sitting on a real T1 line rather than a DSL connection, the quality is usually identical to the switched service. That's because the T1 line is a different level of service than flaky DSL. A while back, I got into a chat with a phone service guy who was digging around inside an open junction box. He said the biggest problem with phone service in the San Francisco Bay area was squirrels eating through the wires. In the process, he showed me the difference between the T1 wires inside the junction box and the DSL hookup. The T1 wire was a huge thick wire. He made it clear that people were paying a lot of money for a T1, and they were getting better quality for the extra money. Yes, spend ten times as much for better wire. What a deal!

There is more to it than that. The phonecos have always played hardball with anyone and anything that ruins their income streams. In the early days of DSL, they attempted to squash the technology, because they knew it would eat into their lucrative T1 and T3 business. The fact is if the phonecos ever prioritized DSL, there would be no need for T1 service anywhere. DSL should deliver the same or better quality as any T1 line. But T1 is still the premium-level service, and the only line that appears to work flawlessly with VoIP systems all the time.

That said, it would be worthwhile to experiment with a VoIP phone at your office or home just to see how well it works. I have taken these phones to hotels to hook into the hotel network and had good luck. But with the current Internet slogging along under constant denial-of-service attacks and overloaded with spurious e-mail transmissions, the idea that VoIP is going to push aside land lines any time soon is wishful thinking. And now phonecos such as SBC are selling the VoIP equipment themselves, while indicating that if you use a VoIP phone that hooks to the company's switched network you are going to have to pay them—unless, of course, you use the company's VoIP service.

Personally, I can't blame them for this policy. Why should they let you piggyback on their hard work? In a day of public utilities that were supposed to serve the greater good, it would be appropriate and right to piggyback. But in a deregulated winner-take-all every-man-for-himself dog-eat-dog world, it makes no sense. And that's the way all this will end. With weak and useless public utilities commissions throughout the country and no regulation, the phone companies will just do the things that benefit them the most. They own most of the wires. That's all that matters.

I guess my point is that the day when all calls are free is still a long way off.

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There's also the complexity of providing interconnection, says Letts.

"About 100 or so different providers in Japan have expressed desire to get into the IP voice market by procuring 050 numbers," he says. "When you have those ops interconnected with each other, you are going to get quality problems, and I think that's one of the major issues at the moment."

Defining VoIP

Internet telephony began in 1994 with PC-to-PC connections over the public Internet, pioneered by Israel-based Vocaltec. While these services remain, they are effectively a closed user group, enabling connectivity only between computers enabled with the same software. Nonetheless, it's a category that's growing: shooting to number one with a bullet since its launch last year is Skype, created by file trading firm Kazaa, which has generated 5.65 million downloads.

In a similar vein is Free World Dialing from U.S. entrepreneur and VoIP advocate Jeff Pulver, which has 80,000 users, and Net2Phone.

Also well-established are IP calling cards which enable tourists or, in countries such as China, those without phones to have access to low cost long-distance calls.

An entrenched part of the long-haul sector industry are IP backbone providers. The largest two carriers, ITXC (founded by Vocaltec) and iBasis, reported just under 2 billion minutes for the third quarter 2003 and count most of the world's biggest telcos among their customers.

For various reasons it's not a market where the majors have intervened. Given the generally balanced trade in voice traffic between major markets, there may not be any incentive to do so just yet.

The fast-growing end of the industry is in VoIP in the enterprise, where IT managers and employees like its ability to be quickly deployed on the rapidly-proliferating IP-VPNs in the corporate world. And instead of needing an army of expensive PBX managers, it's simple plug-and-play for employees.

But the holy grail for IP telephony is retail VoIP--phone-phone services as a direct substitute for TDM. By running an adaptor between an ordinary phone and a broadband modem, Vonage and Netpulse in the U.S., and Yahoo! BB in Japan, can provide low-cost trunk voice calls to an ever-widening arc of global destinations. No wonder carriers are worried.

VoIP in Japan continues to grow with the implicit support of the government, which sees the sector as critical to its high-tech industry policy.

Last October's auction of 9 million IP numbers to voice providers is testament to the bullishness of the market.

Of these, 5.5 million were snapped up by Softbank-owned Yahoo! BB, the driving force in Japan's broadband market. It was Softbank's legal challenge to NTT two years ago that forced the incumbent to open up its exchanges to leased DSL, thus sparking the competition that has created the world's largest broadband market by subscribers.

If successful, it may well be that Yahoo BB writes the book on the broadband business. It now has more than 3 million DSL users, of whom 90% also subscribe to a voice service. Softbank chairman Masayoshi Son has laid out his plans to get into voice, broadcast and other industries on top of broadband connectivity. But for all his efforts, Yahoo! BB is not making any money.

To date, the voice service represents only about 1,000 yen ($8.30) of the 4,000-yen plus ARPU for Yahoo! BB, which last year posted a $708 million loss, although operating losses are falling while customer acquisition losses are also declining.

But the voice business is still virgin territory, and the rules are still being determined.

Much will depend on how well Softbank can "develop and commercialize new services," says a Yankee Group report, which warned that the startup must ward off competition from FTTH and WLAN providers as well as NTT.

Yahoo BB is up against two major business groups, with Japan Telecom, KDDI, NEC and Matsushita on one side, and NTT Communications, Nifty and Sony Communications Network on the other. Providers in each consortium have interconnected their networks, enabling their users to call each other free.

But they don't always interconnect with the PSTN, says Walsh.

"It's very confusing from the point of view of users. To now, it's been very simple. VoIP users have basically used the on-net capability, called other users within the same provider, IP-IP, on the net," says James Walsh, a senior analyst with Yankee Group.

"What is happening now, with those providers interconnecting, with backbone peering with long distance players, in some cases a call is possible, and in other cases it is not."

Still, Japan is where the early shockwaves of the VoIP revolution can be felt. For a start, the 5 million or so IP voice users are learning that distance no longer matters.

On-net calls between all locations are free. A three-minute call from a switched to IP phone costs between 10.4 and 10.7 Yen ($0.095--$0.097)--or five to eight times less than PSTN long-distance rates, says Walsh. A call from an IP to a regular phone is charged at the standard rate, about eight yen per minute.

The introduction of the IP numbers with the 050 prefix provides some definition for VoIP services.

But Geoff Letts, a research fellow for Yankee's Asia-Pac telecom group, warns that quality was already an issue for consumers, along with interconnect uncertainties. Letts and Telegeography's Beckert both note anecdotal evidence of uncertain quality and reliability in Japan and the U.S. The fundamental problem is that a VoIP service rides on top of a DSL or cable connection delivered by another provider.

IPN Communications, a majority-owned subsidiary of DataLogic International, Inc. has announced that Teracom Technology will begin testing its VoIP servers and IP Phones in consideration for China deployment.

Teracom Technology provides telecom carriers, broadband data carriers and e-commerce enterprises with customized services including investment, strategic planning and technology solutions. Upon achieving acceptable test results, Teracom plan to offer IPN's VoIP solutions to its future clients as well as an existing network of several hundred thousand subscribers.

IPN's CEO, Michael Wu, commented, "We are confidence that the test results will be good and that we will soon work with Teracom in deploying our technologies to their customers."

"We anticipate this to be our first medium scale deployment into China. This is part of our plans to proliferate our technologies into various international markets where we feel VoIP will make a significant impact", Keith Nguyen, President of DataLogic, added.

THE ANALOG phone may soon be relegated to the world of 8-tracks and brick-size cell phones. When you look at moving up to VoIP, those old desk clunkers will be the first to go. In their place, you'll get something new, and there's a good chance it will be a SIP phone. SIP stands for Session Initiation Protocol, a signaling protocol that establishes sessions in an IP network. A session may be a simple two-way voice call, or it might be something more advanced, involving conferencing or multimedia. Most important, it's become a hot choice for VoIP systems.

One nice feature of SIP is interoperability. You're not necessarily tied to one vendor. You could install a SIP-based IP PBX from one vendor and SIP phones from another. That's good news for growing businesses that already have an IP-PBX system and are looking to upgrade or expand their stables of desk phones. You have a wide variety of choices, so you can shop for features, voice quality and price.

What's really glamorous about SIP is that all its extra feature potential makes your standard, plain-old-telephone-service phones look like old appliances. We're talking about unified messaging, click-to-call and teleconferencing, among other features. Chances are, you can find one to fit all your business needs.

The Zultys Technologies ZIP 2x2, a $230 (all prices street) upper-midrange phone in their line, features two Ethernet ports, Power over Ethernet and three-way teleconferencing. The phone also sports advanced encryption standard, a good idea for sensitive conversations and for entrepreneurs working in the legal field.

The $280 Cisco 7940G comes stocked with a large display, a built-in headset port and a speakerphone. Cisco aims this particular phone at "transaction type" workers, and it comes with two programmable line and feature keys. In the same price range, the $300 Siemens OptiPoint 410 Standard also comes with PoE, a speakerphone and a built-in LAN

switch.

In the budget range, the Grandstream Networks GXP-2000 comes in at a very affordable $110. You still get two Ethernet ports and multiparty conferencing, and you can add PoE with an optional cable kit. The Avaya 4602SW IP Telephone, on the other hand, lands in the middle of our price range at $170, with 12 programmable call appearance/feature keys, two Ethernet ports and a speakerphone. All the major SIP phone manufacturers have a variety of models, with differences coming down to features like display size, ability to customize and number of call appearances.

ZULTYS TECHNOLOGIES ZIP 2X2

Other considerations include whether you prefer physical buttons to access most features or don't mind scrolling through a display menu. Voice quality is always a top priority, so look for phones with good jitter-buffer technology. Also, if you have Cisco equipment and want to use PoE, be sure the SIP phones you buy support Cisco's pre-standard proprietary version of PoE.

Other manufacturers to check into include Alcatel (www.alcatel. com), Nortel Networks (www.nortel. com), Polycom (www.polycom.com), Snom Technology (www.snom.com) and Tiger Netcom (www.tigernetcom. com). Some IP phone manufacturers are planning to make SIP upgrades to some of their existing phones via a firmware update. Talk to your IT consultant or value-added reseller and fellow business owners for information and recommendations.

The staging of the ITU Asia show in the eccentric location of Busan last month was at least a chance for the world to look at Korea's world-class carriers and manufacturers.

Korea has put a lot of daylight between itself and the rest of the world in telecom's two critical growth paths of broadband and mobile data. With nearly a quarter of the country's citizens connected to broadband, and making some of the smartest 3G phones in the world, Korea certainly deserves some bragging rights.

It's just not clear to what extent this is a result of a concerted national effort, under the leadership of the Ministry of Information and Communications (MIC), or whether it stems from good commercial decisions.

But it is the only country in the world with a broadband universal access policy. High-speed data over cable or DSL is available to 93% of all households, and government policy is targeting 100% by 2007.

Naturally, this all gets a big cheer at a telecom conference, especially one run by the ITU.

business for telecom vendors and digital content providers, and it means consumers can watch IP TV. But these ends are hardly sufficient in themselves. For the network investments made, broadband needs to have a wide economic benefit.

It should create jobs, open up new sectors of the economy and expand national competitiveness. Anecdotally, Korea's broadband boom does seem to have created a development platform for new kinds of business. But this case has not been quantified. More to the point, to the extent that the fast broadband rollout is attributable to the MIC, it should also take the rap for the virtual collapse of the sector over 2002-03.

The lopsided competitive environment did serious damage to shareholder value in the two main competitors to KT, Hanaro and Thrunet.

This is not to knock the efforts of KT, SKT, Samsung and LG, which have between them built one of the world's most wired societies (no. 4 on the ITU Digital Access Index).

But broadband is a maturing technology, with a deployment history of four to five years--long enough to start calculating the economic costs and the benefits. To date, we don't have any estimates on the flow-on effects of broadband on the Korean economy, or anywhere else for that matter.

The accumulated spending on IT throughout the 80s and 90s created an estimated 1% productivity boost for the US economy.

Still, while the actual impact of the MIC on telecom growth is a matter for debate, at least the ministry has shown some faith in the power of competition to drive the sector's development.

Business as usual

The same could not be said for Japan's Ministry of Internal Affairs and Communications (MIAC), which last month rejected Masayoshi Son's application for 3G spectrum.

Son, the chairman of Softbank, accurately noted that the decision lacked transparency and was hard to follow. He also helpfully pointed out that the officials' own pension fund was one of the biggest investors in KDDI.

Son is the man behind broadband provider Yahoo! BB that successfully sued NTT to lease its DSL access lines, thus opening up Japan's competitive broadband market.

No thanks to the MIAC then, or now.

Secrecy, conflicts of interest, resistance to new competitors and ideas: so it's business as usual for the MIAC.

Who can explain how DoCoMo, KDDI and J-Phone obtained their 3G spectrum in the first place? Or why the ministry has promised further slices of spectrum to DoCoMo and KDDI?

Notwithstanding that J-Phone's 3G market share has virtually slipped below the horizon, Japan has three operators in a market of 127 million people. By comparison Singapore has three carriers in a market of 3.5 million, Hong Kong six between seven million, the US five national operators plus smaller players in a market of 280 million people. Only communist China, with two operators serving 1.3 billion people, has less, although that is likely to change shortly.

That the MIAC believes its mobile market is uniquely incapable of absorbing any more competition is perhaps another case of Japanese exceptionalism. Or it could be that, unlike the fluky MIC, the Japanese have lost their touch in picking winners.

Robert Clark is a former group editor of Telecom Asia and an independent technology journalist and analyst (rclark@protocolresearch.com)

Subscribers to the nation's largest cell phone carrier have something to crow about: Cingular has a great range of innovative phones. From simple voice phones to smartphones, the big GSM carrier has all the bases covered.

Some even take advantage of Cingular's EDGE network, the closest thing to a truly nationwide cellular high-speed data network available today. While its speeds may feel more like dial-up than broadband at times, you can't beat EDGE's availability-you can access the Internet from almost anywhere you can get a Cingular cell-phone signal.

Another cool thing about the carrier is that you can also take unlocked foreign phones and activate them on Cingular's network, for a truly exotic experience. Here are some of our favorite handsets from the carrier with the big orange logo.

Nokia 3220 Teens will love the flashing disco lights and spastic vibration of this rugged phone, which lets them SMS and instant message to their hearts' delight. And it can take some hard falls without damage.

Motorola V551 A best-seller for a reason, this midrange phone is all-around great, with a stylish body, a good keypad, a bright screen and even Bluetooth for wireless headsets and file transfer.

Motorola RAZR V3 Coming in silver, black, and soon pink, the RAZR defines high style in cell phones. Even the upcoming Motorola SLVR and PEBL won't detract from its sharp sheen.

Nokia 6682 The latest Nokia smartphone is, first and foremost, a phone. It also packs in a 1.3-megapixel camera and the ability to run thousands of third-party Symbian applications.

Audiovox SMT 5600 For almost year now, the SMT 5600 has wowed us with Microsoft Smartphone power in a tiny little body. It syncs with PCs like a champ and even plays TivoToGo television on its small-yet-big screen. It's amazing nobody else has duplicated its successes.

WHENEVER YOU SEE A movie from the late '80s or early '90s, something always stands out: The cell phones are gigantic. Compare one of those toaster-size devices to the svelte flip phone that's in your pocket, and you're amazed at how far they've come.

Today, we have cameras, PDA hybrids, extensive phone books, internet access, ring tones that sound like songs on the radio, and entertainment applications all built into our cell phones. So what will the future of mobile phones bring? Rather than trying to figure out what phones will look like in a decade (they'll probably be implantable), we wanted to take a peck into the next few years.

By the time you're ready to upgrade your current phone, the capabilities could be very different. One thing holding back the hardware is the limitation of current batteries. Battery technology just doesn't move that fast. Expect slow capacity gains, but also expect to keep a charger handy as more and more power-hungry features are built in.

A couple of years ago, everybody was breathless at the thought of 3G broadband services coming to U.S. cell phones. So far, 3G isn't coming down like a tidal wave so much as a trickle. But the good news is that it's finally arriving. Early adopters take note: Major cities like Dallas, Phoenix, San Francisco and Seattle will be the first to benefit.

AT&T Wireless' service allows data transfer at speeds of about 320Kbps with streaming video and audio available. Verizon Wireless' network, currently running in San Diego and Washington, DC, goes up to 500Kbps. Look for Nextel and Sprint to make progress on their versions before year's end. Entrepreneurs in smaller markets will have to wait a bit for services to become available.

Peter Skarzynski, senior vice president of wireless terminals at Samsung Telecommunications America, points to KOrea as an example of where cell phone services in the United States will eventually end up, albeit a few years behind. "Next year, you'll start seeing things [in Korea] like video on demand, and things like m-commerce [mobile commerce] the year after," he explains. Megapixel camera-phones are new on the U.S. market, and 2- and 3-megapixel versions are on the horizon. Videophones will become increasingly popular as services such as news feeds catch up. Skarzynski expects wide-based broadband to be a reality by the 2006-07 time frame. Then you can start thinking about videoconferencing on your cell phone.

Location-based services are another matter. With E911 requirements being met and GPS services hitting the mainstream, getting directions or even location-based marketing offers could become commonplace. But, once again, don't hold your breath. The phones will be ready before the services themselves are. "There are lots of capabilities in our phones still to be tapped," says Skarzynski.

Work is underway to meld two of the most popular wireless technologies: cell phones and Wi-Fi. Currently, the carriers are trying to figure out how to handle the handoff between the two to allow for a seamless experience. The phone hardware will be out widely in the first part of 2005, with manufacturers like Hewlett-Packard, Motorola, NEC, Nokia and Samsung all onboard. For businesses equipped with Wi-Fi and VoIP, this could be a big step to reducing phone bills. Imagine walking into your office and having your mobile phone automatically switch your call over to your VoIP network.

But the news on the mobile phone front isn't exactly all sweetness and light. Viruses and worms are setting off warning buzzers across the industry. Though they are concerns, most users don't need to worry much, says Muzib Khan, vice president of product management and engineering wireless terminals division with Samsung Telecommunications America in Richardson, Texas. "You could cause trouble by buying or downloading uncertified applications," he says. Entrepreneurs need to stay on top of security issues in much the same way they take steps to protect desktop computers with anti-virus software, firewalls and employee training. The same will apply as issues of cell phone spare and telemarketing crop up.

Put it all together, and here's what your future mobile phone might be like: You're out at a coffee-house for lunch, checking your calendar and e-mail while listening to a streaming MP3. An impromptu videoconference call comes in--you work out the details of a sales contract with your mobile sales representative. You then take an old-fashioned telephone call from a client, and it hands you over to your VoIP system as you step back into the office. Expect many challenges as these innovations hit the market over the next few years, but the upshot will be more flexibility for mobile entrepreneurs.

That sentiment, though, was dismissed by KTF's Song, who spoke enthusiastically about an agreement between his company and Hyundai to provide advanced global positioning systems in all the Korean automaker's vehicles. "The Korean market is a consumer market," he said. "We have not found a compelling application for business in terms of wireless convergence."

Even if that's true, Pathak said, all the companies now eyeing the broadband convergence arena are going to have to forge partnerships with other businesses. This isn't a go-it-alone technology; convergence by its definition is a collection of multiple technologies and applications. To offer a convergence product, companies will have to meld their areas of expertise. "Convergence will not be company against company but value chain vs. value chain," said Pathak. "It's ecosystem-based competition as opposed to firm-based competition."

An excellent model of that, Pathak said, is the partnership that began in 2002 between Yahoo and SBC to offer Yahoo content and services over SBC's DSL lines. Recently, the companies expanded this joint venture to provide video-on-demand, Internet radio and online photos for home-entertainment devices, such as television sets and stereo equipment. In addition, Yahoo-SBC signed a deal with Cingular Wireless to offer multimedia content to the cellular provider's subscribers. "Companies have to work with companies they didn't have to work with before," Pathak said.

Yong Shu, vice president of Asia Pacific region for Riverstone Networks, which provides network management equipment to carriers, service providers and cable companies, offered a dire warning to companies that don't appreciate the importance of new partnerships. He predicted a period of industry consolidation and pointed to the swallowing of AT & T by Cingular and SBC as an example of how weak companies will fare. "What do you expect? In five years when a customer comes to your shop, what is he going to buy? Will he want 100 Mb/s [broadband service] or Internet TV or certain entertainment applications? [If we don't offer these], we will die."

And, in an unlikely sentiment from a network supplier, Shu added that telecom providers are probably giving too much attention to the network itself. "We focus too much on technologies," Shu said.

That brought a sharp rebuke from Hanaro's Yoon. "If you do not have a strong enough telecom service provider, there is no convergence at all," he said. "So the infrastructure matters. You can't ignore that."

Telephone executives say they're also trying to adjust as the market changes and be there when it finally settles down. "A carrier like us is continuously evolving," said KTF's Song, who demonstrated cell phones that were carrying high-quality broadcasts of Korean soap operas. "We just want to develop a mixture of fixed and wireless convergence to allow the customer to always be connected. Profitability? There is no time-frame for profitability."

Those are the same famous last words uttered during the Internet boom. Broadband convergence, though, is a much bigger market with much higher stakes. This time, the Korean telecom companies hope, the rules are different enough that massive investment without profits is the right strategy--and that they will still be standing when broadband convergence pays off.

Hanaro Telecom is trying to make a living in a risky environment. The eight-year-old Korean-based company recently completed the installation of a 100-city, fiber-optic broadband network on which it hopes to piggyback data, video, voice, internet access, music and, in time, links to wireless systems. It's an exciting agenda, perfectly suited, it would seem, to what everyone says consumers desire: the ubiquitous network, or the proverbial "what I want, when I want it, where I want it."

[ILLUSTRATION OMITTED]

But as eye-opening as Hanaro's business plan is, its perils are impossible to ignore. Even in Korea, Hanaro could be facing a muted reaction to its products and services. Its future may be reminiscent of the past in the U.S. when the Internet and telecommunications bubble burst, leaving companies like Qwest, Global Crossing and even AT & T, among many others, holding expensive, sophisticated networks with no place to plug them in.

After all, with no telephone companies anywhere in the world yet making serious money on their Web-focused offerings, how can anyone predict what consumers will be willing to pay for? "Right now, the DNA of [telecom] carriers is that they are connection providers," Prashant Pathak, a partner at McKinsey, told attendees of the "Wired and Wireless Broadband Network Convergence" panel. "Feed and speed has been their business model. But they have to address supply-side economics; they need a 'customer back' perspective to determine the [products and services] that customers will want. Otherwise, there will be a lot of stranded capacity and capital."

Hanaro's CEO Chang Bun Yoon understood the skepticism, but noted that the world had changed since the spate of high-speed telecom failures. Digital content, capabilities and networks, especially in countries like Korea, have become so much more interoperable through better standards and a keener understanding that isolated islands of technology are of little use. Further, the world is moving closer to an era of true broadband convergence, says Yoon, a time when voice, data, video, audio and computer animation will be tied together through high-speed Internet access.

That, Yoon adds, puts Hanaro in a privileged position. "Operators are searching for new opportunities of growth in convergence," Yoon said. "To a telecom provider, convergence can mean the long-awaited chance to go beyond providing just connections. For instance, convergence meets the consumer in home networks and entertainment content; it meets construction in the smart home; it meets retail and financial services in ecommerce."

The wide gap between Pathak's and Yoon's divergent points of view--chiefly, a challenge to completely rethink the telecom business vs. the notion that if we build a great network, customers will come--was the primary focus of much of the panel discussion.

Only the Nimble Survive

One concern expressed by some on the panel was whether telephone companies are innovative enough or possess a sufficiently nimble culture to take advantage of the potential technological breakthroughs anticipated from broadband convergence. Indeed, just the possibilities of convergence are beginning to change the business landscape. Incumbent telephone companies like Hanaro, KT (the nation's biggest telecommunications company) and KTF, KT's wireless subsidiary, may not be the ultimate financial beneficiaries of broadband convergence.

Cable TV companies are already making inroads into home broadband networks with modems that allow them to offer Voice over Internet Protocol, ecommerce, portals, music, games and other services via PC or television set. It's likely that these companies will align with cellular providers and notebook makers to offer these same services to people on the go. Intel, for one, is leading the charge for the WiMAX standard, which would deliver top-quality broadband to laptops. And cellular phone, PDA and other small equipment manufacturers are adding functions to their devices that enable them to do everything--viewing as well as producing photographs and videos--that broadband convergence is currently expected to deliver.

With all this activity, and a consumer base that is still inchoate, it's likely that only the most creative companies will draw significant profits from convergence. "Convergence is a whole set of technologies for allowing competition across platforms," said John Davies, Intel vice president for sales and marketing. "It's driving competition across different devices."

But Davies added that he believes that convergence companies are looking at their potential markets too narrowly. He challenged the telephone executives--Hanaro's Yoon and KTF's executive vice president Joo Young Song--to consider going beyond the consumer market. "I think there's opportunity to make businesses and industries more effective using this fabulous infrastructure," Davies said. "What about health care or field service workers? Convergence applications that blend data, audio and video could increase productivity and bring down costs in almost any industry."

The boundary line that formerly distinguished Korea's highly developed broadband and mobile networks is fading. In one direction, broadband connections are becoming mobile with extensive Wi-Fi (e.g., KT's Nespot) and soon WiBro networks (e.g., KT and Hanaro). At the same time, mobile phone technologies are starting to reach broadband-type speeds, as EVDO comes more widely available and as WCDMA services are launched. Convergence is nigh and the new Korean network likely will be one of the first of its kind in the entire world. Convergence will mean that Koreans have seamless access to fast, robust information wherever they happen to be in the country.

The Korean mobile and broadband networks, while both very advanced, have evolved separately and are quite different in their composition, network architecture, and business models. Therefore, it should be no surprise that there is no exact picture of what the future network will look like. The Korean model has had to be dynamic to reflect the merger of two very dynamic Korean telecom sectors. Even the official name of the new network has undergone a series of transformations, currently settling on broadband converged network (BCN).

To fully understand the BCN, it is important to understand where different network elements fall into place in the wider scheme of total connectivity. The BCN is being touted as one massive IP network to which Koreans can connect from a wide range of terminals and from nearly all locations.

For a society to achieve the goal of total connectivity, the network must use many different technologies, some of which are more suited to certain environments than others. In essence, different services and activities optimally are provided by different types of connectivity, and the BCN should leverage each technology's comparative advantage. For example, video streaming of movies to a household is best done over the broadband, wired network while mobile telephony in the subway may be most efficient over the existing mobile networks. The key then is ensuring that each of the disparate networks can communicate with each other and pass traffic among themselves via IP.

Network-specific services (e.g. SMS) should move away from being solely a mobile technology and should be accessible via any IP-enabled terminal. This creates the need for new network architecture. The BCN will demand an entirely different type of network plan that involves building a third type of data service.

The Portable Internet

In many countries, mobile operators have envisioned being able to encroach on the fixed-line broadband market through their 3G and eventually 4G offerings. Likewise, broadband providers have been eyeing mobile data provision, until now the domain of mobile carriers, by using WLAN technologies such as Wi-Fi.

However, neither broadband nor mobile operators are suited perfectly for offering fast, mobile data. Broadband networks are too stationary since Wi-Fi and other WLAN technologies ranges are short and there is no effective handoff ability. This makes it less effective for use in moving vehicles. Mobile networks, on the other hand, don't have enough bandwidth to offer truly high-speed, broadband-type connectivity, as was highlighted by SK Telecom's experiment with video-on-demand on its CDMA network.

Korea's policy-makers, broadband providers, and mobile operators have come up with a plan to develop a new data network that is more efficient at offering mobile data than either broadband or mobile.

This plan is called WiBro, or "the portable Internet." The portable Internet is a technology that fits well between WLAN and IMT-2000 in terms of mobility and speed. It would offer a 1 Mbps connection to users for a flat monthly fee. The three licensed operators have not said how much they will charge but industry watchers assume the prices will be about US$ 15 per month, for flat-rate access.

The strategies of the three licensed operators for the 2.3 GHz plan vary:

* KT, for example, has already introduced a seamless offering through its Nespot Swing, a bundled package where users can roam between its own Wi-Fi hotspots and its competitors' CDMA2000 1x EVDO networks, when out of Wi-Fi range. WiBro will allow them to take this latter traffic onto their own network;

* The portable Internet promises to further expand SKT's network in a more cost-effective manner than relying on CDMA alone. Because of their limited bandwidth availability, CDMA networks are only cost effective for voice and non data-intensive applications.

* For Hanaro Telecom, WiBro offers a chance to fight back against its loss of market share and traffic to mobile operators, as well as a chance to become a mobile operator itself.

The portable Internet has several advantages over WLAN and IMT-2000 for delivering data. While Wi-Fi is limited to a range of roughly 100 meters, WiBro will be accessible in a 1 km radius around a base station and be accessible at speeds around 60 km/h. WiMAX will be accessible over a much greater range, though probably not from fast-moving vehicles. Mobile carriers are especially interested in portable Internet technologies because of their significant investment in cell towers throughout the country that can be leveraged quickly to offer portable Internet. This upgrade can be effectuated simply by adding a second set of radios on the towers.

Portable Internet technologies, as envisioned, could handle a majority of mobile data traffic while voice calls will be routed over the existing CDMA and W-CDMA networks. This plan leverages the comparative advantages of each technology and allows Koreans an effective way to have fast data access everywhere. However, portable Internet technologies can also accommodate VoIP traffic streams relatively simply, and in this sense would compete more directly with existing mobile networks.

In this sense, the fixed-line operators, like KT and Hanaro, are positioning themselves to offer services, like KT's One-Phone, which provides users with a telephone with a unique number that can be used on both fixed and mobile networks, and will automatically route via whichever link is cheapest for a particular call (e.g., jumping onto a fixed-line network via a Bluetooth, Wi-Fi, WiBro, WiMAX, 3G or 2G interface).

Korean handset manufacturers are also interested in portable Internet technologies as a stimulus for their products. Manufacturers such as Samsung and LG will build multiband phones that work on a variety of networks. Future mobile handsets, like KT's One Phone 26 may have the ability to access the different types of networks: CDMA2000 1X, W-CDMA, Wi-Fi, and portable Internet technologies. Both Samsung and LG make it clear that the technology for building these multifaceted handsets is currently available, but they simply are waiting for word on how the network will evolve before building in portable Internet functionality.

Student unions across the UK are offering a new product for students that combines a flexible broadband contract with free voice calls over the Internet.

The two new packages, Everythingstudent Broadband and Everythingstudent Talk, include broadband Internet access from UK broadband Internet provider, PIPEX, and free calls using Voice over IP (VoIP) from Perfect Branding, from GBP21.99 per month.

Everythingstudent Broadband is available in a variety of speeds, with a 50GB download limit, and offers a reduced fee during the summer months. Everythingstudent Talk is a service, which allows students to call other VoIP users for free via the Internet. In addition, the package from Perfect Branding reportedly offers low cost calls to landline and mobile phones from GBP0.015 a minute and a range of features such as free voicemail, three way calling, SMS call back and a personal telephone number.

Everythingstudent Talk and Everythingstudent Broadband are available now to all students that hold a valid NUS (National Union of Students) Extra or NUS Card.

For the past hundred years, since radio was invented, scientists have tried to prevent wireless signals from interfering with one another. They want signals to arrive at their destinations separate and undisturbed, not scrambled together.

Yet in a remarkable twist of logic, researchers at Bell Labs, Lucent Technologies' research institute, have embraced interference and used it to build a wireless system that's several times as fast as today's cell-phone services. This system, known as Blast, achieves much higher speeds by splitting each call into several different signals, transmitting and receiving with multiple antennas. The signals do interfere, but with its cleverly arranged antennas, the system can recover each signal and deliver an undisturbed call.

"Initially, sending and receiving with multiple antennas sounds like a bandwidth-destroying technology," says Jeff Jaffe, head of Bell Labs. "But the bandwidth actually scales up linearly with the number of antennas."

For years, researchers have struggled to equip notebooks, handhelds, and cell phones with broadband wireless connections. But companies can't just increase the power of each user's signal, because the signals will interfere. "It's the party effect," says Reinaldo Valenzuela, head of the Blast project. "If everybody shouts a little louder, nobody can hear."

Sending multiple signals across the same, limited spectrum seemed equally hopeless. If signals are sent from three transmitters to three receivers, for instance, the signals will scramble together on each receiver. But researchers at Bell Labs noticed that if they placed receivers roughly a wavelength apart, each received a slightly different scramble of data. This simple realization gave rise to Blast, which separates the interfering signals using a special set of algorithms.

The process is a bit like solving multivariable equations in algebra. If you have one equation with three different variables, you can't solve it. If you have three equations with three variables, you can find the value of each variable in a heartbeat. Blast embeds a different marker in each signal sent. Then, by comparing data from each receiver, it picks out these markers-and thus the attached signals-one by one.

Using ten antennas, Blast has achieved 20 to 40 bits per second per hertz, more than 300 times the rate of today's cell-phone connections. Interference is a good thing.

UK telecomms company BT plc has entered into an agreement with mobile phone retailer Phones 4u that will see BT Broadband being sold in Phones 4u retail outlets.

Also as part of the agreement BT Broadband will be made available from the Phones 4u web site at http://www.phones4u.co.uk. The Phones 4u outlets will provide all of the equipment needed for the customer to get online in-store and will supply installation advice as well as information on the benefits of broadband.

The financial terms of the agreement were not revealed.

Now that cellular networks are starting to achieve broadband speeds in major markets, entrepreneurs are taking advantage of the faster data speeds on their mobile phones. But there's no reason you need to be limited to your phone. Why not bring your laptop or PDA to the party? Assorted hardware devices let you capture data over broadband cellular connections.

For example, OmniWav Mobile's MBR-1100 (www. omniwav.com) is an in-vehicle system that lets you connect any Wi-Fi or Ethernet-enabled device to the internet. The vehicle broadband package costs $979, and the data service contract through Verizon Wireless is about $80 for unlimited use. Its range extends up to 300 feet, so you can still get online out side your car. A portable package version is also available so you can connect at your hotel, at a trade show or at a customer's site.

For a less expensive alternative, check out Novatel's Merlin V620 Wireless PC Card Modem (www. novatelwireless.com), which runs about $100 with a service plan. It also works with Verizon's EV-DO network and will keep your laptop connected on the go. Generally, data speeds aren't quite up to your office broadband line, but they're sufficient for use on the road. Check provider websites to see if these services are available in your area yet. As broadband network rollouts continue, expect the number of similar solutions and providers to grow.

Covad Communications Group Inc. shook up the service provider space recently by launching a new VoIP telephone service that allows partners to offer local and long distance voice service to end-users in direct competition with local telephone carriers.

Trials of the new service are expected to begin this month. Covad intends to utilize DSLAM technology to deliver line-powered voice access to non-Bell telephone companies. Nokia and Zhone Technologies are providing the necessary voice cards and DSLAM technologies.

Trials will be conducted in Atlanta, Denver and San Jose, with full commercial service planned by the second half of this year.

CLEC ALTERNATIVE?

"Line-powered voice access will allow Covad to provide CLECs and their customers around the country a facilities-based alternative to the local phone companies' UNE-P platform for voice services," explained Covad CEO Charles Hoffman when the announcement was made.

Covad, a gutsy industry player that has spent the last two years restructuring itself as a wireless broadband player, was the subject of a Oct. 1, 2004 America's Network cover story in which company executives outlined some of their future business strategies.

Covad has been providing networks for service providers interested in delivering VoIP services to customers. But the latest move offering the ability to provide local telephone service adds an entirely different dimension to the battle for voice customers.

LOCAL EQUIPMENT EXEMPT

By using VoIP, Covad and its partners won't need to lease any local equipment from the four remaining Bell operating companies, except for the actual copper wire that links the central office to a customer's location. The DSLAMS and line cards enable line-powered voice access by taking the analog voice signal from a customer's phone and converting into a digital form at the Covad central office where the DSLAM is located.

The digital signal then travels over Covad's national network backbone and connects to any telephone on either a VoIP network or a PSTN network managed by the regional Bells.

Covad's service is especially timely because it comes just a few months after court and federal rulings essentially freed the Bells from having to lease their networks at a low cost to competitors like AT&T Corp., Sprint and MCI. The rulings caused many national carriers to abandon the local phone market to the Bells, setting the stage for price increases later this year. The local copper lines that Covad and its partners would use, however, were not affected by those rulings.

Covad believes its new service offers a true alternative for service providers interested in providing local phone service.

It's not yet clear how many are interested in the Covad product.

That debate over the need for VoIP regulation is gaining momentum in the U.S. Congress as lawmakers grapple with how to manage new IP telephone services that allow users to bypass the traditional phone system. Whatever the final outcome this year, the VoIP dialogue already is setting the stage for a political battle between states and the federal government, as well as framing an early debate over what telecom reform will look like after the November election.

In late July, the Senate Commerce Committee ended up gutting a key bill sponsored by Sen. John Sununu (R-N.H) that would have banned states from regulating and taxing Internet phone calls at all. The committee amended the VoIP Regulatory Feedom Act to allow states to regulate VoIP services ro collect a universal service tax and to compensate telcos for using their facilities. Final Senate action is uncertain before the session ends this year. The original measure was controversial because it would pre-empt the states from regulating VoIP services. California, New York and Minnesota are among the states contemplating taxing and regulating VoIP. Some rural carriers also prefer that regulation be left a local matter.

Sununu, however, has forcefully pushed for a hand-offs approach to VoIP regulation on both the state and federal levels. "It is a simple choice ... vote to establish a clear legal regime based on technological innovation and consumer choice, or vote in favor of multi-layered regulation of VoIP that will let chaos reign," Sununu said in a statement. "Those who use e-mail and instant messaging should know if members vote to regulate Internet applications such as VoIP, those technologies are next."

A companion bill has been introduced in the House by Rep. Chip Pickering (R-Miss.), who warned that a lack of consensus on VoIP could delay telecom reform by as much as three years, which in turn would result in the market leapfrogging any regulatory efforts.

Separately, U.S. Rep. Cliff Stearns (R-Fla.) and Rick Boucher (D-Va.) introduced in early July legislation that would create a broad regulated framework for IP telephony. The Advanced Internet Communications Services Act would have the FCC, rather than state governments, regulate VoIP and other advanced services. More significantly, the legislation would provide a possible framework for next year's expected rewrite of the 1996 Telecommunications Act. "Our goal is to treat all advanced IP applications, including VoIP, with a light regulatory touch," says Boucher. Because Internet users have a broad choice of service providers, there is plenty of competition so the existing rules governing monopoly networks shouldnot apply, Boucher reasons.

The bill also requires the FCC to impose minimal regulation for IP telephony services in just four areas: emergency services, universal service, compensation for use of public-switched networks, and access for the disabled.

"The disparate rules which currently govern different categories of telecommunications service providers have distorted investment and impeded the deployment of new services for consumers," Boucher added.

Many industry executives favor a light federal regulatory touch, arguing a state regulatory approach would likely harm the future of a still fledgling industry by discouraging innovation and raising costs. Executives from seven telecom firms, including Vonage and Level 3, told House telecom subcommittee members in early July that they favored pre-empting the states from becoming involved in VoIP regulation.

FAST FACTS: Congressional telecom debate: Advanced Internet Communications Services Act: * Sponsored by Reps, Stearns and Boucher. * Provides framework for Internet telephony. * Facilitates rapid deployment of new services like VoIP. * Requires "light" FCC regulation in four limited areas. VoIP Regulatory Freedom Act: * Sponsored by Sununu (Senate) and Pickering (House). * Protects VoIP services from any regulation. * Amended to allow state taxation in certain cases.

 

Traditionally, a phone conversation is converted into electronic signals that follow an elaborate network of switches in a dedicated circuit. Long-distance calls cost more because regional carriers have to be paid for originating and terminating the calls.

The new technology has a terribly nerdy name, Voice over Internet Protocol-or Voice over IP or just "VoIP"-but its premise is pretty simple.

When a call is made, the sounds are converted into packets of data that take diverging paths around the Internet or private networks, just like e-mails or Web pages. The packets get reassembled as sound on the other end of the call.

The sound quality sometimes strays from perfection-though it has come far in recent years and is expected to get even better.

The process is cheaper because it cuts some or all long-distance access charges out of the equation-though that is a contentious issue under consideration by the Federal Communications Commission. It also helps big businesses save money because they can use their expensive data networks to make phone calls instead of only shuttle files around.

And because voice is sent like any other kind of data, new videoconferencing services and Web-based phone messaging applications are possible. The address book in an e-mail program can dial a number with the click of a mouse.

Combine all those elements, and VOIP represents a tidal wave.

Providing service costs Vonage about 1 cent a minute; AT&T probably could do it for about seven-tenths of a cent because it has its own vast data network, says UBS Warburg analyst John Hodulik.

With such low costs, charging for long-distance by the minute will probably give way to "all you can eat" plans. For example, Time Warner Cable lets its Internet customers in Raleigh, N.C., and Portland, Ore., make as many calls as they want for $39.95 a month.

Also, cable TV companies increasingly will use VOIP to sell phone and broadband service in an attractively priced "bundle" that makes customers less likely to leave. In response, phone companies might have to accelerate plans to upgrade to fiber-optic lines that can carry a huge amount of stuff, including ultra-fast Internet and high-definition TV.

NEW YORK (AP)-Cable and phone companies are hustling to offer new services that route calls over the Internet, a technology that eventually will make the 125-year-old telephone system seem about as advanced as sending smoke signals.

That day bounded closer this week as three major communications companies-Time Warner Inc.'s cable TV unit, Qwest Communications International Inc. and AT&T Corp.-announced plans to sell Internet phone services to consumers.

The plans promise to lower the cost of phone service and include new features, like the ability to check voice mail or program call-forwarding requests on the Web.

Internet phone technology has already made serious inroads in big companies and as a means of carrying international calls.

But while Internet phone services for consumers have been available for more than a year from some cable companies and startups like Vonage Holdings Corp., it has remained a niche technology.

Fewer than 200,000 Americans use Internet phone service as their primary line, according to TeleGeography Inc.

That figure could soar in 2004. Besides the announcements made this week, the nation's biggest phone company, Verizon Communications Inc., plans to deliver a consumer Internet phone offering within six months.

"The giants getting into the business gives Voice Over IP credibility," said Guzman & Co. analyst Pat Comack, using the technology's official name. "People will give it a shot now. All of a sudden, this is not a toy anymore."

But while the Internet phone bandwagon swells, the full-fledged revolution seems several years away. For now, only the roughly 20 percent of U.S. households that have broadband Internet access can use the technology.

Perhaps most importantly, special steps have to be taken to make the Internet phone systems connect to 911 dispatch centers or work in blackouts like the old-fashioned phone network can.

"I'm not going to pretend that we're ready to solve those problems," AT&T spokesman Gary Morgenstern acknowledged Thursday. "We're working on that."

Other providers say they have addressed those issues. Internet phone pioneer Net2Phone Corp., which is focusing on helping cable companies deliver the service, boasts that it also has overcome the technical hurdle of letting law enforcement officials set wiretaps, which phone companies are required to allow.

The VoIP industry pioneers such as Vonage, Packet8, Voice Pulse and others are seeing their market share hammered as top brand names such as AT&T, Cablevision and others move forcefully into the consumer telephone space, according to a new research report released by the Yankee Group.

The report, prepared by Kate Griffin, Yankee Group senior analyst for consumer technologies and services, finds that the smaller "alternative voice" providers will see their residential VoIP market share plunge from 66% at the end of 2003 to just 19% by the end of next year. Traditional telcos, primarily RBOCs, ILECs and IXCs, will drop in market share from 34% in 2003 to 25% in 2005. A new breed of player--the cable MSOs--will grab a 56% market share next year from virtually nothing last year, the report says.

"Alternative voice providers lose market share every day to the major players," Griffin concludes. "MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers." Griffin sees evidence that the smaller industry pioneers already are sniffing out new approaches, business models and features to stay competitive. Vonage, for example, added a lower-tiered, lower priced VoIP offering. Nuvio launched its consumer VoIP service in January, but now focuses on developing private-label partnerships with telecom, wireless and cable companies. VoiceGlo, which launched broadband VoIP service in the third quarter of 2003, now focuses on a PC-based VoIP service that resembles that of Skype.

More industry pioneers could head for the exits as they are forced to compete in a more demanding mass market that favors big brands offering services like 24/7 customer support, truck rollouts to simplify provisioning and new, more efficient billing systems.

MASS MARKET APPEAL

The market share shift is occurring at a time when the VoIP industry is booming, and cable companies are moving much more aggressively into the phone market to compete more effectively with regional Bells. In many cases, the MSOs are turning to big names like AT&T to provide their VoIP services. Overall, VoIP subscribers will hit 1 million by the end of 2004, according to the Yankee Group, up from just 131,000 last year. However, the firm expects 17.5 million U.S. households to go with VoIP by 2008.

The VoIP industry pioneers such as Vonage, Packet8, Voice Pulse and others are seeing their market share hammered as top brand names such as AT&T, Cablevision and others move forcefully into the consumer telephone space, according to a new research report released by the Yankee Group.

The report, prepared by Kate Griffin, Yankee Group senior analyst for consumer technologies and services, finds that the smaller "alternative voice" providers will see their residential VoIP market share plunge from 66% at the end of 2003 to just 19% by the end of next year. Traditional telcos, primarily RBOCs, ILECs and IXCs, will drop in market share from 34% in 2003 to 25% in 2005. A new breed of player--the cable MSOs--will grab a 56% market share next year from virtually nothing last year, the report says.

"Alternative voice providers lose market share every day to the major players," Griffin concludes. "MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers." Griffin sees evidence that the smaller industry pioneers already are sniffing out new approaches, business models and features to stay competitive. Vonage, for example, added a lower-tiered, lower priced VoIP offering. Nuvio launched its consumer VoIP service in January, but now focuses on developing private-label partnerships with telecom, wireless and cable companies. VoiceGlo, which launched broadband VoIP service in the third quarter of 2003, now focuses on a PC-based VoIP service that resembles that of Skype.

More industry pioneers could head for the exits as they are forced to compete in a more demanding mass market that favors big brands offering services like 24/7 customer support, truck rollouts to simplify provisioning and new, more efficient billing systems.

MASS MARKET APPEAL

The market share shift is occurring at a time when the VoIP industry is booming, and cable companies are moving much more aggressively into the phone market to compete more effectively with regional Bells. In many cases, the MSOs are turning to big names like AT&T to provide their VoIP services. Overall, VoIP subscribers will hit 1 million by the end of 2004, according to the Yankee Group, up from just 131,000 last year. However, the firm expects 17.5 million U.S. households to go with VoIP by 2008.

That huge growth might allow many of the early industry pioneers to survive if they adopt realistic business plans, says Griffin. "The early adopters aren't going to single-handedly overturn the RBOCs," she notes. "But if they set their targets on realistic growth, they can still be a profitable business." One factor helping is their broad national reach. The MSOs typically are limited to specific geographic areas where they have the cable franchise.

Even so, the smaller pioneer providers face dangers from escalating price wars, limited resources and unknown brand names that limit their addressable market to niche segments, according to the report. With the window of opportunity in the VoIP provider field rapidly closing for new entrants, the focus needs to be on quality, customer service and differentiated functionality to thrive. "Vonage's success has shown there is a market for a best-effort, lower priced telephone service," says Griffin. "However, in the next several months these early market entrants will face tough competition from battle-tested telephone and cable MSO ready to fight for local VoIP leadership."

FAST FACTS:

Challenges to small VoIP players

* Brand recognition--dwarfed by large companies' brand name investments

* Minimal resources--major players have deeper technical, telephony expertise

* Demanding mass market--users expect RBOC-like, seamless phone experience

VoIP Market Shake-out

2003

Alternate provides lose market share

Traditional Telcos -04%

Alternate Providers 66%

Cable MSOs 34%

2005

[projected]

Alternate provides lose market share

Traditional Telcos 25%

Alternate Providers 19%

Cable MSOs 56%

Source: The Yankee Group

THE ANALOG phone may soon be relegated to the world of 8-tracks and brick-size cell phones. When you look at moving up to VoIP, those old desk clunkers will be the first to go. In their place, you'll get something new, and there's a good chance it will be a SIP phone. SIP stands for Session Initiation Protocol, a signaling protocol that establishes sessions in an IP network. A session may be a simple two-way voice call, or it might be something more advanced, involving conferencing or multimedia. Most important, it's become a hot choice for VoIP systems.

One nice feature of SIP is interoperability. You're not necessarily tied to one vendor. You could install a SIP-based IP PBX from one vendor and SIP phones from another. That's good news for growing businesses that already have an IP-PBX system and are looking to upgrade or expand their stables of desk phones. You have a wide variety of choices, so you can shop for features, voice quality and price.

What's really glamorous about SIP is that all its extra feature potential makes your standard, plain-old-telephone-service phones look like old appliances. We're talking about unified messaging, click-to-call and teleconferencing, among other features. Chances are, you can find one to fit all your business needs.

The Zultys Technologies ZIP 2x2, a $230 (all prices street) upper-midrange phone in their line, features two Ethernet ports, Power over Ethernet and three-way teleconferencing. The phone also sports advanced encryption standard, a good idea for sensitive conversations and for entrepreneurs working in the legal field.

The $280 Cisco 7940G comes stocked with a large display, a built-in headset port and a speakerphone. Cisco aims this particular phone at "transaction type" workers, and it comes with two programmable line and feature keys. In the same price range, the $300 Siemens OptiPoint 410 Standard also comes with PoE, a speakerphone and a built-in LAN

switch.

In the budget range, the Grandstream Networks GXP-2000 comes in at a very affordable $110. You still get two Ethernet ports and multiparty conferencing, and you can add PoE with an optional cable kit. The Avaya 4602SW IP Telephone, on the other hand, lands in the middle of our price range at $170, with 12 programmable call appearance/feature keys, two Ethernet ports and a speakerphone. All the major SIP phone manufacturers have a variety of models, with differences coming down to features like display size, ability to customize and number of call appearances.

ZULTYS TECHNOLOGIES ZIP 2X2

Other considerations include whether you prefer physical buttons to access most features or don't mind scrolling through a display menu. Voice quality is always a top priority, so look for phones with good jitter-buffer technology. Also, if you have Cisco equipment and want to use PoE, be sure the SIP phones you buy support Cisco's pre-standard proprietary version of PoE.

Other manufacturers to check into include Alcatel (www.alcatel. com), Nortel Networks (www.nortel. com), Polycom (www.polycom.com), Snom Technology (www.snom.com) and Tiger Netcom (www.tigernetcom. com). Some IP phone manufacturers are planning to make SIP upgrades to some of their existing phones via a firmware update. Talk to your IT consultant or value-added reseller and fellow business owners for information and recommendations.

Shopping List PUT A SIP IN YOUR SETUP, AND TAKE YOUR TELEPHONES TO A WHOLE NEW LEVEL. MANUFACTURER/ ENTHERNET MODEL CONTACT PORTS Avaya (866) GO-AVAYA 2 4602SW IP Telephone www.avaya.com Cisco (800) 553-NETS 2 7940G www.cisco.com Grandstream Networks www.grandstream.com 2 GXP-2000 Siemens (800) SIEMENS 2 OptiPoint 410 Standard www.siemens.com Zultys Technologies (408) 328-0450 2 ZIP 2x2 www.zultys.com MANUFACTURER/ STREET MODEL FEATURES PRICE Avaya PoE, speakerphone $170 4602SW IP Telephone Cisco PoE, speakerphone, $280 7940G built-in headset port Grandstream Networks PoE, speakerphone, $110 GXP-2000 built-in headset port Siemens PoE, speakerphone, $300 OptiPoint 410 Standard built-in LAN switch ZultysTechnologies PoE, speakerphone, $230 ZIP 2x2 call encryption

The 4D Talk business VoIP service has been unveiled by 4D Internet Ltd, a communications company based in the UK, providing a replacement for existing small PBX or FeatureLine installations for managing and routing calls.

The service provides businesses with a telephone adaptor enabling them to use their usual BT/analogue phone over any broadband Internet connection, using advanced VoIP technology without needing to make calls via their PC.

According to 4D Internet Ltd, the service enables VoIP calls to be made for less than the cost of standard calls made via BT, a UK telephony services provider, while avoiding the need to use traditional voice services for inbound and outbound calls. Features offered by 4D Talk include voicemail, caller return, caller display, caller ID blocking, address books, number blocking and call waiting, with fax2email and non-geographic numbers services offered to businesses.

Calls made with the 4D Talk business package to other 4D Talk users are free of charge and the service is suitable for companies using up to eight analogue lines. An unlimited 2Mb/s business broadband and business VoIP is being offered for GBP49.99 per month rather than the usual GBP69.99 per month as a special launch offer, for companies signing up by 30 June 2006.

VoIP is everywhere these days, and is arguably the hottest thing since the tech bubble of 2000. So, right away there should be some cause for concern. Depending on what hat you're wearing, this is true, but it is also an exciting time for anyone close to this market. With low barriers to entry and minimal regulation, VoIP is attracting new money and new players. The market will go through its natural--and necessary--cycles of speculation, investment, exits and consolidation, but there is an undeniable sense that VoIP is poised to fundamentally alter the telecom landscape.

[ILLUSTRATION OMITTED]

So, what is happening with VoIP? At the consumer level, broadband telephony is redefining voice communications, and the benefits of IP are going mainstream. VoIP has had numerous false starts, and has simply moved outward from the network core to the edge and access space, where it becomes real for the end user. IP technology has proven itself effective at reducing network operating costs, and the focus has now shifted to revenue generation via IP services.

VoIP is really just a technology, or an application in a data network. VoIP is not really an industry; it's an enabling technology that supports something much bigger--IP communications.

Why Now?

The simple answer on the timing of VoIP is the "V" word: Vonage. The "Vonage effect" is real, albeit far out of proportion to its impact in taking market share away from the RBOCs. No other virtual operator has come close in demonstrating proof of concept and bringing a consumer-friendly value proposition to market. By doing so, Vonage has had a substantial impact in accelerating the deployment plans of all the Tier 1 service providers.

Underlying that, however, is a more pervasive factor: broadband adoption. There is no VoIP market without broadband, and penetration has finally reached a critical mass where a number of offerings can be supported. By year-end, one in four U.S. homes will have broadband, and with the RBOCs finally making a serious push into DSL, the take rate will steadily increase over the next few years. In fact, VoIP itself may soon become a driver for getting broadband.

Just as voice and data are converging at the desktop, Frost & Sullivan sees several other factors converging that makes today such a dynamic environment for VoIP:

* It works. This sounds like an obvious statement, but residential VoIP did not work well for a long time. VoIP has had several false starts since its inception in 1995. Although it is not 100 percent ready for prime time, it is certainly good enough now for mainstream use.

* Regulations. So far, the FCC has taken a laissez faire approach to VoIP, which has been critical for early-stage success. Had cellular been regulated in its early days, it may well have not evolved to where it is today. Regulation will come to VoIP, but not likely until it becomes more established.

* Competition. This is a crucial driver that was absent in telecom until last year. Rising broadband adoption and the cost efficiencies of IP have led all types of service providers to offer VoIP, and begin competing for customers who previously were the sole domain of incumbent telcos.

* End user demand. In the long run, the laws of supply and demand rule, and we are now truly seeing signs of VoIP demand from consumers. VoIP has been a supply-driven market to date, but as services are rolled out, consumers are quickly recognizing the value proposition of IP services.

* Triple play. For the cable operators, VoIP completes the triple play, which is their main strategy for taking on the RBOCs. To counter this, the RBOCs are adding video to their triple play, along with voice and high-speed Internet. This sets the stage for the "battle of the bundles," which we expect will determine who wins control of the broadband home.

* Wireless substitution. This trend impacts telecom on many levels, but in terms of VoIP, the key issue is the unprecedented decrease in access lines for the RBOCs, which are largely migrating to cellular. With the declines in wireline subscribers and long-distance revenues, RBOCs are under heavy pressure to offset these losses with new services, which brings us to VoIP.

Who Is Leading the Charge?

The United States has seen tremendous activity in 2004, both in terms of VoIP subscriber uptake, and the variety of operators coming to market. At this point, five operators have demonstrated notable success in attracting subscribers: Vonage, AT & T, Primus, Cablevision and 8X8. There are several others, of course--some who are in the market now, and others who are very close to entering. However, these five account for the vast majority of residential U.S. VoIP subscribers.

* Vonage. Clearly the market leader on many fronts, including subscribers, service coverage, mind share, channels, money raised, first mover, etc. Vonage has been able to sustain a healthy growth rate even as new offerings come to market, and is currently in the range of 250,000 subscribers. Vonage's main vendor partner is Cisco for media gateways, and for applications, dynamicsoft (soon to be part of Cisco) is the engine upon which it develops its own features. On the premises side, Vonage has adopted a strategy of supporting multiple ATA vendors, including Motorola and Linksys.

In terms of 911, Vonage has a partial solution, and it also offers 411. Vonage provides LNP (local number portability), which allows subscribers to keep their existing phone number. However, unlike the Tier 1 carriers, Vonage does not operate its own network, and cannot assure end-to-end QoS.

Aside from an aggressive advertising presence, which includes print, radio and Internet, Vonage has developed extensive channel coverage, including RadioShack (over 3,700 locations), Staples (over 1,100 locations), Circuit City, Best Buy and Office Depot. It entered Canada in April, but has done little active marketing yet. Despite this, Vonage appears to be gaining good traction, largely due to the absence of any strong VoIP competitors in the Canadian market.

* AT & T. Although subscriber numbers are not known, CallVantage has firmly established itself as a strong alternative to Vonage since its launch in March. AT & T operates the largest IP network in the United States, and can provide all the requisite features for full primary line replacement--QoS, LNP, 911 and CALEA compliance. Its network is powered by Sonus gateways, and its ATA partner is D-Link. AT & T is rapidly developing channels, and is in over 600 locations, primarily with Best Buy, as well as online with Amazon. For the DSL market, AT & T has partnered with Covad for local access. More than any other VoIP provider, AT & T has the brand name; a critical intangible that gives it an edge for long-term growth. Furthermore, of all the VoIP operators, AT & T might have the most at stake to succeed in this market.

* Primus. Primus' VoIP offering, Lingo, was launched in June, and like AT & T, it is entering the market primarily to counter the decline in its core long-distance business. While not as well known as AT & T, Lingo actually has a broader footprint across the United States, although AT & T is quickly expanding its rollouts. Similar to AT & T, Primus operates its own network, and has an edge over virtual operators such as Vonage and 8X8 in terms of QoS. Lingo provides LNP, and currently provides native mode 911 (called ECS). An upgrade variation called V911 is coming, which Primus feels is a better solution for VoIP.

Primus is adopting a price leader approach, with an attractive rate of $19.95, which includes unlimited calling to Western Europe. It operates an extensive global VoIP network, which allows it to market Lingo as an international offering. One example of this is the ability for subscribers to choose overseas area codes from 12 major cities, such as London or Tokyo.

* Cablevision. Optimum Voice was launched in the Long Island area in September 2003, and since then has far and away been the most successful VoIP launch among MSOs. Cablevision's larger rivals--Comcast, TWC, Charter, etc.--have been in trials for some time, but are only just coming to market now, especially Charter. Using the Siemens soft-switch platform and PacketCable standards, Cablevision can deliver end-to-end QoS with E911 support. With an aggressive and attractive $90 bundle for voice, video and high-speed access, Optimum Voice has attracted some 120,000 subscribers. This is an impressive number, not just for its sheer size, but also because it represents roughly a 10-percent penetration among its 1.1 million broadband subscribers.

Aside from the competitive price point, Cablevision is offering to set up VoIP for up to five phones in the subscriber's home for free. Considering the prevalence of multi-phone homes, this is a very nice sweetener. Cablevision's $90 bundle is for a 12-month period, and we expect this offer will continue to fuel its strong growth while it is in effect. That said, it remains to be seen if Cablevision can retain these subscribers after 12 months and higher rates kick in. If the growth rate then slows, it could be argued that the company's success is not based on normal market conditions, and that the effectiveness of bundling has not yet been proven. On the other hand, Cablevision's results have been surprisingly good, and may be a harbinger of the success that MSOs will enjoy when the other majors roll out VoIP.

* 8X8. This is by far the smallest of the group discussed here, but 8X8 is included to illustrate the challenges faced by all virtual broadband operators. Despite being a public company, 8X8 does not disclose its subscriber counts. However, we believe it is maybe one-tenth of what Vonage reports, making it the second-largest operator. The low cost of entry has attracted many virtual operators, and 8X8 competes with several others--namely Voiceglo, VoicePulse and BroadVoice--who can't match what 8X8 has accomplished. These operators are all capable of providing a competitive VoIP offering, but are faced with the major challenge of acquiring subscribers on a cost-effective basis. To achieve this, 8X8 has chosen the price-leader approach, and is not out to duplicate Vonage's heavy marketing push to attract subscribers. As such, its growth has been on a more modest level and pace. 8X8 has also tried to keep costs down by developing much of its software and endpoints in-house. As a result, its offering is low priced, but really only suitable for second-line service. It offers E911 as an option at $3 per month, and to provide this, it has partnered with Level 3. Furthermore, it can only provide limited LNP.

Like Vonage, 8X8 has developed several channel partners, including Zones, CSI and Fry's Electronics, but on a smaller scale. Interestingly, 8X8's main point of difference is a videophone offering. This is having some success, but the high price point for video (even after rebates) will keep this from being a mainstream service for some time. 8X8 is arguably the most successful virtual operator after Vonage, but clearly it is difficult, if not impossible for any of them to duplicate what Vonage has done.

The Bigger Picture

Mapping out the broader competitive landscape would require a separate article, and here we can only say that the residential VoIP market will become more crowded and more dynamic. Consumers will be the big winners, benefiting both from cheaper telephony and the first wave of innovation that will give them a taste of what multimedia IP communications is all about.

Essentially, there are four basic types of subscriber-based VoIP service providers (see Figure 1). In addition, there is a sub-group of wholesalers, who provide platforms that enable others to offer VoIP. The best-known example is probably deltathree, who provides the platform for Verizon's second line variation of its VoiceWing offering. Other wholesalers of note include Net2Phone and Level 3.

That said, each type has a distinct set of strengths and weaknesses, and at this time, there is room in the market for all of them.

How Will the Market Play Out?

In short, as long as the market remains lightly regulated, VoIP is on track for healthy growth over the next few years. That said, it is too early to tell how much of this growth will be at the expense of existing POTS lines, as opposed to ex-panding the wireline market through the growth of second lines. Either way, it is clear that the revenue picture for POTS is not bright.

Naked DSL is not widely available, and until that time comes, residential subscribers taking up VoIP with their RBOC will inevitably scale back their POTS lines to bare minimum. In markets where POTS is decoupled from broadband (such as with Qwest), we expect to see an increasing rate of dropping POTS as consumers become more comfortable--and confident--with VoIP.

As the major players make their moves into VoIP, the window for startups and virtual operators becomes smaller. On the bright side, there is still plenty of room for all types of providers, especially since overall U.S. broadband penetration is fairly low. However, as the majors shift into high gear, facilities-based operators may hold too much of an advantage, and will ultimately control most of the market. Furthermore, as VoIP matures, success will driven more by marketing and brand recognition than the underlying technology, which plays into the majors' favor. In that scenario, some of the virtual operators will be acquired or driven out of the market, and others will find a viable niche, probably on a regional basis. VoIP is still evolving, and we have not even begun to address the potential of wireless IP, or peer-to-peer offerings such as Skype or Free World Dialup. As such, we expect VoIP will support a rich and diverse ecosystem for some time to come.

IPCC Chair discusses major initiatives, and why there will be VoIP winners and losers

As Michael Khalilian, chairman of the International Packet Communications Consortium, sees it, the move from TDM to IP is analogous to a switch from black-and-white TV directly to HDTV. Senior Editor Sean Buckley recently sat down with Khalilian to discuss the future of the IPCC and its role to advance the VoIP industry.

SB: What are the IPCC's major initiatives for 2005?

MK: The new IPCC is focused on IP technology deployment issues, including peering guidelines, which we are writing with our members, partner organizations and service providers. We're also looking at the implementation and definition of SBC (session border controllers), OSS, billing, CDR records and SLAs.

SB: What's your sense of the VoIP market as it stands now?

MK: The problem is that VoIP means different things to vendors, service providers and end users. This is a challenge and an opportunity. If VoIP means to me as end user flat, lower-cost long-distance service with an ILEC/RBOC, Vonage or a cable company, I really don't care if you're doing it via TDM or VoIP. Vonage is taking advantage of the all-you-can-eat concept. By bypassing the traditional process of meeting CableLabs-based infrastructure for broadband, Vonage changed the whole perspective of the market last year.

SB: Everywhere you look there seems to be a new VoIP service provider emerging. What's your take on these players?

MK: You have a lot of good companies such as Net2Phone and Level 3. On the other side you have the cable industry and the wireline companies working with wireless guys to take advantage of VoIP to allow businesses to bundle services over PDAs and Wi-Fi. The commonality between all these service providers is IP. Voice is an application taking advantage of this IP infrastructure. We're going through an evolution where it does not matter whether you are a telephone company, cable company, wireless operator or a satellite provider--everyone wants a bundle of services. Voice is like a utility service, and the Internet is sitting right next to it. So, how do you integrate these two things? VoIP is the ideal application for it.

SB: The IPCC developed six working group initiatives. What are these working groups looking to accomplish?

MK: We built a project working group to prioritize and solve VoIP issues. Service providers came to us and said: 'There are no guidelines for VoIP peering.' We put a number of service providers and members together to draft guidelines, and that draft will be ready by the end of this year and in Q1 2005 we will publish it. The second issue was session border control. What does it mean, what is the value proposition, and how do SBCs work with various softswitches and gateways, no matter the brand or protocol. We paired SBC vendors with the service provider members in a working group to define all aspects of this in a format of the guidelines.

MK: Initially, VoIP was designed for offloading Internet traffic, and then it was used for Class 4 long-haul sitting on top of frame relay and ATM using different QoS elements. Then, with all of the network upgrades to fiber, it was easier to use VoIP from point A to point B by using a different codec, which cut traditional 56 kbps bandwidth for voice down to 32 kbps. Then, the industry came up with the idea of offering enhanced services. Traditionally, a PBX would sit in your building and the telephone companies said they could do the PBX functions remotely via Centrex. An emerging group of third-party service providers such as Telverse or GoBeam said they could do all of this and more with IP Centrex. Now, the cable companies want to offer voice service to residential over either a primary-line or secondary-line connection. When you are in the primary-line business, regardless if you are a cable company or a telephone company, you have to meet E911 operator assistance and other traditional requirements. Companies that just focus on offering E911 such as TCS, which designed E911 for cellular companies, offer a similar concept for VoIP. The solutions are there, and in 2006, we're going to see a lot of VoIP deployments. The value proposition of VoIP is not to replace traditional TDM, which improves network efficiency, but rather in delivering new services.

MK: The VoIP industry is going through an evolution, and we're going to have a lot of good news and a lot of bad news, but not everyone is thinking of the VoIP definition correctly. VoIP means different things to different people and there are a lot of challenges for VoIP deployments, but there are also solutions. You can design a VoIP network to have QoS. That will push VoIP to the next level, but you have to have the right architecture and implementation plan.

--Sean Buckley

Jon Arnold is VoIP program leader for Frost & Sullivan (jon_arnold@frost.com)

TeleCommunication Systems, Inc. (TCS) (NASDAQ:TSYS), a global leader in wireless data technology, has announced it has deployed Voice Over Internet Protocol E9-1-1 service for Las Vegas, Nevada-based CommPartners, a Voice Over Internet Protocol ("VoIP") facilitator providing IP telephony services and connectivity to service providers. The deployment is the latest in TCS' E9-1-1 services that have been deployed in states across the United States since 1998. The service delivers a set of comprehensive capabilities meant to address the broad range of challenges for emergency services that are posed by current VoIP technologies.

CommPartners, with a growing national base of resellers, has incorporated TCS' E9-1-1 VoIP service with its suite of VoIP offerings. TCS' solution meets the requirements and expectations of E9-1-1 services offered to traditional landline and wireless subscribers. It supports a wide range of VoIP solutions ranging from those offering a landline replacement to those providing the business traveler with VoIP connectivity wherever he plugs into the Internet. Existing 9-1-1 solutions for VoIP are hampered by several limitations; key among them are slow location updates and inefficient routing. These limitations are typically the result of trying to provide VoIP E9-1-1 by upgrading the existing wireline E9-1-1 infrastructure rather than taking a more dynamic approach.

Wireline phones are statically connected to specific locations; thus, the wireline phone number can be mapped to that specific location. VoIP phones, however, are not necessarily tied to the same location each time a call is made. Many VoIP service providers allow their customers to make calls from any location as long as they can connect into the VoIP service provider's data network. Thus, unlike E9-1-1 calls originating from wireline phones, VoIP E9-1-1 calls cannot be mapped to a specific location based upon phone number alone. This is similar to the problem that wireless carriers originally faced with their customers: the phone number of a wireless subscriber did not automatically identify the location from which the person was calling. In 1998, TCS engineers worked with the States of Indiana to solve this challenge by extracting information about the caller's location from the wireless network as the call was being made. Since then, TCS has worked actively with the wireless industry to deploy innovative wireless E9-1-1 technology around the country and now supports tens of millions of subscribers who make tens of thousands of wireless E9-1-1 calls daily. TCS is now applying these lessons learned to solve similar challenges for CommPartners' VoIP customer base.

Where others are trying to update the wireline databases, which can take up to 48 hours to activate, TCS provides mechanisms to its customers that allow the information to be updated and validated in a fraction of the time and uses this information to dynamically route the call to the appropriate Public Safety Answering Point, of which there are over 6500 in the United States.

"Deploying TCS' authentic E9-1-1 VoIP solution positions us to set the bar for emergency services via VoIP," said Dave Clark, President of CommPartners. "When subscribers choose a telephony solution, they expect a certain level of service - that the quality of the call will be good and that they can dial 911 with assurance they will be connected to emergency personnel without any unnecessary delay. With TCS' E91-1 VoIP service, we now have a complete solution that meets and exceeds our customers' expectations."

CommPartners is interested in providing a complete, reliable E9-1-1 solution for its comprehensive VoIP service and would not settle for less," said Robert Dawson, Senior Vice President of Service Bureau Operations for TCS. "E9-1-1 VoIP is a natural extension to TCS' years of proven location and wireless E91-1 experience and we look forward to taking those offerings to the next level in the public safety arena."

The unanimous decision by the Federal Communications Commission (FCC) last month that VoIP Internet telephony service offered by Vonage isn't subject to traditional state public utility regulation certainly clears the path for VoIP service providers to step up their marketing efforts, but it's far from the final word on the issue.

For one thing, the Minnesota Public Utilities Commission is likely to appeal the ruling. And it's going to have lots of state PUC support: California, New York and others all have a multimillion-dollar financial stake in the outcome. California alone estimates it could lose $400 million in phone tax revenue over the next few years as more wire line customers ditch traditional phone service for VoIP. A key argument will be whether the FCC will prevail in its assertion that the states can't regulate Vonage's service because it can't be broken down into separate intrastate and interstate services.

Another interesting sidelight: The FCC didn't address the issue, raised by Vonage, of whether the VoIP service should be classified as an unregulated "information service" or a more traditional telecommunications service. That issue, with its extremely broad ramifications, will be left for another day. So will issues such as whether VoIP service providers have to provide access to the disabled, pay intercarrier compensation and contribute to the universal service fund. In other words, now that the FCC reserves for itself the right to regulate VoIP, just how light or heavy will that touch wind up being?

Of course, the United States Congress in its upcoming session could trump the FCC if it decides to pass legislation deregulating the VoIP business entirely. That would cut out the FCC, much as the FCC cut out the states. An earlier effort to do so this year failed in the eleventh hour, but the new Congress will likely be even more conservative and free-market oriented than the outgoing one. It's quite likely Sen. John Sununu (R-N.H.) will take another stab at deregulating VoIP.

Still, the latest FCC decision was hailed by many as a step in the right direction and an achievement in removing regulatory uncertainty. "This landmark order recognizes that a revolution has occurred," said FCC Chairman Michael Powell. "To subject a global network to disparate local regulatory treatment by 51 different jurisdictions would be to destroy the very qualities that embody the technological marvel that is the Internet."

Most VoIP vendors and service providers--and industry trade organization like USTA, CompTel/ASCENT and TIA--agree with that assessment and hail Powell's ruling. "It is not logical or practical to subject this voice application to 100-year-old regulations by 50 individual states," says Jason Talley, president of Nuvio Corp.

Jeffrey Citron, Vonage's chief executive, says the FCC action "assures that competition from VoIP is here to stay" and allows service providers to focus resources on improving their VoIP services.

If you're going to offer a true alternative VoIP service, you better make sure you take responsibility for the customer experience, says Bruce Chatterley, president and CEO of Seattle-based Speakeasy. For all of the hype surrounding VoIP this year with new entrants popping up on a daily basis, Chatterley is confident that this dedication to quality will give his company a leg up on the competition.

"We're initially only going to offer VoIP in combination with a Speakeasy broadband connection, and we think that's important because the only way we can manage QoS end-to-end is if we control the connection," said Chatterley. "We believe that by doing that we're going to offer a much higher-quality user experience than companies like Vonage that just plugs their VoIP feature on someone else's connectivity and can't manage that connection."

When Speakeasy asked what customers would want in a VoIP service, there were four main fundamentals: quality/reliability, cost, single bill/single support and new features, with quality and cost being at the top of the list. To keep its promise, Speakeasy has built a dedicated, private fiber-based network backbone via its partner Level 3, which includes eight major U.S. local POPs. In the last mile, Speakeasy has a direct connection into local provider partners including Covad, Qwest and SBC. This is then combined with its VQ Technology, a managed QoS mechanism that prioritizes voice traffic over data traffic. A customer could, for example, be simultaneously downloading a file while on a VoIP call without any degradation in voice quality.

In addition to controlling QoS, Speakeasy provides true 911 and enhanced 911 services with the same PSTN reliability customers have come to depend on. Whereas other providers utilize an administrative interface for 911, which generally does not have the calling address for the person, Speakeasy's 911 service is integrated with local Public Safety Answering Points in each market that provide name, address and phone number information to deal with emergency calls.

To power up its VoIP and naked DSL service sets, Speakeasy has enhanced its partnerships with Level 3 and Covad. Speakeasy will offer its OneLink service by leveraging Covad's dry loop, or dedicated DSL lines. For VoIP, Speakeasy will utilize Level 3's HomeTone VoIP service, a wholesale turnkey VoIP service that combines the relevant building blocks (911, directory assistance and operator services) of its VoIP Enhanced Local service with Class 5 softswitch capabilities. In addition, Home Tone offers enhanced unified messaging and find me/follow me features. Speakeasy will take those features and package them under its Speakeasy Voice for residential and then business customers.

"It was logical for us to partner with Level 3 because they are focused on wholesale, and we're confident that they won't compete with us," said Chatterley. "The other thing is that their whole core competency is to organize their whole business, operations and support around providing wholesale services that we can add value to and differentiate in the market, so VoIP was a logical extension of our relationship. Because our private fiber backbone is a sub partition of their national network, their VoIP application server sits on the same network as us, so from a latency and QoS standpoint we get a benefit there."

Although the traditional landline phone will be with us for a long time to come, the two biggest drivers toward naked DSL and VoIP are wireless phone substitution and those users that want to use VoIP instead of traditional PSTN service. Cellular users are prime targets for naked DSL and VoIP services because they both offer a flat rate and unlimited usage. In fact, Forrester Research estimates that approximately 2.3 million U.S. households will replace landline phones with a wireless phone by 2006. Then, there's a growing population that are not only substituting their landline phone with wireless, but also wanted to break ties with their phone company. On the business side, it's the desire to get a dedicated data connection with five-star support.

Speakeasy Voice service will be compatible with its existing cadre of DSL and T1 service packages, including its naked DSL service. When combined with its naked DSL service OneLink, which does not require a user to purchase a phone line, a consumer or business can effectively break ties with the traditional phone company and get a single bill of flat-rate, unlimited voice and data services. As an added caveat, cell phone users could use OneLink for their DSL data connection, or choose a hybrid that connects their cell phone with OneLink DSL plus VoIP with find me/follow me capabilities.

While the initial drive for Speakeasy Voice will be residential, Speakeasy does intend to offer the service to its SMB customers. Speakeasy has been targeting the budding SMB market via a growing cadre of independent IT consultants, a channel that Chatterley believes is a gold mine of opportunity. To maintain customer responsiveness, Speakeasy assigns a dedicated business manager for the life of the account. Such a structure gives this market a direct link into a person that knows their account.

"When it comes to our customer targeting, we try to target the most valuable segments that are not well served by what I call the McDonalds-quality carriers," said Chatterley. "We're serving on the business side through a unique channel that no one has been able to tap into yet. They are not going to make a living off of selling our stuff in terms of commissions, but what they want is a company they can work with where they have confidence that it's not going to degrade their relationship with the customer, and be able to immediately resolve issues."

But even as Speakeasy reaches about 92 percent of the U.S. market with DSL, the company is not resting on its laurels. After receiving a strategic funding from the Intel Communications Fund, Speakeasy recently began initial testing of broadband WiMAX with business customers in Seattle. The operator chose Seattle as the test city because of its rough terrain and strong demand for broadband services. Initially offering a 3-Mbps service, Speakeasy will also offer a dedicated account manager and SLAs for mission-critical applications.

IT'S SORT OF a telephone on wheels. The VoiceStick from i2Telecom (www.voicestick. com) is smaller than a lipstick case, barely a decent-sized key fob, but it can unlock an unlimited number of local and long-distance phone minutes for you as well as carry a good number of your work files on the road.

It's another one of those new wowee-zowee VoIP devices that will draw a crowd in a Starbucks or an airport lounge--just two of the places where you should be able to quickly make phone calls from any desktop, laptop or handheld with an internet connection and an open USB port.

VoiceStick is truly plug-and-play: no manual required. Just plug the voice-enabled memory stick into your computer and put its high-quality Plantronics earpiece/mic combo into your ear. Configuration is automatic: On first use, an installation screen will pop up so you can register for a calling plan and load VoiceStick's few operational files. Load them onto your hard drive or run VoiceStick from its flash memory: That will still leave most of its 50MB of storage available for file backup or transfer or to hold your PowerPoint sales presentation.

VoiceStick's on-screen dialer and minute-tracker pop up automatically to show which of i2Telecom's domestic and international calling plans you've selected and the calling time remaining. Choose from monthly rates of $10 for 60 minutes, $14 for 500 minutes or $24 for unlimited calls to any phone in Canada and the United States. Additional minutes are available for 3.5 cents per minute with a one-year contract, and international calls carry various low rates, depending on the country.

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As with all other IP phone services, you can make an unlimited number of free domestic and international calls to other i2Telecom subscribers. So for as little as $20 per month, traveling co-workers can constantly stay in touch with each other or the office for free.

Over the years, we've grown accustomed to needing a certain amount of hardware--usually wall-mounted--to make phone calls. But future phones will definitely be mobile--some no more than an earpiece and a directional mic.

How much lower? Rates for some of the more popular international destinations include about 3 cents per minute to the United Kingdom instead of the $3.90 per minute typical of straight cellular calls, says i2 Telecom senior vice president Rick Scherle. Per-minute charges are roughly 3 cents to Mexico City instead of 55 cents, 5 cents to China instead of $4.20, and 21 cents to India instead of $4.20.

You'll still log minutes on your cellular plan during prime time. But i2Telecom's clock starts only if a call leaves the Internet and travels over the traditional phone system. Monthly rates for domestic calls start at $11.95 for 300 off-network minutes or $16.95 for 500 minutes; you can also negotiate plans based on your company's calling patterns.

IF YOU MAKE A LOT OF LONG-DISTANCE business calls, you probably already know you can save by routing them over the Internet using VoIP technology. How would you like VoIP savings on your cell phone, too?

Boca Raton, Florida-based i2 Telecom International (www. i2telecom.com) has a new device (patent pending) that hands off cellular calls to its VoIP network, so you can save the roaming and long-distance charges still levied under many cellular plans. Its InternetTalker MG-3 saves still more on calls to Canada, Mexico or overseas, where cellular carriers still levy steep charges.

About the size of a CD case, the $109 MG-3 connects to a traditional or IP phone line on one end and the router for your broadband connection on the other. It's not unlike the analog/digital converters distributed by all VoIP service providers, letting any phone connect to their broadband networks. But MG-3 has the added benefit of routing cellular calls over the Interact. One prerequisite is that caller ID be activated on all the phones involved.

In a typical usage scenario, you might use your cell phone to call overseas or a domestic number off your carrier's network not that you can really tell which numbers are off-network, of course). Instead of dialing directly, you call the home or office line with your MG-3. Using caller ID, the device determines that the call is from an authorized phone and switches you onto i2Telecom's VoIP network. Now you dial the long-distance number and are connected at a much lower price than cellular rates.

MG-3's installation and configuration were brief and intuitive, and it works well with various office telecom equipment like PBXs and key sets. The device recognizes incoming calls from up to three cell phones of any type, and, like most VoIP devices, calls between MG-3s in branch offices or key employees' homes are completely free.

There are still boundaries between different telecom networks, but an SUV-size hole gets punched in them every day.

Headquartered in the Los Angeles area, Anthony International is a developer and manufacturer of refrigeration and shelving products for an eclectic group of consumers, including supermarkets, warehouse clubs, service stations, florists and other retailers. The company maintains several

production facilities across the United States and Europe, and operates a call center in Southern California to facilitate orders.

Maintaining efficient communications throughout the network is a critical task. Most of its sales are generated from incoming calls. Distributing this heavy phone traffic to the right individual or department in a timely fashion has always been an important element to Anthony International's growth, but, until recently, redirecting incoming orders and customer-service queries was a cumbersome task that left many callers and staff with a sense of frustration.

Anthony International relied on a myriad of hardware, software and carrier vendors for its communications needs, resulting in a patchwork network that differed widely between its locations. Additionally, as a result of this hodge-podge infrastructure, the firm regularly incurred monthly telephone charges exceeding $30,000 from its providers. Most importantly, customer service began to slip when incoming calls went unanswered.

What we had was a real mess," remembers Disa Gause, Anthony International's accounting manager. "We were receiving invoices from many different vendors and some of the bills I couldn't even figure out. And on top of the expenses, our communications system was cumbersome and inefficient. We were relying too much on our paging system, which was disrupting our work environment. We knew we had to make a change."

Anthony International executives met with integrator BTI Communications Group, which assessed Anthony International's needs and developed a course of action.

VOIP RECOMMENDED

"One of the first suggestions we made was far Anthony International to leverage Inter-Tel's Axxess converged platform to deliver voice-over-IP (VoIP) capabilities throughout its network," says Eric Brackett, chief executive of BTI. "This provided common functionality to every endpoint in the Anthony International infrastructure, which was something they were clearly lacking."

BTI recommended that the integration of many applications built into the Axxess converged platform would improve the efficiency and productivity of Anthony International. Wireless handsets, for example, strategically positioned throughout warehouses and production facilities, could improve Anthony International's work environment, resulting in a more conducive, professional atmosphere.

"The old system that Anthony International used relied heavily on the internal paging system, which had quickly become a source of nuisance," explains Brackett. "Since there was no direct communication link between the receptionists and personnel on the floor and in the warehouse, there was no choice but to use the paging system to reach staff."

By deploying the wireless endpoints, the receptionists can immediately transfer calls to employees who work in mobile settings, at any of Anthony International's locations. This has reduced its paging by about 95%, according to Gause.

The integration of the wireless endpoints reduced costs for Anthony International in other areas, as well. The company no longer needed its elaborate, yet inconsistent walkie-talkies and expensive cell phones to reach colleagues. The wireless instruments would handle those specific duties, seamlessly. Anthony International was also able to leverage its new VoIP network by distributing IP phones to its remote sales force, thus centralizing and controlling costs.

In addition to the new hardware, BTI introduced Anthony International to several Inter-Tel presence applications to improve business processes even more. For example, Inter-Tel's Unified Communicator v-2.0 software enables colleagues around the globe to see the status of their associates, partners and customers regardless of geography. When the software determines that the intended party is available, a phone call can be initiated from the desktop.

Users also can determine bow they can be reached. If a sales person is expecting a call from a prospective customer, he can route that urgent call directly to his wireless extension or cell phone, while sending all other callers to associates, voice mail and any other destination of his choosing.

Adding to the list of new applications was the inclusion of Inter-Tel's Call Center Suite, which helped the company track the metrics of each call, answering a litany of questions that had never been addressed, such as how many calls come to the company, who answers these calls and how long does efficiently handling these calls take.

To help regain control of its telecommunications services, Anthony International opted for Inter-Tel's managed services program, which enabled the company to go to one source for all of its telecommunications needs. BTI was able to negotiate a lower rare far carrier services for Anthony International as part of the managed services approach, and was able to build in a migration strategy for the company should it choose to upgrade its system down the road.

Most importantly, managed services includes ongoing maintenance, repair and support if something should go wrong--as it did shortly after the installation of the Axxess platform.

When a transformer blew, knocking out power and communications for Anthony International, BTI's crew was on sire within a half hour of the outage, repairing the lines and replacing some 25 phones damaged by the incident. Within a matter of minutes, the system was up and running as if nothing had happened.

According to Gause, the managed service program saves the company $13,000 per month on its telecommunications expenditures. "This isn't just about saving money," she adds. "It was a change we needed to make in order to better serve our customers."

For more information from Inter-Tel: www.rsleads.com/407cn-266

TECHNOTE

Small, medium and large organizations participating in an Infonetics Research study, on average, plan to mere than double their expenditures on IP voice products and services between 2003 and 2004. "However, actual adoption of IP voice in North America is still in its infancy, and needs to overcome the inertia new markets face," says Matthias Machowinski, Infonetics Research's next generation voice analyst and lead author of the study.

YOU LIKED THE PRICE CUTS. NOW comes part two: VoIP innovation. The Packet8 Desktop VideoPhone from internet phone company 8x8 lets you see and hear calling partners.

Full-motion video calls have arrived--some 40 years after Bell Labs introduced its Picturephone and long after we tired of visiting it at Disneyland. The Packet8 Desktop VideoPhone is available on 8x8's website (www.8x8.com) and through large computer retailers online and off for $299, or $499 for two (all prices street).

It's not one of those kludgy computer video solutions we've seen before. And it doesn't require special, per-minute service charges since 8x8 isn't a traditional phone company delivering video over the traditional phone network. VideoPhone is a creature of the new, unregulated phone network So while arguably it's the first, it won't be the last such device we'll see.

A broadband connection of at least 128Kbps is needed for real-time video and voice quality, says Bryan Martin, chair and CEO of 8x8 in Santa Clara, California. The Packet8 phone is definitely a convenient way to get "just like being there" video. Plug it into an Ethernet port on your broadband router, dial an activation code, and you're in business. It finds its own IP address, can be used across an office LAN, and is easily moved to other locations and connected to a TV or large LCD. It doesn't cost much more than most office phones. In fact, except for a barely noticeable camera and a 5-inch active-matrix LCD, the VideoPhone looks like any office deskset.

You'll need a Packet8 calling plan, which starts at $29.95 per month for unlimited calls to any North American number and unlimited free calls to other Packet8 subscribers worldwide. Most of the VideoPhone's calling features--from voice mail to three-way conferencing to call forwarding--are delivered via the calling plan, not the phone. Reception is great: clear audio and crisp, full-color images on an LCD that's just the right size.

Looking a decade ahead, the VoIP industry has taken its first steps towards foiling future attempts by Internet-style hackers to bring down a major IP phone service. A new group, the VoIP Security Alliance, or VOIPSA, recently launched two projects aimed at developing industrial-grade VoIP security methods.

VOIPSA members include manufacturers, service providers, research institutions and consultancies. The first two projects of the organization, which was formed in February, aim to develop a "threat taxonomy" and to define security requirements.

VOIPSA's efforts will be of particular interest to manufacturers of session border controllers, or SBCs, which will for a long time to come play a crucial role in defending VoIP networks from attack.

SBCs, which typically sit between the softswitches that control VoIP services and the public Internet, have a number of functions. One of the most important is firewall traversal. When a VoIP call has to go through a firewall, as most do, it can easily fail. Firewalls don't know how to deal with VoIP, which can involve as many as five separate data streams. SBCs know how to manuever both VoIP and video traffic through them.

FLEXIBLE CONTROLLERS

SBCs also escort VoIP calls through network address translation (NAT) setups, which use internal IP addresses for data traveling within an enterprise, but translate them into public IP addresses for traffic traveling over the Internet. And SBCs permit VoIP peering, allowing traffic to travel between VoIP providers' networks without conversion into TDM/SS7 form. They also give VoIP systems the ability to implement CALEA requirements, involving interception of traffic for law enforcement purposes.

SBCs' security features haven't yet faced a real test, because there have been no notable attacks on VoIP services so far. Such assaults will eventually be more dangerous than even a massive Internet attack, because as VoIP goes mainstream, more people will be using it for life-and-death purposes like dialing 911. And, without serious security measures, assaults will surely happen.

"When you have an Internet-based service of any type, it will be attacked up and down the protocol stack," says Dan Freedman, founder and chairman of SBC pioneer Jasomi Networks. "People will attack it just because your server is a server."

One way SBCs protect VoIP systems is by concealing the fact that the systems exist, a technique called topology hiding. In addition, SBCs prevent hackers from targeting specific softswitches or other devices. Without an SBC in front of it, a softswitch would have to have a publicly routable IP address, a sitting target for hackers.

Now that VoIP technology has gained mainstream mind and market acceptance among many residential and business voice users, service providers and vendors are looking straight on to the next challenge: Wireless VoIP.

Combining the attractive features and pricing of VoIP with the convenience and portability of wireless seems like a natural to many industry adherents, who figure forthcoming Wi-Fi and WiMAX standards will help focus attention, interest and perhaps investment in the converged technology. They see Wi-Fi and then WiMAX-based portable phones supplementing--and perhaps years from now replacing--traditional wired and cellular technology as consumers and businesses opt for portability and, ultimately, true mobility.

However, for now and in the near future, wireless VoIP is taking root primarily in enterprise and small-business accounts as a convenient voice technology that offers limited portability in a campus-like setting. Nevertheless, a variety of vendors and service providers--including well-known technology "disrupters" like Vonage--is waiting in the wings with new product introductions.

WI-FI HANDSETS

We see a high demand from some customers who just want a wireless device," explains Louis Holder, executive vice president of product development for Vonage, the pioneering VoIP provider that is currently beta-testing a new Wi-Fi handset. Vonage partnered with UTStarcom to develop the phone, which Vonage expects to market before year's end.

"Eventually, wireless VoIP is going to be commonplace," predicts Bill Simmelink, general manager of the VoIP Business Group for Texas Instruments. "The ramp-up is just about to occur." Simmelink adds that TI already is developing about half a dozen wireless VoIP handsets for enterprise applications.

"We are seeing a lot of demand for wireless VoIP services," says Dave Williams, vice president of products, markets and systems with NextWeb, a Fremont, Calif.-based fixed-wireless business ISP. In mid-April, NextWeb launched what it billed as the nation's largest deployment of VoIP services over a pre-WiMAX network. This month it will begin marketing wireless VoIP service to 500,000 small and mid-size businesses in more than 175 cities in California, its main service area.

The fledgling wireless VoIP industry is bracing for many more such service offerings. A recent study from Infonetics Research estimates that Wi-Fi VoIP handset revenue totaled $45 million in 2004 with 113,000 units shipped worldwide. Revenue and units are expected to grow sharply through 2009 as more enterprises deploy voice over wireless LANs (VoWLAN).

CELLULAR DISRUPTION

"Wi-Fi capability will eventually become a common feature in cell phones, just as it is becoming standard in laptops today, giving mobile operators a big opportunity with Wi-Fi voice," predicts Richard Webb, directing analyst for Infonetics and author of the report. He adds that wireless VoIP could end up being "a hugely disruptive technology."

Explains Webb: "The traditional model of time and distance-based pricing for voice calls will be eroded by VoIP, and as VoIP goes wireless, this will present a challenge not only to fixed-line operators, but to mobile operators as well."

Webb and other industry executives concede that a number of issues such as standards, QoS, seamless roaming across different platforms and signal range will have to be resolved before wireless VoIP can really take off. The wait might be surprisingly short. "But with vendors currently working towards standards to address these challenges, it is likely we will be at the foot of the adoption bell-curve by mid-2006," Webb says.

Some U.S. service providers aren't waiting that long.

US Wireless Online, which operates a large Internet wireless broadband network, launched a new VoIP service for the SMB market in Columbus, Ohio in March. The service is expected to roll out to customers in the company's 11-state service area that extends from Pennsylvania to Texas this year. "With business spending on VoIP expected to more than double to $10.9 billion in the U.S. by 2009, we believe our company is well-positioned to capture significant VoIP market share in our growing markets," explains Jai Bhagat, executive chairman of US Wireless Online.

Vonage's Holder believes wireless VoIP will attract a new set of small business customers to Vonage, lured by less expensive calling rates, increased convenience and VoIP's robust functionality that allows for better call management. "A lot of enterprises are talking about Wi-Fi, and the small and midsize business market will be able to get into it without the large capital expense," he says.

However, it is the enterprise user who seems most focused on wireless VoIP at the moment. Roger Sands, vice president of engineering for Colubris Networks, a Campbell, Calif-based WLAN system provider, counts more than 1,000 enterprise and service-provider customers worldwide including Swisscom, Telecom Italia, NTT-ME, Connexion by Boeing and McGill University in Montreal.

VERTICAL MARKETS

Sands says the company has about 400 U.S. customers, mostly in the retail, hospitality, healthcare and education verticals. "The enterprise is motivated by the performance increase they see in their workers, the productivity improvement and cost savings. We expect you are going to see this migrating horizontally within the enterprise service-provider market."

Such a horizontal move, involving more consumer-oriented applications, is still a few years away, he concedes. Still, as Wi-Fi and WiMAX standards emerge, hotspots become more commonplace and the need for seamless mobile voice becomes more prevalent, Sands and others foresee dual handsets emerging that combine wireless VoIP and traditional cellular capabilities. "This will augment cellular technology," Sands predicts.

SWITCHING to a new form of technology can be exciting for a growing business, but the road is rarely smooth. We caught up with two very different businesses as they shed their old telephone systems and got onboard with some of the latest technology.

In 2001, Mary Heather Hanley, 28, founded PR and advertising firm 525 Communications in Atlanta. At first, her landline was her main phone. Now, with eight employees working remotely and a lot of business travel happening, everyone uses cell phones, mostly Blackberry-enabled models.

Giving up the landline has required some adjustments. At one time or another, everyone has accidentally racked up big monthly overage charges. Hanley covers her employees the first time it happens, but they're responsible after that. Unlimited-minute plans help keep costs in check. Hanley also keeps a backup battery with her and has a half-dozen chargers. For this 'round-the-clock business, the switch to cell phones made sense. "No one has to wait for me to get back to them unless I'm on an airplane," she says.

First Century Bank, based in Bluefield, West Virginia, balances about 180 employees in 10 branches in a largely rural area. When they decided to upgrade their leased digital PBX phone system, they went with VoIP. The VoIP project was part of a larger upgrade to a new IP network with T1 connections.

Senior vice president Bill Albert and IT manager James Farmer oversaw the project. Along with Advanced Logic Industries, an IT consulting company, they selected a Cisco-based system. "We were already using Cisco equipment for our data, so it made sense to run the voice and data across the same equipment," says Farmer.

The major overhaul took about a year to complete. With VoIP in place, First Century saw monthly long distance bills drop from around $4,000 to $300. Conference calling, voice mail, caller ID and music on hold are no longer extra costs. "The other big benefit is the flexibility of moving sets and [making] changes," says Albert. When it comes to balancing the books, it doesn't get much better than that.

SWITCHING to a new form of technology can be exciting for a growing business, but the road is rarely smooth. We caught up with two very different businesses as they shed their old telephone systems and got onboard with some of the latest technology.

In 2001, Mary Heather Hanley, 28, founded PR and advertising firm 525 Communications in Atlanta. At first, her landline was her main phone. Now, with eight employees working remotely and a lot of business travel happening, everyone uses cell phones, mostly Blackberry-enabled models.

Giving up the landline has required some adjustments. At one time or another, everyone has accidentally racked up big monthly overage charges. Hanley covers her employees the first time it happens, but they're responsible after that. Unlimited-minute plans help keep costs in check. Hanley also keeps a backup battery with her and has a half-dozen chargers. For this 'round-the-clock business, the switch to cell phones made sense. "No one has to wait for me to get back to them unless I'm on an airplane," she says.

First Century Bank, based in Bluefield, West Virginia, balances about 180 employees in 10 branches in a largely rural area. When they decided to upgrade their leased digital PBX phone system, they went with VoIP. The VoIP project was part of a larger upgrade to a new IP network with T1 connections.

Senior vice president Bill Albert and IT manager James Farmer oversaw the project. Along with Advanced Logic Industries, an IT consulting company, they selected a Cisco-based system. "We were already using Cisco equipment for our data, so it made sense to run the voice and data across the same equipment," says Farmer.

The major overhaul took about a year to complete. With VoIP in place, First Century saw monthly long distance bills drop from around $4,000 to $300. Conference calling, voice mail, caller ID and music on hold are no longer extra costs. "The other big benefit is the flexibility of moving sets and [making] changes," says Albert. When it comes to balancing the books, it doesn't get much better than that.

Just as you wouldn't hire a fledgling firm to handle a high-end, family function flush with Kodak moments, neither would corporate America hand over its critical communications services to an unproven outsider.

But all that has changed dramatically with the last several years of telecom turmoil, a far tighter focus on cost reduction and avoidance, and the rapid rise of future IP-focused providers willing to spare users the pain of technology transitions.

As a result, the migration to hosted IP services is well underway, with VoIP largely responsible for the evolution of a market with sorely needed business brawn that offers more than just reduced communications costs.

[FIGURE 1 OMITTED]

The Migration to Hosted IP Services

With little exception, all businesses purchase some form of voice services. In this manner, VoIP represents not a new service but rather a replacement of an existing system. This is a key point in understanding not only the market potential but also the competitive landscape.

An early benefit of VoIP has been cost savings, and this remains a primary driver for VoIP adoption. If service providers are going to turn VoIP into a growth opportunity, it will require creating a migration path from trunking and integrated access solutions focused on cost savings toward feature rich platforms that provide a distinct advantage over current circuit-switched capabilities.

For most Tier 1/Tier 2 service providers, including RBOCs, IXCs and CLECs, VoIP services do not represent a new revenue stream but rather a replacement for circuit-switched local and/or long-distance voice. With the exception of service providers using VoIP to enter the voice market, and service providers serving enterprises (mostly SMEs via UNE-P), it is harder to justify the deployment of new services when a significant amount of resources have been used to deploy a circuit-switched architecture.

This represents a challenge for the industry to define and successfully market value-added VoIP applications for which customers are willing to pay. These applications might include worker mobility, wireless/wireline integration, unified messaging, number portability, collaboration and conferencing. (See figure 1).

Stratecast Partners recognizes that because of these factors a number of service providers have taken a conservative approach to the deployment of VoIP services, particularly network-based, hosted services. However, VoIP is the direction in which the market is heading, and those service providers that continue to drag their feet will be left behind.

Long term, the majority of businesses will utilize some form of IP-based equipment and/or services for their voice communications. Those service providers that have deployed or are currently deploying the necessary infrastructure to offer VoIP services will be best positioned for success long term, even if it results in the short-term cannibalization of existing, higher-revenue services.

There is no disputing the fact that the transition from circuit-switched to IP is happening within the business and residential markets. For businesses, there are a number of options to explore as they move down the migration path toward a converged IP environment.

While a number of service providers jumped into the market with fully hosted VoIP service offerings, we are now beginning to see providers developing a suite of offerings that provide businesses with a migration strategy. Having a migration plan that allows businesses to adopt different levels of IP voice capabilities takes into account a variety of factors including existing investments, quality and security concerns, site specifications, and number and location of offices within the business.

Migration Path to Hosted VoIP

While full VoIP solutions, hosted or customer premises, are ideally suited for greenfield sites, the value proposition becomes slightly more challenging for those businesses that have significant investment in existing PBXs or key systems, and corresponding handsets. In these instances, providing customers with an entry point through IP integrated access or trunking services is the first step toward full IP migration. This provides an entry point into a customer to help solve a key requirement: reduction of telecom expenses.

Integrated Access

IP integrated access, similar to a TDM-based integrated access solution, allows enterprises to carry voice and data traffic over the same connection. (See figure 2). Two key differences are the ability to offer lower overall costs through IP and to provide dynamically allocated bandwidth. IP integrated access represents basic circuit-switched line replacement, providing businesses with lower bills for local, long-distance, and toll-free phone service, while at the same time enabling them to continue utilizing an existing phone system and handsets. The service is implemented through an integrated access device or router placed at the customer premises.

To date IP integrated access services have been targeted primarily at SMEs and branch/remote offices of larger enterprises. The WAN transport of the voice traffic may be over the PSTN or a packet-based network after it hits the gateway or softswitch, depending on the service provider.

Customers can retain their PBX or key systems for internal call management and feature control. This allows businesses to gain the cost benefits of IP voice while retaining existing investments. VoIP access in this regard is being successfully marketed by CLECs such as Cbeyond, Covad, US LEC, and XO. In some cases the IP-based solution is an evolution from successful TDM-based integrated access businesses.

Those service providers that are not offering a basic IP trunking or integrated access services are missing an opportunity to build an installed base of customers in which to upsell value-added features and capabilities over time. Beyond basic local and long-distance voice and high-speed data offered with an integrated access solution, service providers can layer on enhanced features as a PBX overlay.

These features compliment a company's existing PBX and might include conference calling, integrated Web conferencing, auto attendant, find me/follow me, and call screening. These features allow businesses to gain access to capabilities that may be unavailable with an existing phone system but without having to completely migrate to IP.

Making the full migration to VoIP, a business can opt to implement an IP PBX or contract with a service provider for hosted voice services. Hosted IP voice is a network-based/Class 5 replacement solution that involves complete management of the system by a service provider.

Enhanced Application

Stratecast Partners considers hosted IP voice services as an enhanced application running over a packet network; these services are available with varying degrees of applications/calling features and place service providers in direct competition with the IP PBX manufacturers. This does not include the hosting of a customer-owned IP PBX in a service provider data center, which is an option some businesses have chosen to implement. Most services are available over a T-1 or higher-speed connection.

While a hosted voice solution must include all the standard Class 5 features such as call forwarding, call waiting, caller identification, voice mail, and three-way calling, there are also a number of enhanced capabilities which are becoming requirements. These enhanced features begin with a voice portal that allows users to manage their voice communications and options from any location.

As the core user component, the portal is key for productivity and integrated communications. Additional features offered through a hosted voice solution that have quickly become expected include click-to-dial, auto attendant, call logs, call screening, find me/follow me, and do not disturb.

The challenge for service providers is in developing a further set of capabilities off the hosted voice platform that businesses will be willing to pay for above and beyond the current feature set typically offered with IP voice. A number of solution providers are working on enhanced service capabilities that include integrated instant messaging, mobile wireless features, advanced security and encryption policies, and integrated video. The challenge will be in building a pricing model that offers a compelling value to businesses while at the same time providing an avenue for revenue growth for service providers.

Stratecast Partners has long held that in a tough competitive environment, service providers with a highly focused strategy will be better positioned for long-term success. In the VoIP services market this has become especially true, given the number of competitive operators vying for the same business. Certain service providers, however, stand out by differentiating themselves based on target market, channel strategy or geographic coverage.

The path to success in offering full hosted voice business services will be the result of offering a migration strategy that begins with IP integrated access and trunking services. Those service providers that have laid the foundation by marketing IP integrated access will have greater success in upselling hosted service capabilities.

Diane Myers is program manager for communication service strategies and opportunities at Stratecast Partners. (dmyers@stratecast.com)

SAN JOSE, Calif.-America Online Inc.'s disclosure on Tuesday that it will introduce a voice-over-IP telephone service will definitely add credibility to the technology, but it is unlikely to provide the long-term growth engine that would ensure the company's survival.

This was the view of three telecommunications industry executives who were attending the VON Spring 2005 conference here who have long been looking for a business catalyst to jump-start the acceptance and use of VOIP (voice over IP).

VOIP is still at the early-adopter stage, although acceptance is starting to pick up, said Mark Hung, director of strategic marketing at Atheros Communications Inc. in Sunnyvale, Calif.

"I think it is awesome" because AOL has the experience and the infrastructure to introduce VOIP technology to a mass market, Hung said.

"I think that AOL can only help accelerate that ramp-up" of VOIP use, Hung said. "If AOL can't succeed, then I think that the VOIP community had better figure out who can," he said.

Click here to read more about AOL's plans to offer VOIP phone services.

AOL CEO Jonathan Miller disclosed in his VON keynote presentation Tuesday that "within the next 30 days," his company will formally introduce a VOIP service integrated with its familiar AOL Instant Messenger console.

The AOL service is likely to prove especially popular with teenagers, college students and their parents who want to stay in touch with them, said Anthony Dalby, a planning engineer at Alltel Communications Inc. in Little Rock, Ark.

Dalby said college students used to using IM to stay in touch with their friends are likely to become ready users of a long-distance Internet phone service that they can access anytime for a flat fee to talk to a friend at a school across the country.

The same thing is true for their parents, even those who don't worry as much about the expense of calling their children long distance, he said.

But AOL will "really have to force their hand to get into the business sphere," Dalby said, because enterprises will prefer to use "their own VPNs, their own IP Centrexes or their PBXes for VOIP" because they will have greater security, he said.

Dalby also questioned whether AOL will be able to capture a hefty share of the VOIP market in the same way it dominated a massive portion of the dial-up Internet access market in the mid-'90s.

AOL certainly helps add credibility to the market, but Dalby said he thinks it is a market with fundamental differences. Other big companies, not the least of which are SBC Communications Inc. and AT&T Corp., are getting into the VOIP market, he said.

Other large phone companies will likely follow suit, at the very least to try to protect their customer bases, he said.

Next Page: "AOL is the company that people are migrating away from."

"AOL is the company that people are migrating away from," Dalby said, because most savvy users have many options for Internet access. He added that the company has not become a big player in broadband access in the same way it once commanded the dial-up business.

The move into VOIP may help delay the erosion of AOL's market position for a time, but it's unlikely to reverse the gradual decline in AOL's position that has been under way since the wide availability of broadband Internet access, said Ed Sassone, development director at eTalk Corp., a provider of contact-center systems based in Irving, Texas.

"I think that broadband technology has really marginalized" AOL, with the result that it is "getting squeezed, and at both ends of the market," Sassone said.

It must compete with multiple broadband providers at the top end of the market, while watching its remaining dial-up service evaporate, he said.

Executives at Level3 Communications Inc., AOL's phone network infrastructure partner, expressed confidence that AOL's VOIP venture would meet with great success.

AOL will succeed because it is coming into the 100-year-old telephone market as a market disruptor by "making a new technology simple to use," said Cynthia F. Carpenter, vice president of marketing for consumer voice services at Level3.

AOL is vying for a piece of the residential phone market that is estimated to be worth $100 billion in North America, Carpenter said. The company will do that by appealing to the kind of technically savvy consumer who will be eager to give VOIP a try, she said.

This is also the type of consumer who will be willing to switch to a different service provider that offers the most attractive deal, she said. AOL is going to appeal to these users by offering features beyond simple price discounts, such as "cellular service, broadband, video, and by adding feature that their phones can't do right now," Carpenter said.

Check out eWEEK.com's VOIP & Telephony Center for the latest news, views and analysis on voice over IP and telephony.

SAN JOSE, Calif.-America Online Inc.'s disclosure on Tuesday that it will introduce a voice-over-IP telephone service will definitely add credibility to the technology, but it is unlikely to provide the long-term growth engine that would ensure the company's survival.

This was the view of three telecommunications industry executives who were attending the VON Spring 2005 conference here who have long been looking for a business catalyst to jump-start the acceptance and use of VOIP (voice over IP).

VOIP is still at the early-adopter stage, although acceptance is starting to pick up, said Mark Hung, director of strategic marketing at Atheros Communications Inc. in Sunnyvale, Calif.

"I think it is awesome" because AOL has the experience and the infrastructure to introduce VOIP technology to a mass market, Hung said.

"I think that AOL can only help accelerate that ramp-up" of VOIP use, Hung said. "If AOL can't succeed, then I think that the VOIP community had better figure out who can," he said.

Click here to read more about AOL's plans to offer VOIP phone services.

AOL CEO Jonathan Miller disclosed in his VON keynote presentation Tuesday that "within the next 30 days," his company will formally introduce a VOIP service integrated with its familiar AOL Instant Messenger console.

The AOL service is likely to prove especially popular with teenagers, college students and their parents who want to stay in touch with them, said Anthony Dalby, a planning engineer at Alltel Communications Inc. in Little Rock, Ark.

Dalby said college students used to using IM to stay in touch with their friends are likely to become ready users of a long-distance Internet phone service that they can access anytime for a flat fee to talk to a friend at a school across the country.

The same thing is true for their parents, even those who don't worry as much about the expense of calling their children long distance, he said.

But AOL will "really have to force their hand to get into the business sphere," Dalby said, because enterprises will prefer to use "their own VPNs, their own IP Centrexes or their PBXes for VOIP" because they will have greater security, he said.

Dalby also questioned whether AOL will be able to capture a hefty share of the VOIP market in the same way it dominated a massive portion of the dial-up Internet access market in the mid-'90s.

AOL certainly helps add credibility to the market, but Dalby said he thinks it is a market with fundamental differences. Other big companies, not the least of which are SBC Communications Inc. and AT&T Corp., are getting into the VOIP market, he said.

Other large phone companies will likely follow suit, at the very least to try to protect their customer bases, he said.

Next Page: "AOL is the company that people are migrating away from."

"AOL is the company that people are migrating away from," Dalby said, because most savvy users have many options for Internet access. He added that the company has not become a big player in broadband access in the same way it once commanded the dial-up business.

The move into VOIP may help delay the erosion of AOL's market position for a time, but it's unlikely to reverse the gradual decline in AOL's position that has been under way since the wide availability of broadband Internet access, said Ed Sassone, development director at eTalk Corp., a provider of contact-center systems based in Irving, Texas.

"I think that broadband technology has really marginalized" AOL, with the result that it is "getting squeezed, and at both ends of the market," Sassone said.

It must compete with multiple broadband providers at the top end of the market, while watching its remaining dial-up service evaporate, he said.

Executives at Level3 Communications Inc., AOL's phone network infrastructure partner, expressed confidence that AOL's VOIP venture would meet with great success.

AOL will succeed because it is coming into the 100-year-old telephone market as a market disruptor by "making a new technology simple to use," said Cynthia F. Carpenter, vice president of marketing for consumer voice services at Level3.

AOL is vying for a piece of the residential phone market that is estimated to be worth $100 billion in North America, Carpenter said. The company will do that by appealing to the kind of technically savvy consumer who will be eager to give VOIP a try, she said.

This is also the type of consumer who will be willing to switch to a different service provider that offers the most attractive deal, she said. AOL is going to appeal to these users by offering features beyond simple price discounts, such as "cellular service, broadband, video, and by adding feature that their phones can't do right now," Carpenter said.

Check out eWEEK.com's VOIP & Telephony Center for the latest news, views and analysis on voice over IP and telephony.

AOL plans to launch a VoIP service, called AOL Internet Phone Service, which will leverage the "buddy list" used in the AOL Instant Messenger service to show a subscriber whether friends or associates are currently available.

VoIP's LACK of landline-class emergency services didn't seem that big a deal initially--tall phone-bill savings overshadowed the problem. Then a couple of Vonage (www.vonage.com) customers dialed 911 and didn't get an emergency response.

Within days, state attorneys general had filed consumer-protection lawsuits against Vonage, and Congress introduced new bills to tax VoIP. The FCC told internet phone companies to have landline-grade emergency services by November.

Most broadband phone companies already have 911 services of a sort. But unlike a traditional phone number, a VoIP phone number isn't tied to a street address, so customers have to register their locations. Some calls get routed through administrative offices instead of directly to emergency responders--often without location and callback numbers. That all needs fixing by November, warns the FCC.

"That shouldn't be a problem," says Brooke Schulz, Vonage senior vice president. "We were already close to getting access to the Bells' infrastructure." All four Bell Operating Companies have agreed to open their 911 systems to all VoIP providers.

That still won't automatically pinpoint businesspeople who use VoIP on the road, something that could be fixed by Enhanced 911, or E911, service. That is being slowly rolled out, region by region, and adopted by carriers to different degrees. For a $1.50 monthly surcharge, 8x8 (www.packet8.net) claims to provide coverage "which mirrors that of legacy landline phone service providers" in 43 states.

Covad (www.covad.com), SunRocket (www.sunrocket.com) and Zoom Technologies (www.zoom.com) have all expressed confidence they can meet the FCC's deadline. But service levels and features could vary for a while, warns Teresa Mastrangelo, principal analyst at Broadbandtrends.com. Remember, even with E911, you can't make any calls if you lose power. And no one has figured out how to find internet-only callers whose transmissions don't veer onto the traditional phone network

For the near term, scrutinize your VoIP provider's emergency coverage closely. And if you do dial 911, specify your location to emergency personnel--just to be on the safe side.

INTERNET BUSINESS NEWS-(C)1995-2006 M2 COMMUNICATIONS LTD

Blue Wireless & Data Inc (OTCBB:BWDI), a broadband service provider, announced on Wednesday (11 January) that it is now offering business and residential Voice over Internet Protocol (VoIP) telephony services.

The new VoIP services are being marketed by the company to its existing customer base.

The company said that it could also provide the service within 82 national markets outside of its own wireless broadband network.

According to Blue Wireless, the service is offered to residential customers as a home phone alternative and to business customers as a PBX replacement.

COMMUNICATIONS LTD

Telappliant, a supplier of end-to-end and business VoIP solutions, has announced the launch of a new software-based office phone system built on Asterisk open source and Linux-based telephony software.

The Telappliant IP-based Private Branch Exchange provides office phone users with a range of voice and data features and helps to reduce both PBX implementation costs and phone bills through the use of VoIP calling.

The new product provides features such as least cost call routing, voice mail, call queuing, Automated Attendant, interactive voice response, call conferencing and music-on-hold. It also supports features such as video conferencing, web collaboration, stereo call recording and the integration of geographically remote telephone extensions.

In addition, the Telappliant IP-PBX can be integrated into offices with a traditional phone network and the software will also support any telephone handset that supports the SIP open standard.

Telappliant IP-PBX software can be supplied direct by the company on a CD or will shortly be available from http://www.voiptalk.org. Pricing starts from GBP15 per user, with system prices starting at GBP899.

Vonage and VTech said this week that they have teamed up to take the VOIP service cordless with an integrated system.

Although normal corded and cordless phones can be plugged into a Vonage-enabled router to allow VOIP service, the new IP-8100-2 phone from VTech will integrate the Vonage service directly into the phone. The phone will cost $149.99, not including a $50 rebate that can be mailed in after 60 days of the Vonage service.

The phone will go on sale Monday at 8,000 retailers, Vonage said.

The IP-8100-2 will include a pair of handsets and will be expandable up to a total of four, according to VTech. It will plug directly into an existing (non-Vonage) router.

"Vonage is pleased to offer its customers the world's first broadband enabled cordless phone system, as the company is always seeking to offer a variety of hardware choices for its innovative flat-rate, full featured calling plans that are rapidly becoming the touchstone of the telecommunications market," said Jeffrey Citron, Vonage's chairman and chief executive, in a statement. "Vonage's service coupled with VTech's great design and retail strength makes this a strong partnership for two companies who share the same customer service vision of quality and ease of use."

GOOGLE'S NEW Google Talk isn't the best VoIP phone service; Skype is. It isn't the best IM service; that title goes to AOL Instant Messenger. Google Talk (www.google.com/talk) is likely to disappoint both high-volume VoIP and IM aficionados.

But casual users will find it a convenient blend of both mediums nicely integrated with Gmail, whose responsiveness and innovative message archiving make it an acceptable office e-mail system. Unlike AOL, MSN and Yahoo! web mail, Gmail is useful for something more than personal or backup messaging. What Google brings to the party is the successful integration of several hot-hot-hot communications technologies under one intuitive and sprightly interface.

Still, there's no way the first version of anything can be best of breed from a feature standpoint. Unlike the AOL (www.aol.com), MSN (www.msn.com) and Yahoo! (http://messenger.yahoo.com) IM programs, Google Talk can't send photos and videos or videoconference. It can't connect to landlines or encrypt messages like AOL Callways and Skype (www.skype.com). And each Google Talk competitor has added its own little gems over time, such as customized backgrounds, calendaring and online gaming.

So if you can temporarily live without skins and emoticons, the only challenge in Google Talk is getting buddies to join you. The major services have been largely successful at walling in their users. On the other hand, Skype signed up 54 million users in two years, and Google Talk sets up easily enough.

You have to sign up for Gmail first, though, and that requires a cell phone number. Supposedly, that's a way to verify your identity if you forget your password. But by the way, do you mind if Google keeps your number around so you can get alerts on "topics that interest you" and future, unspecified "Google Mobile services"? Translation: "Our text ads are perfect for a tiny phone display, and we've got big plans for those 1 billion-plus cell phone users."

That number will double by 2009, by which time no one will even remember that e-mail, IM, cell phones, VoIP and landlines were once separate. Google Talk isn't for everyone, but it's all most folks need for now.

Last week we took a break from our VoIP obsession but this week, we can't help it, VoIP is back. Several of you have written to back up our suspicion: The problems we've been having with Vonage lie in the SBC network.

Interestingly, all of you who have cable broadband report nearly flawless performance with Vonage. It may be that cable's generally higher data rates make Vonage's VoIP better or maybe, as we have mentioned, the rumors are true that some telcos shape traffic for what they say are QoS reasons that just happen to degrade VoIP sessions they aren't making money on.

If there are any SBC techs out there who would be interested in helping to solve this problem, please get in touch. We'd really like your help.

While we've been wrestling with ourVonage problems we haven't been otherwise idle on the VoIP front. Nope, over on the Skype side of the VoIP universe things are busy We just tested a new Skype-related product from Linksys, the Cordless Internet Telephony Kit (otherwise known as the QT200),and we're very impressed.

The CIT200 works only with Vonage and consists of a wireless handset with a charger stand (which obviously has a wall wart power supply) and a separate box - the base station - that connects to your PC via USB.

The PC setup is simple. It installs the USB drivers and sets up the connection for your existing Skype installation or installs a fresh copy of Skype if needed. That's it! If your Skype worked before you installed the C1T200 it should work now.

You can program telephone numbers into the CIT200 as well as use the numbers you have already defined in Skype or your existing Skype speed-dial entries.

The handset has all sorts of setup options ranging from basics such as setting its internal clock to registering and de-registering which base station is paired with the CIT200 handset.

The sound quality of the CIT200 is very good and only limited by VoIP service quality It also is a speakerphone, shows caller ID, has a minijack for a headset and has a remarkable unobstructed range of around 300 feet. Not only that, the base station can support up to four CIT200s and the handsets can be used intercom-style.

To our amusement the CIT200 produces a variety of weird tunes and sounds for various functions other than ringing; for example, it sounds a peculiar arpeggio when you put it in its charging stand. We haven't quite figured out what all the sounds mean but that doesn't seem to matter. At around $130 the CIT200 is rather pricey but it is a terrific piece of hardware and does the job very well. Linksys, please note: We definitely need to test this product for an extended period, say, the next couple of years.

If you've been tracking the VoIP universe you may have heard of a project called Asterisk (www.asterisk.org). If you haven't, you really need to keep your eye on this.

Asterisk is fantastic. It is a complete, open source, Linux-based multi-protocol,software-only PBX that runs on Linux, BSD and Mac OS X. It has all the features you would expect from a serious business-quality PBX, such as providing voice mail services with directory services, call conferencing, interactive voice response and call queuing, three-way calling and caller ID services. And it can handle ADSI, Session Initiation Protocol and H.323 (as both client and gateway) traffic.

Asterisk also provides open APIs and supports scripting in a variety of languages. In short, it is remarkable and in many people's eyes has the potential to change how companies think of PBXs.

You can find a lot of information on Asterisk's Web site and there's even a book on the system called Asterisk: The Future of Telephony by Jim Van Meggelen, Jared Smith and Leif Madsen. This is an excellent guide to the why what and how of Asterisk. Highly recommended.

Your recommendations to gearhead@gibbs.com. Oh, et cherchez le Gibbsblog (http://www.networkworld.com/weblogs/gibbsblog/). Merci.

Copyright Network World Inc. Oct 31, 2005
Provided by ProQuest Information and Learning Company. All rights Reserved

RENT OR BUY: IT'S A FAMILIAR CALCULATION for businesses maximizing cash flow. lust as you might outsource Web site hosting or expensive programs, you can check out VoIP telephone systems before buying PBX hardware by signing up for IP Centrex.

It's not the same as the analog Centrex services the Bells and other large telecom companies offer small and midsize businesses. Like other all-digital systems, IP Centrex benefits from the cost-effectiveness of an Internet transmission backbone, the growing need of businesses for broadband data streams, and its ability to mingle voice and data.

IP Centrex preserves the advantages of older 'analog key systems--minimal upfront capital investment, with no cables to pull and no on-site telephone equipment to buy beyond desk sets. System management, security, upgrades and redeployment are headaches for your service provider, not you.

But IP Centrex differs from traditional analog services in its ability to deliver a broader array of mixed voice/data services more easily and cheaply. Call forwarding, caller ID, multicaller conferencing, four-digit dialing of free calls among branch offices and even key customers, and calls that follow you home aren't special requests with big price tags. They're part of the package. So is a universal inbox for voice mail and e-mail; integration with other applications, like sales force management and CRM; and simplified Web-based configuration of usage profiles by both the system administrator and users themselves.

You get the greater features and no-hassle moves, adds and changes typical of all-digital VoIP services. You don't get the circuit-switched technology baggage, monopoly pricing and bureaucracy typical of the telephone system we all grew up with.

IP Centrex differs from consumer-oriented VoIP services (from companies like Vonage) in that service providers-such as BellSouth (wwvc.bellsouth.com), Covad Communications (www.covad. com), or VirtualPBX (www:virtualpbx. com)--have business-class packages with dedicated IP networks, VPN security, and service agreements that guarantee call quality and system uptime.

We set up a private BellSouth network using Internet protocol, but with better security, predictability and performance," explains Mark Kaish, vice president of Next Generation Solutions for BellSouth in Atlanta. "Its carrier-class service isn't subject to the variability or other problems of the Internet at large." But IP Centrex will cost more than consumer-oriented Vole After a $150 setup fee, VirtualPBX charges $5 to $15 (per extension) per month, plus per-minute phone charges. As IP alternatives proliferate, competition will drag down everyone's prices. Long term you'll probably want the local control over your data and the quick network reconfiguration of an on-premise IP PBX. But for a fast-growing entrepreneurial company, IP Centrex could be a quick and easy solution to bringing VoIP phone service to one or more of your locations.

Inexpensive group and conference calling. Users can quickly conduct up to 10-way conference calls, and establish group call lists such as "board members," "sales team" or "alliance partners." TalkPlus makes it easy to set up and manage conference calls and group lists without the need for expensive conference bridging services.

-- Do-Not-Disturb/Priority Call Lists. Users can create incoming call lists that enable them to be reached when and by whom they want to be reached. Lists can be automatically or manually activated or deactivated by the time of day and/or the day of the week. For example, a user can block all incoming calls, yet allow designated contacts to ring through.

TalkPlus Gives Cell Phone Users Freedom of Choice

"TalkPlus Call Manager is completely changing the way that the world uses cellular and VoIP calling services," said Jeff Black, Founder and CEO of TalkPlus, Inc. "TalkPlus provides cell phone subscribers with a spectrum of VoIP-like services that enable them to choose if, when and how they want to reach out to their family, friends and business associates, and at costs that are comparable to VoIP calling services. We are excited to preview TalkPlus Call Manager at DEMOfall and are highly honored to have been selected to participate in this prestigious event."

According to DEMOfall Executive Producer Chris Shipley, "The TalkPlus Call Manager will prompt consumers to demand and expect new and improved services that will enhance and protect their personal and professional lives, and drive carriers and handset manufacturers to develop and deploy next-generation products and services. It was for these reasons that I selected TalkPlus to participate in DEMOfall 2005, and I am pleased to provide the launching pad for its industry-changing technology and services."

Pricing and Availability

TalkPlus Call Manager will be available this fall. Services start at less than ten dollars per month.

The annual DEMO conferences focus on emerging technologies and new products, which are hand-selected from across the spectrum of the technology marketplace. The DEMO conferences have earned their reputation for consistently identifying tomorrow's cutting-edge technologies, and have served as launch pad events for companies such as Palm, E*Trade, Handspring and U.S. Robotics, helping them secure venture funding, establish critical business relationships and influence early adopters. Each DEMO conference features approximately 70 new companies, products and technologies. For more information on the DEMO conferences, visit www.demo.com.

About TalkPlus

Founded in 2004, TalkPlus is a privately-held company in Menlo Park, California. Its seasoned management team includes executives, engineers and research and development experts from such notable companies as Digital Equipment Corporation, Bells Labs, Intel, iAtlas, AltaVista, Hotels.com and Adelphia Cable Communications. The company has been incubated by PartnerVision Ventures. For more information please visit www.talkplus.com.

TalkPlus is a trademark of TalkPlus, Inc. All other trademarks are the property of their respective owners.

TalkPlus Call Manager gives cell phone users virtually unlimited range of accessibility and privacy options, freeing callers from landlines, broadband phones, and networked PCs. Network agnostic and WAP compliant, service supports standard cell phones that operate on BREW and JAVA platforms, and landline phones via interactive voice response system. It provides full identity management, group and conference calling, and Do-Not-Disturb/Priority Call Lists.

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Industry's First Solution that Delivers VoIP Calling Services over Cell Phones Previews at Leading Technology Showcase

DEMOfall 2005 - Station #56 - HUNTINGTON BEACH, Calif., Sept. 19 /-- TalkPlus, Inc. announced today at DEMOfall 2005 the debut of the industry's first Voice over Internet Protocol (VoIP) service, over circuit-switched and cellular networks. TalkPlus Call Manager gives cell phone users a virtually unlimited range of accessibility and privacy options at rates that are comparable to broadband calling services, including Vonage and Skype. TalkPlus Call Manager frees callers from landlines, broadband phones and networked PC's, while delivering all of the benefits of VoIP services over existing cell phones.

Installing TalkPlus Call Manager is as simple as downloading a ringtone. Its patent-pending technology is network agnostic, and supports standard cell phones that operate on the BREW and JAVA platforms. TalkPlus Call Manager is WAP compliant, and supports landline phones via an interactive voice response (IVR) system.

TalkPlus Call Manager provides powerful VoIP-like features such as:

-- Full identity management. TalkPlus Call Manager enables individuals to completely manage personal, business and dating life with one simple device -- their cell phone. Through the use of multiple numbers, users can now change their calling identity without the need for multiple cell phones.

-- Additional domestic and international telephone numbers. Users can add multiple U.S. and international telephone numbers to their existing cell phone to maintain a virtual presence almost anywhere in the world and at prices comparable to broadband calling services.

BTC phone, compatible with SIP IP phones and mobile phones, is operated via 3 buttons and powered by single set of batteries for one week. Calls can be originated on ZIP 4x5 phone or BTC phone using voice-activated dialing, and calls can be answered on either phone. Design promotes portability, and use of open standards permits phone to be moved from room to room or used at remote facility. Phone features 4 microphones, DSP, and acoustic echo cancellation.

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Unique product offers true conferencing over VoIP

SUNNYVALE, Calif., December 6, 2005 - Zultys Technologies today announced the BTC phone, a powerful wireless conference phone that is compatible with its range of SIP IP phones as well as mobile phones. The BTC (Bluetooth Conference Phone) provides unparalleled speech quality and removes clutter from the conference room table.

The BTC phone is incredibly easy to use, having just three buttons. The phone is paired with any Bluetooth phone such as the Zultys ZIP 4x5 IP phone. Calls can be originated on the ZIP 4x5 phone or on the BTC phone using voice activated dialing. Calls can be answered on either phone. A conference call with multiple parties can be made using the features of the ZIP 4x5 phone. With its unique Bluetooth capability, these features are also available in conjunction with any other Bluetooth phone, including cell phones.

The BTC phone is aesthetically designed to enhance any conference room. Its batteries power the unit for about a week, obviating the need for power cables and phone lines to be dragged across the conference room table. The portability and use of open standards permit the phone to be moved from room to room or to a remote facility-even your car. The phone has four microphones and a powerful DSP (Digital Signal Processor) ensuring clarity of both the listeners as well as those at the other end of the call. The phone's speaker output is best in its class and the acoustic echo cancellation permits a natural conversation.

"We have been delighted with the quality of Zultys' products and service since our installation several months ago," said Dennis Cabuco, IT manager at the San Francisco Bay Guardian newspaper, in San Francisco, California. "There has not been a viable solution for adding conference phones to an IP system before Zultys introduced this phone. We love the fact that Zultys products are so flexible, easy to use, and have such great speech quality."

This BTC phone rounds out a range of SIP phones from Zultys which includes Ethernet and Wi-Fi sets. It permits an exclusively SIP installation to add conference phones without running wires to carry analog signals. The phone has four quad-color LEDs that display its status. The phone also is equipped with standard 3.5mm connectors (pink and green) so that it may be connected by wires to a desktop phone or a soft phone running on a PC. This enhances its flexibility for any application-wired, or wireless.

"When people think of conference room phones, they usually think of one supplier," said Patrick Ferriter, VP of Product Marketing at Zultys. "This phone will radically change the perception of what a conference phone should be like. Instead of stagnant features, Zultys has demonstrated clear technological leadership with this product."

The BTC phone is in trials now with quantity shipments beginning in February. Pricing for the BTC will also be announced in February.

About Zultys Technologies

Incorporated in 2001, Zultys Technologies has its headquarters in Sunnyvale, California. Zultys designs and manufactures products that converge telecommunications and data communications for businesses. Zultys develops its hardware and software specifically to create products that deliver completely integrated solutions, allowing for ease of deployment, management, and use. These products support multiple languages and are based on open standards to ensure interoperability in a network. After installation, productivity increases and operating costs decrease. Zultys sells its products worldwide and has distribution today in 115 countries. For more information on Zultys or its products, access: http://www.zultys.com

IT SEEMS LIKE everybody's offering you internet phone service. But AOL's Callways (www.aol.com) offers more than just voice calls.

Though it was hurt by the switch to broadband, the communications giant still counts 22 million subscribers willing to pay at least $15 per month to get stuff most web travelers get for free. That's because AOL wraps e-mail, IM, chat rooms, blogs and message boards into one comfy interface with common inboxes, address books and buddy lists. There's one-click access to just about everything you can find through web portals--from search to domain hosting to shopping--and the tools needed to exploit them all. Adding VoIP was a no-brainer.

For $30 a month ($40 after six months), Callways combines unlimited local and long-distance calling in North America with AOL's dizzying menu of other services. Alternative pricing is available for current subscribers, and instead of a dumb Public Switched Telephone Network adapter for your phone, AOL has been giving away (during rollout, at least) a 54Mbps 802.11g Wi-Fi router from premier networking companies Netgear or Linksys. My subscription included Netgear's Wireless Router with Phone Adapter. It not only can be the cornerstone of your wireless network, but also has two ports for plain old telephone lines and is tuned for voice quality.

Callways itself has the usual VoIP features--voice mail, caller ID, call waiting, and call forwarding to home and cellular phones. Like most AOL services, it can travel on a laptop, PDA or cell phone, and you can retrieve both voice mail and e-mail from any touch-tone phone. AOL is also one of the few providers with Enhanced 911 emergency services in all its markets--a connection to emergency dispatchers comparable to landline 911.

Callways is incredibly easy to set up and use throughout. But its full menu comes with comparable computing overhead, and you've got ads--lots of ads. Of course, that's not a bad thing if you're an AOL advertiser tapping those 22 million users.

It's not for everyone, but Callways is a quick way for SOHO companies to get an all-in-one communications solution.

The new elmeg IP290 SIP Voice-over-IP telephone is currently being shipped by Funkwerk Enterprise Communications (FEC). The phone is said to enable users to switch to VoIP without losing features.

The phone can be connected directly to an Ethernet network and comes with two Ethernet ports for the network and PC. Users can send and receive calls from other VoIP, digital or analogue phones by using a UK Session Initiation Protocol service provider such as SIPCall, RadiusIP or 1899.com.

The phone features a graphical display, keypad and height adjustable base, programmable keys, call holding, blocking and transfer along with call back and forwarding. Other features include a caller list, speed dialling, hands-free speaking, support for 12 different languages and an address book for up to 100 entries, the company said.

The elmeg IP290 is available in the UK from Funkwerk distributor NXGEAR (http://www.nxgear.com) and has a recommended price of GBP116.55.

It was only a matter of time before Wi-Fi and VoIP met up and joined forces in your business. They've come together in the form of Session Initiation Protocol phones. This very flexible protocol has become a top choice for VoIP applications. Chances are, if you have a VoIP setup, it already includes SIP protocols. Theoretically, you can plug any SIP-enabled VoIP phone into your SIP-based VoIP setup.

The newest of those phones is the Zultys (www. zultys.com) WIP2 wireless IP phone, a full-featured phone with voice encryption, paging and three-way conferencing. WIP2 includes everything you'd expect in a high-end VoIP phone, and it lets you prowl around the premises using the Wi-Fi capability. Pricing hadn't been set as of press time. Like the WIP2, ZyXEL's $230 (street) Prestige P-200W (http://us. zyxel.com) is 802.11b-compatible. There are a few small trade-offs, though. Expect your talk time to be limited to about four hours, and remember, you can only talk when you're within range of a Wi-Fi access point. In other Wi-Fi and VoIP news, Vonage (www.vonage. com) has tested a Wi-Fi handset that works with its service and should be available by the time you read this. Look for more Wi-Fi VoIP phones to hit the market as demand builds.

ONE ADVANTAGE your cordless home phone has over your office phone is that you can walk and talk without losing your connection. Uniden's new home- or branch-office phone system delivers cordless convenience, office phone features and low-cost internet calling through Packet8.

Available for $159 at electronics retailers, Uniden's UIP1868P system (www.uniden.com) includes a traditional desk set and cell phone-like cordless handset. It can accommodate up to 10 cordless handsets starting at $70 each, depending on the model.

The system sports common business niceties like call transfers, conferencing and intercom between handsets, and it has an excellent speakerphone. Instead of hard-to-remember key codes, you access features via labeled function keys like the "Do Not Disturb" button, which forwards calls directly to voice mail.

Meanwhile, a Packet8 Freedom Unlimited calling plan adds virtual PBX services like caller ID, find me/follow me call forwarding and even voicemail attachments to e-mail. There's unlimited free internet-only calling and 1,500 minutes of local and long-distance calling over the traditional phone network in North America for $20 a month. Toll-free or out-of-area numbers and true E911 emergency support are small additional charges.

Like you, I always try to set up equipment without reading the instructions. No problem with the UIP1868R Plug its AC adapter into a wall socket, its Ethernet cable into your broadband connection, and visit the Packet8 website (http://activate. packet8.net) to activate service. Simple menus on each handset's LCD walk you through setup of voice mail and other preferences.

The UIP1868P avoids conflicts with your 2.4GHz Wi-Fi network or microwave by communicating over the 5.8GHz band. The system's only flaw is the lack of separate extensions and voice-mail boxes for each handset or user. But after all, this is a ridiculous amount of functionality for a ridiculously low price.

Systems like this used to cost thousands, and they required a phone technician to set up or change. Instead, you can equip a home office or branch office in minutes, or pick up the UIP1868P and move it to any internet connection, any time.

Don't travel to your next trade show or off-site conference without one.

When Todd Jespersen ran out of phone capacity at his growing architecture firm, he decided it was time to reach for--what else?-the Internet.

Jespersen convinced his partners at Kruger Bensen Ziemer Architects Inc. to make the switch to Voip, the acronym for Voice over Internet Protocol. The move has saved the Santa Barbara firm, which has its employees spread across three offices and multiple buildings, $300 to $400 per month--and thrust the firm into the forefront of the latest telecommunications revolution.

"It was a little scarier for the partners ... but once the data came out about the cost savings per month, we could see our return on investment," said Jespersen. "We figured if we were going to do the system upgrades, now would be the time."

Called the "next killer app" by some and a premature technology by others, Voip is beginning to draw interest at all levels.

With Voip technology, telephone calls are made using a computer network--over data lines rather than phone lines--thus bypassing the regular toll charges of the telephone. The voice signal is converted into a digital signal, which then travels over data lines and gets converted back into voice at the other end.

Internet phone service company Vonage, based in New Jersey, has made the biggest Voip splash, signing up 700,000 residential subscribers, including 50,000 in Los Angeles, with an ad blitz over the past year. Its primary focus has been on the residential market, with about 20 percent of its subscribers being small business owners.

Boeing Co. and Bank of America have made the switch to Voip using Cisco Systems networks, while telecommunications companies AT&T Corp., Verizon Communications and others are making the service available to both residential and commercial customers. Comcast Inc. and Time Warner Cable offer the service through digital cable lines.

Cisco has sold 5 million Voip phones to customers, though many were bought by large Fortune 500 customers that bought tens of thousands or more at a time.

"Obviously small businesses will be attracted to this type of service," said Gene Walton, founder of technology research firm Walton Holdings.

Telecommunications revolution

Some versions of Voip service involve sitting in front of a computer with head phones. But the kind KBZ Architects installed--and what Vonage offers--is conducted through traditional phones plugged into high-speed data lines.

Vonage requires businesses to purchase a piece of hardware, called a Voip gateway, from the company or one of its resellers, which typically runs between $1,000 and $3,000. But that covers installation and promises big savings on monthly phone bills.

"Small businesses save anywhere from 35 to 50 percent off their phone bill. With the typical phone bill ranging from $500 to $5,000, you can do the math," said Mark Lyons, the company's vice president of sales.

One of Vonage's plans, which targets companies from five to 100 employees, offers unlimited calling, starting at $49.99 per month. Plans offer up to 24 phone lines, but Lyons said most small business customers use eight lines.

SightSpeed Inc., based in Berkeley, offers business customers four-way conference calling, allowing four different users to appear on a computer screen. The cost is just $5 per month for unlimited audio and video calling, with multiparty conference capped at 15 minutes per day. Unlimited conferencing costs $14.95 per month.

Chief Executive Brad Treat said one quarter of his customers are small business owners who use the service on a standard lap-top computer with a webcam attachment. But Treat isn't marketing his service as a telephone replacement, but as a business tool.

In the case of KBZ, the architectural firm employed a communications contractor that installed Cisco hardware. The big goal was to have a unified phone system for all its offices. The company operates out of three buildings in its Santa Barbara headquarters, with a branch office in Ventura and one opening in Lompoc. It had a phone system from Lucent Technologies, with its Santa Barbara offices in Verizon Communications territory and its Ventura office in SBC Communications Inc. territory--so interoffice calls were long distance.

The company has reaped big monthly savings and the installation of the system was relatively painless, Jespersen said. The contractor built the network side-by-side with the firms' existing network, and when it was ready to transfer, it was done in just a few hours, after-hours.

But it wasn't cheap. The firm anticipated spending $40,000 to $60,000 to upgrade its phones, but the total bill came to more than $100,000. That included new servers, new rack systems, and fiber-optic cabling. "Like any good project, the scope seems to creep," Jespersen said.

Technology pitfalls

Though more businesses are moving to Voip technology, it's coming slowly. Concerns about the technology range from voice quality to network fallibility.

"For the first few years Voip was around, there was very slow acceptance levels," said Jon Jensen, chief executive of Nexus I.S. Inc., a Valencia-based communications solutions firm that installs Cisco networks.

To address those concerns, Jensen and other contractors build redundant systems so that if one Internet server fails, another can be used in its place. Power backups also are installed in case of summer blackouts.

Another issue is timing. The technology was developed shortly after companies had completed Y2K overhauls, so most businesses weren't ready to take another plunge. "We're at a point where those systems are six and seven years old, and a lot of companies have been planning for that migration to a new technology," Jensen said.

Still there are good technological reasons to move to Voip.

Historically, companies have had to run two parallel communications networks--one for their phone service and one for their data. With Voip, both services run off of one network, including video. Gone is the tangle of wires behind a desk and separate IT support for its computer and phone networks.

"I can look at my jack, where I used to have three lines: one for fax, one for computer, one for phone. Now I just have one cord," Jensen said.

He replaced his own office system with Voip last year, and now the seven offices from Seattle to San Diego all operate on the same phone number. All 265 employees can each have their own four-digit extension.

"I can literally walk into any office in any location and with a few commands at any telephone, I can make it my phone--seamless," said Jensen, who estimated that Nexus would recoup the cost of the transition in 12 to 18 months.

IF MEMORY SERVES, it was the Carpenters who popularized that '70s tune "We've Only Just Begun." Bad leisure suit visual aside, that's a pretty good description of where the phone business is headed.

Increasingly, you'll be able to buy premium phone services a la carte without a service call or hardware installation and at pretty reasonable monthly rates. For example, CallWave (www.callwave.com) has a new $4 per month offering called CallWave for Mobile that lets you reroute your cellular calls to any landline or IP-based phone you like.

Mobile Call Screening is simple in operation but lets you do a remarkable thing: listen in while folks leave messages on your cell phone. One button lets you grab the call or forward it to any other phone, conserving those precious cell minutes. Otherwise, the caller's message gets forwarded to your e-mail. Your callers get a toll-free number to use, leaving your current cell number available, and you can take the call on another line even if your cell phone is turned off.

CallWave for Your Home is the latest add-on to a suite of CallWave services that already lets you swap landline and IP calls. For just $8 per month, you can get new toll-free and local numbers whose incoming calls can be forwarded to any landline, cell or IP phone number. An alert on your PC tells you who is calling and, if you don't pick up, any message is forwarded to your e-mail inbox as a WAV file attachment. Faxes to your dedicated CallWave fax number (you get three lines total) arrive as PDF attachments. Competitors such as RingCentral (www.ringcentral.com) sell other bundles of services.

CallWave's president and CEO, Dave Hofstatter, estimates that about an eighth of the company's customers are entrepreneurs giving customers in far-flung markets local numbers to call, or providing co-workers who need them with "fax machines" in their inboxes. Individual accounts are set up and managed entirely on CallWave's website, with monthly charges added to a credit card or phone bill.

It's all part of the next step in telecom's evolution: You'll be able to mix and match the services you want and who you want providing them.

Covad Communications Group Inc. shook up the service provider space recently by launching a new VoIP telephone service that allows partners to offer local and long distance voice service to end-users in direct competition with local telephone carriers.

Trials of the new service are expected to begin this month. Covad intends to utilize DSLAM technology to deliver line-powered voice access to non-Bell telephone companies. Nokia and Zhone Technologies are providing the necessary voice cards and DSLAM technologies.

Trials will be conducted in Atlanta, Denver and San Jose, with full commercial service planned by the second half of this year.

CLEC ALTERNATIVE?

"Line-powered voice access will allow Covad to provide CLECs and their customers around the country a facilities-based alternative to the local phone companies' UNE-P platform for voice services," explained Covad CEO Charles Hoffman when the announcement was made.

Covad, a gutsy industry player that has spent the last two years restructuring itself as a wireless broadband player, was the subject of a Oct. 1, 2004 America's Network cover story in which company executives outlined some of their future business strategies.

Covad has been providing networks for service providers interested in delivering VoIP services to customers. But the latest move offering the ability to provide local telephone service adds an entirely different dimension to the battle for voice customers.

LOCAL EQUIPMENT EXEMPT

By using VoIP, Covad and its partners won't need to lease any local equipment from the four remaining Bell operating companies, except for the actual copper wire that links the central office to a customer's location. The DSLAMS and line cards enable line-powered voice access by taking the analog voice signal from a customer's phone and converting into a digital form at the Covad central office where the DSLAM is located.

The digital signal then travels over Covad's national network backbone and connects to any telephone on either a VoIP network or a PSTN network managed by the regional Bells.

Covad's service is especially timely because it comes just a few months after court and federal rulings essentially freed the Bells from having to lease their networks at a low cost to competitors like AT&T Corp., Sprint and MCI. The rulings caused many national carriers to abandon the local phone market to the Bells, setting the stage for price increases later this year. The local copper lines that Covad and its partners would use, however, were not affected by those rulings.

Covad believes its new service offers a true alternative for service providers interested in providing local phone service.

It's not yet clear how many are interested in the Covad product.

 

If you're a Skype user, you know how annoying it can be to fumble around for your headset when you receive an incoming Skype call. The Internet Phone Wizard from Actiontec solves this problem. At just under $70, this small (1.1 by 4.6 by 3.4 inches, HWD) USB-powered appliance lets you connect an analog phone to your computer as another means of interfacing with Skype. At the same time, you can also have a traditional analog phone line connected to the device so you can make and take regular landline calls on it as well. There is a USB port on the back of the appliance for connecting to the Skype client on the PC, as well as two analog phone ports (one for your phone line and the other for attaching the phone).

The Internet Phone Wizard installs as a USB audio device under Microsoft Windows 2000 and Windows XP. Installation requires running the included CD and takes only a couple of minutes. A small program links the device to the Skype client program on your PC so they can communicate. You have the choice of using the Skype client as you normally would, or you can simply initiate calls the old-fashioned way, with the telephone.

When you receive an incoming call, the phone rings and two indicator lights on the front panel show you whether you're receiving an "Internet" call (Skype) or a "Regular" call. The device allows you to switch between the two types of calls by hitting the pound key twice on the touch-tone keypad of the attached phone. You can easily assign a speed-dial number to your Skype contacts within the PC interface, making it simple to dial them directly from the telephone keypad.

We made several free Skype-to-Skype calls from New York to California, as well as a call from New York to Japan using the Internet Phone Wizard. The parties called said our call quality was indistinguishable from a conventional landline call. Calls to non-Skype members require users to sign up for the Skype Out service. You would then purchase credits using a credit card. Pricing is done in Euros and the current minimum is 10 Euros, or approximately $13.30. Skype Out calls within the U.S. and to the U.K. and most of Western Europe cost $0.022/minute. Skype Out calls to Japan cost $0.0245/minute. Of course, when calling European cell phones, the caller pays for the cellular air time (unlike in the U.S., where the recipient pays). For example, calls to a U.K. cell phone cost $0.262/minute-quite a difference from the land-line rate. A complete listing of international call rates is available on Skype's Web site.

The Internet Phone Wizard provides Skype users the convenience of answering calls on a traditional phone. And if you're feeling adventurous, you can hook it up to a cordless-phone base station and use your landline phone and Skype service anywhere in your house.

DRIVING ONLINE shoppers to your website isn't always best; your company might connect better with prospects over the phone. Instead of paying for ads or clicks, you can now buy one-on-one conversations.

Through pay-per-call advertising you can promote a phone number instead of, or in addition to, your URL. Many people would skip surfing your website to buy right now. A flat tire, a toothache or a lost cell phone needs immediate resolution. People pressured for time could be searching the web impatiently for a restaurant or a florist. An ad displaying a phone number is a shining beacon.

FindWhat.com and Citysearch (www.citysearch.com) are leading the way with internet pay-per-call advertising. FindWhat.com advertisers can choose up to five keyword categories and one geo-targeting option: national, regional, state, city or ZIP code. It costs $10 per year for the listing, a minimum per-call bid price of $2, plus 10 cents per minute for calls over 10 minutes. There's a bid price because, just as with its pay-per-click program, FindWhat.com advertisers outbid each other to secure better listing positions.

Citysearch charges a flat fee of $2 to $12 per call received, depending on the category. Advertisers can choose an unlimited number of categories and either a national or local campaign. The listing positions are ranked based on several factors, such as the advertisers' distance to city or ZIP code searches done by users.

When pay-per-call prices are the same as pay-per-click prices for competitive keywords, calls are actually cheaper because a call is a lead while a click is just traffic. But don't open your phone lines until you can make each call count. Train your phone personnel to complete specific actions, such as collecting contact information, processing orders, upselling orders or cross-selling related items, and offering freebies to nonbuyers. Pay-per-call isn't just about getting the immediate sale. Use it to increase your per-order revenue and grow your lead database.

58% of internet users have deleted cookies--files used to track user web traffic;

39% delete them monthly.

NEWPORT BEACH, Calif. -- Conexant Systems, Inc. (NASDAQ:CNXT), a worldwide leader in semiconductor solutions for broadband communications, enterprise networks and the digital home, today announced that Aztech Systems, Ltd., a global leader in data and voice communication products, has incorporated the company's voice over Internet Protocol (VoIP) chipsets in their V300ATA broadband router. Aztech's VoIP router and Internet Phone Server Starter Kit will be bundled with Global Village(TM) Internet phone service from Zoom Technologies, allowing broadband users to make low-cost Internet phone calls using existing analog telephones. The V300ATA is the first of a series of VoIP devices from Aztech based on Conexant VoIP technology.

"Cost-savings and a rich set of telephony features are two primary reasons that many consumers are turning to VoIP for local and long-distance calling," said Zeev Collin, vice president of Voice Access Products for Conexant. "The combination of Aztech's broadband VoIP router, Global Village's managed network, and our silicon solutions provides consumers with a high-quality voice solution and the cost-benefits of Internet-based telephony."

"Choosing a silicon provider with proven technical expertise was extremely important to us," said Michael Mun, president and chief executive officer of Aztech. "Conexant's heritage in voice technologies provided us with an extra level of assurance that our products will continue to provide the performance and reliability our customers expect from Aztech."

Aztech's V300ATA broadband router and Internet Phone Service Starter Kit provides users with the ability to make low-cost VoIP calls anywhere in the world using an existing telephone while simultaneously surfing the Internet over a broadband connection.

Zoom Technologies' Global Village VoIP phone service provides a rich set of enhanced calling features to users around the world, and can be accessed through an easy-to-use Web browser interface.

Conexant has a long history in voice band processing, and holds an extensive intellectual property portfolio in voice processing and coding technology. The company's field-proven voice technology has enabled more than 100 million voice/data modems, and has been incorporated in millions of voice ports and wireless cellular telephones. The company's VoIP products include voice coprocessors and codecs for the easy addition of voice to networked devices, complete system solutions including network processors, and a suite of application software and reference designs.

About Conexant

Conexant's innovative semiconductor solutions are driving broadband communications, enterprise networks and digital home networks worldwide. The company has leveraged its expertise and leadership position in modem technologies to enable more Internet connections than all of its competitors combined, and continues to develop highly integrated silicon solutions for broadband data and media processing networks.

Key products include client-side xDSL and cable modem solutions, home network processors, broadcast video encoders and decoders, digital set-top box components and systems solutions, and dial-up modems. Conexant's suite of networking components includes a leadership portfolio of IEEE 802.11a/b/g-compliant WLAN chipsets, software and reference designs, as well as solutions for applications based on HomePlug(SM) and HomePNA(TM). The company also offers a complete line of asymmetric and symmetric DSL central office solutions, which are used by service providers worldwide to deliver broadband data, voice, and video over copper telephone lines.

Conexant is a fabless semiconductor company that recorded more than $900 million in revenues in fiscal year 2004. The company has approximately 2,400 employees worldwide, and is headquartered in Newport Beach, Calif. To learn more, please visit us at www.conexant.com.

About Aztech

Aztech is a global leader in data and voice communication as well as digital electronic products. It designs and manufactures DSL modems, Analog modems, Broadband Residential gateway, Wireless 802.11 b/g, Homeplugs, VoIP, SMS Colour DECT/WDCT Phones, Personal Mobile Radio, Digital Weather Station, MP3 Players and Baby Monitor

This press release contains statements relating to our future results (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: the substantial losses the company has incurred recently; the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions and product quality; the company's ability to anticipate trends and develop products for which there will be market demand; the availability of manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the uncertainties of litigation and the demands it may place on the time and attention of company management; and the risk that the businesses of Conexant and GlobespanVirata have not yet been completely and may not be integrated successfully, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Conexant is a registered trademark of Conexant Systems, Inc. Other brands and names contained in this release are the property of their respective owners.

The Access211's traffic shaping capability prevents heavy Internet data traffic from interfering with the bandwidth required for superior voice quality, and is a feature that distinguishes it from all other VoIP analog telephone adaptors in its class. Without traffic shaping, the voice quality in other devices can break up during simultaneous voice and heavy Internet data activity such as uploading pictures, music or sending e-mails with large attachments. The Access211 also provides other Quality of Service mechanisms such as voice priority over data.

Unlike other devices, the Access211 extends the benefits of variable voice compression technology to both of its VoIP phone ports, providing the ability to deliver high quality voice on both ports simultaneously even when bandwidth is limited. This feature is particularly helpful in the many instances in which the uplink for a broadband Internet service is in the 128-256 Kbps range.

The Access211 also provides telephone lifeline support in which an end-user can still have phone service in the event of a power failure or VoIP network failure.

The Access211 is a member of Telco Systems' Access200 family, which is a diverse line of VoIP ATAs designed for service providers who need to deliver high-quality VoIP, video, and data (triple play) services to their residential and SOHO customers over existing broadband Internet access. The product line offers a cost-efficient means for service providers to migrate their customers' traditional analog telephones and faxes onto IP-based networks.

ABOUT TELCO SYSTEMS

Based in Foxboro, Massachusetts, Telco Systems, a BATM company and a leader in network edge technology and IP switching platforms, provides industry-leading networking solutions to the carrier, service provider and enterprise markets. Telco Systems' focus is to maximize the power of their customers' networks by integrating transport, access, and packet technologies onto industry-leading platforms that meet today and tomorrow's network demands.

Telco Systems is a wholly owned subsidiary of BATM Advanced Communications. BATM (London stock exchange ticker symbol:BVC) is a worldwide leader in designing and supplying carrier-class IP packet-based systems, such as high-capacity, self-routing switches with extensive QoS (Quality of Service). For more information, please visit Telco Systems' web site at http://www.telco.com.

 

CHICAGO -- Telco Systems today at the SUPERCOMM telecommunications trade show here (booth 24048) announced that Falcon Broadband, a competitive local exchange carrier and cable television company in Colorado, has selected Telco Systems' Access211 VoIP Analog Telephone Adapter (ATA) for its new broadband VoIP Internet phone service.

The Access211 ATA enables subscribers to make and receive phone calls and faxes over broadband Internet connections using standard telephones and fax machines. Customers simply plug in a standard telephone, fax machine and PC into the Access211 and connect the Access211 to a DSL or cable modem.

"We selected the Access211 because of its superior voice quality, user friendly design, advanced features such as integrated routing and the ease in which it interoperates with our General Bandwidth G6 Universal Media Gateway," said Randy DeYoung, the president of Falcon Broadband.

Falcon Broadband (http://www.falconbroadband.net/), headquartered in Colorado Springs, has just launched its SIP-based broadband Internet phone service in Denver, Colorado Springs and Pueblo, Colorado and plans to expand the VoIP service offering state-wide. The company offers local Colorado phone numbers for their VoIP service.

Falcon Broadband is currently providing traditional phone service as a competitive local exchange carrier (CLEC) throughout Colorado. It also offers wired and wireless broadband Internet access, cable television and Fiber-To-The-Home (FTTH) triple play services in select Colorado markets, which include Colorado Springs and Pueblo in El Paso County.

Jeff Corbo, Falcon Broadband's Technical Operations Manager, said: "The Access211 outshines them all. It was one of the easier boxes to configure. It is more user friendly in terms of customer set-up and for us to provision. Its web-based graphical user interface is easy to use and the ability to do remote upgrades and remote trouble-shooting means we don't have to roll a truck." But, he added: "We'll still roll a truck if someone is having a problem. We're differentiating ourselves from other VoIP service providers with our local feel, local services and local support."

The Access211 provides superior voice quality and performance because of features such as traffic shaping, advanced quality of service standards and an enhanced voice compression capability.

Rural telcos, political forces and other policy makers mixed company last week in a lobbying campaign for continued favorable support of broadband infrastructure investment and communications service improvements in sparsely populated areas. Ensuring the strength of the $7.1 billion universal service fund (USF) was seen as a linchpin of this effort.

Possible conflicting intentions in the U.S. Congress regarding USF reform as well as ongoing Federal Communications Commission proceedings on revamping intercarrier compensation (ICC) methods and USF management - as well as bringing Internet Protocol (IP) service contributions into the fold - are key open questions causing concern among rural and small-community interests.

The House Congressional Rural Caucus outlined a 2006 legislative agenda with USF protections as its centerpiece - in contrast with what is perceived to be an atmosphere of apathy (if not some hostility) in the House - while reports circulated on Capitol Hill that a Senate measure to substantially strengthen the FCC subsidiary program may soon surface.

In addition, FCC Commissioner Jonathan S. Adelstein gave a pep talk to a receptive Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) on regulatory movement that is expected to help rural telecom viability.

All told, the messages appear to be designed to underscore that telecom ubiquity and affordability, particularly regarding broadband Internet access, are indispensable to rural/small community economic and social well-being in the lands of agriculture and animal husbandry. But does USF support and rural lobbying reflect more than just pork-barrel politics by farmers and ranchers, especially when supposedly hard-pressed small telco managers were addressed by Adelstein at OPASTCO's 43rd Annual Winter Convention in Maui?

What The Caucus Has In Store

Such musings notwithstanding, the House Congressional Rural Caucus, which claims to represent a bipartisan collection of more than 140 members speaking for rural districts across the country, says it is planning a series of member briefings and staff meetings, among other events, on legislative priorities (TelecomWeb news break, Jan. 24).

Vodafone is responding aggressively to the rise of VoIP by launching a low cost, flat rate phone service of its own, using capacity on its 3G network. Echoing similar mores by its US joint venture Verizon Wireless, Vodafone's plan reflects the main defense that cellcos have against the non-3G operators that seek to steal their voice markets using voice over Wi-Fi or, in future, WiMAX. This is to exploit the superior spectral efficiency of the 3G networks to bring voice prices crashing down and remove the main advantage of VoIP. This could have far reaching implications for the 3G business plans though.

UMTS networks allow operators to deliver voice minutes far more cheaply (for about one-third of the cost), and so are valuable in keeping margins stable even as voice prices fall. However, the efficiency of 3G was expected, by most carriers, to deliver a net increase in voice margin for some years as, before mass market wireless VoIP loomed on the horizon, they were predicting gradual erosion of voice rates, rather than a need to compete with flat rates and even, in future, voice services bundled for free.

One of the key trends putting pressure on the 3G operators' business plans is, of course, the rise of low cost voice over IP services, increasingly to be offered by wireline and multi-network carriers over wired and wireless links as part of their convergence strategies. Users will increasingly use VoIP, usually over Wi-Fi, when in range of an access point, falling back to cellular only when that is the only connection available. Combined handsets that can support both links and also connect to the landline are starting to come to market, and towards the end of the decade, mobile WiMAX could make it even less necessary to rely heavily on cellular networks.

Vodafone is taking the lesson that combinations of services and bundling will be the key to margin, ARPU and customer loyalty in future, rather than single 'killer applications' or simple price cutting. Thus, while offering flat rate voice services could have a dramatic effect on its margins, given that voice still accounts for the vast bulk of cellco revenue, it is also expected to drive up customer numbers and retention, and therefore to generate higher uptake of added value data services, some of which are less easily emulated by the non-cellular carriers, at least until they have mobile WiMAX to play with.

It will also, Vodafone hopes, accelerate the move for subscribers to dump landlines altogether and, in some markets, it may be able to claim such migrants for itself before a commercial VoIP alternative has been launched. "We have to move fast," said incoming CEO of Vodafone Germany, Fritz Joussen. "If we don't, fixed line usage might move to broadband."

DRIVING THE 3G BUSINESS MODEL

Increasingly, substitution of fixed lines for mobile is driving the business model for 3G, even more than boosting data usage, and as operators like BT fight back with converged services using Wi-Fi, the cercos are likely to start to follow Vodafone's lead and use aggressive pricing tactics to retaliate.

The value of a flat rate service, according to the cellco, is that it generates renewable subscriptions and customer satisfaction and delivers a higher margin than the wireline operators command for charging by the minute --lessons the cellcos, which have prospered from their higher per-minute margins, are only just starting to learn from the VoIP carriers like Vonage.

The Vodafone flat rate phone service will be rolled out first in Germany, under the brand 'Vodafone ZuHause Zone', and will then be extended to other countries, said CEO Arun Sarin. ZuHause (At Home) offers 1,000 minutes of local and national calling for a flat lee of 20 [euro] ($24) per month, with extra charges for calls to mobiles and international lines, when the user is at home or within adjacent cells, giving a normal range of two kilometers radius.

Cable operators are finally doing more than stepping into the VoIP waters and quickly retreating with a scream.

Really.

They all say so.

Every big MSO will at least trial VoIP this year, and many will roll out service with "black phone" offerings that duplicate the incumbents' circuit-switched features while undercutting the price. There's little chance cable subscribers will see any of the gee-whiz VoIP elements that vendors have been hyping for the past decade--at least until MSOs prove they can reliably duplicate a service that's been around for over 100 years.

"Right now they're selling a cheaper bundle than the RBOCs," said Michael Harris, president of analysis firm Kinetic Strategies. "The question over time is how that becomes more interesting."

The other question is how much time cable operators have until they must spice things up. The ILECs are preparing residential VoIP offerings that include advanced IP features. At the same time, companies like Vonage--a voice ASP (application service provider)--are taking free rides on cable's broadband infrastructure with low-priced VoIP services that please customers and pull phone dollars out of cable coffers.

The five big MSOs--Comcast, Time Warner Cable, Cox Communications, Charter Communications and Cablevision Systems--will all do VoIP this year, and smaller players--Insight Communications, Armstrong, Adelphia Communications and Liberty Media--will explore ways to make voice a part of a video and high-speed data bundle.

"VoIP's a killer app," said Jimmy Schaeffler, chairman, CEO and senior research analyst at The Carmel Group. "It's a great technology. It can do nothing but work, which begs the question: Why wait?"

Some critics have been putting that question to Comcast, the nation's biggest MSO. A VoIP pioneer, Comcast will likely be among the last to push into packetized telephony rollouts on a large scale. That's partially because the company needs more time to digest the huge AT&T Broadband infrastructure--including a large circuit-switched voice business--that it acquired in 2002. Those customers do not fit into its vision, and Comcast has curtailed any further marketing efforts to that base as it prepares for full VoIP service targeted for 2005. The company will offer VoIP in four markets in 2004--Coatesville, a Philadelphia suburb where the company is already running trials, Indianapolis, Connecticut, and parts of Massachusetts.

"We are very hopeful that VoIP is going to be a way that telephony can be a profitable business line and a good bundle," said Brian Roberts, Comcast's president and CEO during a presentation to the Citigroup Smith Barney Entertainment Media & Telecommunications Conference in Phoenix in January. "Should that be the case, I think we're ready to keep going and really accelerate the footprint where we offer telephony."

That's not a cautious message if you see it from Comcast's perspective of what VoIP means as a piece of an overall cable offering, said Steve Craddock, Comcast's senior vice president of new media development. Comcast wants to deliver an integrated IP-based unit that folds into its other video entertainment and data services. The unit would include SIP (Session Initiation Protocol)-based features like follow-me and data integration around which Comcast can build a suite of services leveraging existing high-speed data networks.

"Black phones can't do any of that," Craddock said. "People want to have instant communications. This thing is very smart; it finds you, it determines what devices you have available to you that people can get you on."

While it might pop up here and there in trials, it won't be common to Comcast subscribers in 2004.

Partnering Up

Time Warner Cable, AOL Time Warner's cable group and the nation's second-largest MSO, takes a position about 180 degrees from Comcast. The New York City-based behemoth is partnering with Sprint and MCI to "aggressively enter the voice business," according to AOL Time Warner Chairman and CEO Richard Parsons, speaking at the Citigroup gathering. "By year-end we expect to offer voice in almost all our systems."

That's a big advance from the single operation the company has rolled out in Portland, Maine, and it depends heavily on help from telco partners.

"We're providing a variety of services to them [including] interconnection [and] all types of CLEC telecom services that are part of a carrier-grade service, ranging from E-911, ordering numbers, providing operator assistance, directory assistance, really making sure that it's the same kind of service they would get from their original home provider," said John Overy, Sprint's business development director.

It will be a black phone service that costs about 20-percent less than what the ILEC offers. "Down the road the thought is to provide advanced services that will be very competitive and hard to match. First of all, let's make sure it's reliable and carrier-grade," Overy added.

This type of cable-telco relationship would have been heresy just a few years ago; today the two share a common opponent: the ILEC. Sprint wants to widen its wireless base; Time Warner wants to add a third piece to its video and data offerings.

"We're drawing on our expertise plus long-distance assets and, in the future, wireless capabilities to enable cable companies to compete in a meaningful way against the RBOCs," says Overy. "We see it as a win-win for both companies."

Competing against the ILECs was once relatively easy: A service provider would come in with a cheaper, albeit less dependable, second-line deal with similar or better features than the incumbent, and cherry pick high-end customers and features, leaving the incumbents with skeletal primary line service. That formula still works for companies like Vonage, which runs on both telco and cable broadband infrastructure.

While this is only making a small dent in a huge telco business, it's been enough to drive the incumbents to slash prices and develop their own bundled packages, including DSL and wireless.

Full Steam Ahead

What is the current state of VoIP technology? Where is it headed? Who will emerge as winners and losers? What role will regulators play?

These were among the questions a distinguished panel of telecom executives examined several weeks ago when America's Network sponsored its first VoIP industry summit in the Washington, D.C. law offices of Swidler Berlin Shereff Friedman. The freewheeling, roundtable discussion was directed by William Wilhelm, a telecom law expert with the firm. The discussion was co-chaired by Al Senia, the managing editor of America's Network.

The VoIP roundtable lasted more than two hours. Edited excerpts of the questions and answers follow. A fuller, more detailed discussion is available at America's Network Web site (www.americasnetwork.com).

Q: What kind of features are VoIP users most interested in?

DONDERO: We've done research on that with enterprises and consumers. We did it a few years ago and we're just redoing it now. So features like video calling among consumers. We were quite pleasantly surprised, frankly. We saw a significant interest in that sort of communication. The ability to manage call lists, control your calling, route your calls to your cell phone and provision that in real time.

In a collaborative environment, things like video chat, teen chat lines. We really do see a lot of interest in that. And in Asia Pacific markets where video is dominant, (there's) a lot of interest in those sorts of technologies there.

ATTWOOD: SBC is, in fact, in the business market now, the small-medium business markets, selling precisely those mobility applications, collaborative applications, personal productivity enhancements.

But I'd also say one of the great things about the IP platform is that, in fact, as new applications come online, the incremental ability of the end-user, the customer, to customize that service, to add a feature, is really what distinguishes this kind of service from some of the traditional services. The customer is able to customize what they need, their communications needs.

One of the key changes ongoing in telecoms is that a rising number of users buy their services from a company that is not a telco. Almost any company with a recognized brand is considering adding telecoms services to its mix, usually by leasing capacity on a cellular network under an MVNO (Mobile Virtual Network Operator) deal. And more radical options are opening up for these virtual telcos--creating their own networks using a technology such as WiMAX, and delivering voice services via VoIP; and then even pursuing the last mile and triple play bases with broadband wireless as an alternative to telco DSL. In some cases, we may even see non-telcos buying up spectrum to create fully controlled alternative networks. Against this background, why then is Microsoft being so coy about its plans for voice over IP?

Microsoft has been aggressive behind the scenes of the broadband wireless surge. Like Intel, it supports any trend that will stimulate usage of PC-style devices (including Windows phones) and support the open IP model, which places the balance of revenue and profit in favor of the device maker rather than the operator. It has put considerable weight behind stimulating Wi-Fi usage with a range of functionality incorporated into Windows and has cutting edge activities in mesh networking. Although, unlike Intel, Microsoft has not yet used significant investment dollars to promote Wi-Fi and WiMAX--perhaps still smarting from the failure of its multibillion dollar gambles on broadband wireless operators at the turn of the century--it has been a key lobbyist, along with Cisco and Intel, for additional unlicensed spectrum to be opened up in the US and Europe.

SMALL STEPS

In this context, its moves into VoIP seem positively timid on the wireless side, especially when compared with eBay's acquisition of peer-to-peer VoIP pioneer Skype for up to $4bn. The giant recently announced the purchase of a small, two-year old VoIP technology company, Teleo of San Francisco, as a step towards launching voice services under its MSN brand and so keeping up with similar moves from the other major portals, Yahoo and Google. The move is highly logical in terms of the battle between MSN and these rivals, but it could go so much further, taking Microsoft into the world of telecoms services. Yet it stated categorically, when questioned about the Teleo acquisition, that its VoIP strategy does not extend to offering full telco services or a phone-based voice product.

This is an odd decision. As major operators shift towards convergence models that integrate wired and wireless services using IP, a strong phone-based VoIP platform could enable Microsoft, at last, to make significant inroads for Windows-based handsets. Even in the cellular-only world, companies like Verizon are looking to offer VoIP over their EV-DO networks and there will be a race to provide attractive handsets and operating software for such services--a race that Microsoft, in contrast to that for the conventional cellphone market, could enter almost at the starting gate, just behind Nokia rather than miles behind.

HESITANT ABOUT WINTEL

Microsoft could go a step further, launching full wireless phone services--voice and data--under its strong MSN brand and so helping to promote its broader objective of making the all-IP model ubiquitous. If the Wintel approach to life is to survive, it has to be translated to the handset--as that becomes, in its future forms, the key end user device--and to ubiquitous communications. Intel and Microsoft both know this well, but so far Microsoft is being more hesitant about taking the actions to support the theory.

Of course, it is possible that Microsoft regards the fight with Google, which increasingly focuses on communications facilities such as instant messaging, as the first stage in a war that it will later take to the telcos. And it will naturally be wary of threatening the incumbent operators too much as it still seeks to gain their approval for its Windows Mobile handsets. But like most players in the telecoms world, IP is forcing some hard choices on Microsoft. We believe it will never gain the share that its business plan requires in cellular-specific handsets, but has a better chance in converged and mobile IP devices. These products are a threat to the conventional cellcos, but they are increasingly being forced to embrace them, and Microsoft has an opportunity to create a platform for them--as it is doing with France Telecom.

But it also needs to put VoIP services on to handsets as well as PCs if it is to stay ahead of Google and finally see off Skype. Internet providers have to become telcos, because in the future few people will buy internet access as a standalone service.

Initially, Teleo will be used to enhance the voice capabilities of MSN instant messaging, allowing Microsoft Messenger users to place phone calls to people listed in their electronic address books. MSN will also integrate Teleo's technology with its local search function, enabling subscribers to locate and call local businesses such as restaurants. This is part of the long term MSN strategy to use the subscriber's electronic address book as the basis for competing in other services, with this address book unifying different communications offerings such as Hotmail email, Messenger, Spaces and upcoming functions such as presence.

CONVERGENCE OFFERINGS

This is a strong approach that has helped Microsoft keep up with AOL and Yahoo, but it could be even more powerful if applied to the phone platform and even offered to other operators--enabling users to integrate their cellular and internet address books. This will be a key feature of the convergence offerings of the large telcos, and again, Microsoft could take a headstart if it spreads its VoIP wings beyond PC-based MSN. Incorporating good VoIP and SIP features into Windows Mobile, not just into XP, would certainly strengthen the platform and could reawaken vendor interest in it. This is a big opportunity for Microsoft to redeem itself in the mobile market, and it should take two brave steps--integrate VoIP at an early stage into Windows Mobile to boost its mobile OS business; and extend the MSN-style platform into a full telco offering for handsets, whether this is under the MSN brand or in partnership with established or new operators.

Incumbent long-distance carriers insist they are not sitting idle as fledgling voice-over-IP service providers skim voice minutes - and revenue - from their networks.

Skype is only the latest broadband voice-over-IP company to create a buzz by offering a free alternative to traditional telephone services. The company says about 1 million people have downloaded its peer-to-peer software that lets users call other Skype users without cost.

And Skype is not the only new game in town. Broadband VoIP service providers such as Vonage and 8x8 could be bigger threats to AT&T, MCI and Sprint. The heavyweights for years have watched voice-service revenue drop even without the VoIP competitors, which last week were encouraged by a Minnesota court ruling that could lessen regulatory burdens on them.

They do not seem as concerned about Skype, which requires users to download software and does not support connectivity to the public switched telephone network (PSTN).

"Everyone is watching Vonage," says Tom Valovic, director of IP telephony at IDC. "It has that disruptive potential that has been talked about with VoIP for many years."

Last month, Vonage announced that it had installed 50,000 access lines. The company offers unlimited long-distance and local calling for $35 per month. The attraction is that customers still can use their standard telephone, although they are required to install a device that connects to a RJ-45 telephone jack. Users can call anyone anywhere in the world.

Even though its traditional voice revenue could be in jeopardy AT&T sees the value of a broadband VoIP service. The telecorn giant has been testing a broadband voice service with employees. And while MCI wouldn't say if it is readying a similar offering, the carrier is taking notice. So far, Sprint is mute on the subject.

While some of the incumbents are sharpening their broadband voice strategies, their competitors are proliferating.

Skype is the brainchild of the people who developed Kazaa, which in addition to being a popular file-swapping system has turned into a major security and bandwidth headache for network administrators. It's not clear whether Skype presents similar issues, but one thing is certain: A lot of people are downloading the software, and it's sending traffic via Internet that would have otherwise traveled over the PSTN.

Another company in the same genre as Vonage is 8x8, which offers its Packets broadband VoIP service to consumers and small businesses. Packets service starts at $20 per month for unlimited calling.

Besides the fact that the services let users lower their monthly telephone expenses, these packages are truly flat-rate. When AT&T, SBC or Verizon offers a flat-rate package, users see a handful of service fees related to state and federal regulations on their monthly invoice. Until recently Vonage and 8x8 didn't have to worry about these regulations.

California, Minnesota and Wisconsin are trying to regulate VoIP service providers as traditional voice carriers. But the VoIP side won one battle in Minnesota last week when a federal court put an end to the state's efforts to regulate Vonage as a carrier offering voice over a circuit switched network (see www.nwfusion.com, DocFinder:8046).

These VoIP services are more successful than previous VoIP incarnations because they let users call anyone on the PSTN, While all Vonage and 8x8 voice calls are initiated over an IP connection, the vast majority are terminated over the PSTN, IDC's Valovic says.

This might be just one reason why incumbents are taking a closer look at these alternative service offerings.

AT&T says it is testing a broadband VoIP service that it might introduce to consumers. The carrier says its offering is not in response to companies such as Skype or Vonage, but rather is designed to offer customers more flexibility

"We have our own game plan," says Joe Aibinder, director of AT&T voice-over-Internet services.

AT&T just finished an employee trial for a consumer voice service that runs over an IP broadband connection. Now the carrier is setting up an external trial with residential customers.

"It's not just about [plain old telephone service], but the potential to support new features," he says. AT&T's plan is not to simply introduce a service that could cost less than the company's traditional local and long-distance voice packages. Instead, AT&T plans to bundle features such as personal voice conferencing that aren't available with POTS.

"Vonage is a vendor that a lot of people have noticed, including us," Aibinder says. "But we have our own objectives. Everyone needs to find alternative service opportunities."

Although Sprint declined to comment on the topic, MCI also is looking at the broadband VoIP market.

"I don't want to take anything away from the Vonage folks; it's a really good service. But we want to offer our customers a reliable service that works," says Vinton Cerf, long-time Internet activist and chief scientist at MCI.

Broadband VoIP presents a host of options that traditional telephony does not, he says. For example, customers will be able to use tools similar to AOL Instant Messenger to set up and tear down calls, he says.

"There is a lot of interest on the consumer side, but the question is whether all parts are there for literally a mass-market service," Cerf says. "We want to do due diligence to understand all of the service requirements. We need to be sure [quality of service] comes out on top right from the start."

VoIP is everywhere these days, and is arguably the hottest thing since the tech bubble of 2000. So, right away there should be some cause for concern. Depending on what hat you're wearing, this is true, but it is also an exciting time for anyone close to this market. With low barriers to entry and minimal regulation, VoIP is attracting new money and new players. The market will go through its natural--and necessary--cycles of speculation, investment, exits and consolidation, but there is an undeniable sense that VoIP is poised to fundamentally alter the telecom landscape.

[ILLUSTRATION OMITTED]

So, what is happening with VoIP? At the consumer level, broadband telephony is redefining voice communications, and the benefits of IP are going mainstream. VoIP has had numerous false starts, and has simply moved outward from the network core to the edge and access space, where it becomes real for the end user. IP technology has proven itself effective at reducing network operating costs, and the focus has now shifted to revenue generation via IP services.

VoIP is really just a technology, or an application in a data network. VoIP is not really an industry; it's an enabling technology that supports something much bigger--IP communications.

Why Now?

The simple answer on the timing of VoIP is the "V" word: Vonage. The "Vonage effect" is real, albeit far out of proportion to its impact in taking market share away from the RBOCs. No other virtual operator has come close in demonstrating proof of concept and bringing a consumer-friendly value proposition to market. By doing so, Vonage has had a substantial impact in accelerating the deployment plans of all the Tier 1 service providers.

Underlying that, however, is a more pervasive factor: broadband adoption. There is no VoIP market without broadband, and penetration has finally reached a critical mass where a number of offerings can be supported. By year-end, one in four U.S. homes will have broadband, and with the RBOCs finally making a serious push into DSL, the take rate will steadily increase over the next few years. In fact, VoIP itself may soon become a driver for getting broadband.

Just as voice and data are converging at the desktop, Frost & Sullivan sees several other factors converging that makes today such a dynamic environment for VoIP:

It works. This sounds like an obvious statement, but residential VoIP did not work well for a long time. VoIP has had several false starts since its inception in 1995. Although it is not 100 percent ready for prime time, it is certainly good enough now for mainstream use.

* Regulations. So far, the FCC has taken a laissez faire approach to VoIP, which has been critical for early-stage success. Had cellular been regulated in its early days, it may well have not evolved to where it is today. Regulation will come to VoIP, but not likely until it becomes more established.

* Competition. This is a crucial driver that was absent in telecom until last year. Rising broadband adoption and the cost efficiencies of IP have led all types of service providers to offer VoIP, and begin competing for customers who previously were the sole domain of incumbent telcos.

* End user demand. In the long run, the laws of supply and demand rule, and we are now truly seeing signs of VoIP demand from consumers. VoIP has been a supply-driven market to date, but as services are rolled out, consumers are quickly recognizing the value proposition of IP services.

Triple play. For the cable operators, VoIP completes the triple play, which is their main strategy for taking on the RBOCs. To counter this, the RBOCs are adding video to their triple play, along with voice and high-speed Internet. This sets the stage for the "battle of the bundles," which we expect will determine who wins control of the broadband home.

* Wireless substitution. This trend impacts telecom on many levels, but in terms of VoIP, the key issue is the unprecedented decrease in access lines for the RBOCs, which are largely migrating to cellular. With the declines in wireline subscribers and long-distance revenues, RBOCs are under heavy pressure to offset these losses with new services, which brings us to VoIP.

Who Is Leading the Charge?

The United States has seen tremendous activity in 2004, both in terms of VoIP subscriber uptake, and the variety of operators coming to market. At this point, five operators have demonstrated notable success in attracting subscribers: Vonage, AT & T, Primus, Cablevision and 8X8. There are several others, of course--some who are in the market now, and others who are very close to entering. However, these five account for the vast majority of residential U.S. VoIP subscribers. Vonage. Clearly the market leader on many fronts, including subscribers, service coverage, mind share, channels, money raised, first mover, etc. Vonage has been able to sustain a healthy growth rate even as new offerings come to market, and is currently in the range of 250,000 subscribers. Vonage's main vendor partner is Cisco for media gateways, and for applications, dynamicsoft (soon to be part of Cisco) is the engine upon which it develops its own features. On the premises side, Vonage has adopted a strategy of supporting multiple ATA vendors, including Motorola and Linksys.

In terms of 911, Vonage has a partial solution, and it also offers 411. Vonage provides LNP (local number portability), which allows subscribers to keep their existing phone number. However, unlike the Tier 1 carriers, Vonage does not operate its own network, and cannot assure end-to-end QoS.

Aside from an aggressive advertising presence, which includes print, radio and Internet, Vonage has developed extensive channel coverage, including RadioShack (over 3,700 locations), Staples (over 1,100 locations), Circuit City, Best Buy and Office Depot. It entered Canada in April, but has done little active marketing yet. Despite this, Vonage appears to be gaining good traction, largely due to the absence of any strong VoIP competitors in the Canadian market.

* AT & T. Although subscriber numbers are not known, CallVantage has firmly established itself as a strong alternative to Vonage since its launch in March. AT & T operates the largest IP network in the United States, and can provide all the requisite features for full primary line replacement--QoS, LNP, 911 and CALEA compliance. Its network is powered by Sonus gateways, and its ATA partner is D-Link. AT & T is rapidly developing channels, and is in over 600 locations, primarily with Best Buy, as well as online with Amazon. For the DSL market, AT & T has partnered with Covad for local access. More than any other VoIP provider, AT & T has the brand name; a critical intangible that gives it an edge for long-term growth. Furthermore, of all the VoIP operators, AT & T might have the most at stake to succeed in this market. Primus. Primus' VoIP offering, Lingo, was launched in June, and like AT & T, it is entering the market primarily to counter the decline in its core long-distance business. While not as well known as AT & T, Lingo actually has a broader footprint across the United States, although AT & T is quickly expanding its rollouts. Similar to AT & T, Primus operates its own network, and has an edge over virtual operators such as Vonage and 8X8 in terms of QoS. Lingo provides LNP, and currently provides native mode 911 (called ECS). An upgrade variation called V911 is coming, which Primus feels is a better solution for VoIP.

Primus is adopting a price leader approach, with an attractive rate of $19.95, which includes unlimited calling to Western Europe. It operates an extensive global VoIP network, which allows it to market Lingo as an international offering. One example of this is the ability for subscribers to choose overseas area codes from 12 major cities, such as London or Tokyo.

* Cablevision. Optimum Voice was launched in the Long Island area in September 2003, and since then has far and away been the most successful VoIP launch among MSOs. Cablevision's larger rivals--Comcast, TWC, Charter, etc.--have been in trials for some time, but are only just coming to market now, especially Charter. Using the Siemens soft-switch platform and PacketCable standards, Cablevision can deliver end-to-end QoS with E911 support. With an aggressive and attractive $90 bundle for voice, video and high-speed access, Optimum Voice has attracted some 120,000 subscribers. This is an impressive number, not just for its sheer size, but also because it represents roughly a 10-percent penetration among its 1.1 million broadband subscribers.

Aside from the competitive price point, Cablevision is offering to set up VoIP for up to five phones in the subscriber's home for free. Considering the prevalence of multi-phone homes, this is a very nice sweetener. Cablevision's $90 bundle is for a 12-month period, and we expect this offer will continue to fuel its strong growth while it is in effect. That said, it remains to be seen if Cablevision can retain these subscribers after 12 months and higher rates kick in. If the growth rate then slows, it could be argued that the company's success is not based on normal market conditions, and that the effectiveness of bundling has not yet been proven. On the other hand, Cablevision's results have been surprisingly good, and may be a harbinger of the success that MSOs will enjoy when the other majors roll out VoIP.

* 8X8. This is by far the smallest of the group discussed here, but 8X8 is included to illustrate the challenges faced by all virtual broadband operators. Despite being a public company, 8X8 does not disclose its subscriber counts. However, we believe it is maybe one-tenth of what Vonage reports, making it the second-largest operator. The low cost of entry has attracted many virtual operators, and 8X8 competes with several others--namely Voiceglo, VoicePulse and BroadVoice--who can't match what 8X8 has accomplished. These operators are all capable of providing a competitive VoIP offering, but are faced with the major challenge of acquiring subscribers on a cost-effective basis. To achieve this, 8X8 has chosen the price-leader approach, and is not out to duplicate Vonage's heavy marketing push to attract subscribers. As such, its growth has been on a more modest level and pace. 8X8 has also tried to keep costs down by developing much of its software and endpoints in-house. As a result, its offering is low priced, but really only suitable for second-line service. It offers E911 as an option at $3 per month, and to provide this, it has partnered with Level 3. Furthermore, it can only provide limited LNP.

Like Vonage, 8X8 has developed several channel partners, including Zones, CSI and Fry's Electronics, but on a smaller scale. Interestingly, 8X8's main point of difference is a videophone offering. This is having some success, but the high price point for video (even after rebates) will keep this from being a mainstream service for some time. 8X8 is arguably the most successful virtual operator after Vonage, but clearly it is difficult, if not impossible for any of them to duplicate what Vonage has done.

The Bigger Picture

Mapping out the broader competitive landscape would require a separate article, and here we can only say that the residential VoIP market will become more crowded and more dynamic. Consumers will be the big winners, benefiting both from cheaper telephony and the first wave of innovation that will give them a taste of what multimedia IP communications is all about.

Essentially, there are four basic types of subscriber-based VoIP service providers (see Figure 1). In addition, there is a sub-group of wholesalers, who provide platforms that enable others to offer VoIP. The best-known example is probably deltathree, who provides the platform for Verizon's second line variation of its VoiceWing offering. Other wholesalers of note include Net2Phone and Level 3.

That said, each type has a distinct set of strengths and weaknesses, and at this time, there is room in the market for all of them.

How Will the Market Play Out?

In short, as long as the market remains lightly regulated, VoIP is on track for healthy growth over the next few years. That said, it is too early to tell how much of this growth will be at the expense of existing POTS lines, as opposed to ex-panding the wireline market through the growth of second lines. Either way, it is clear that the revenue picture for POTS is not bright.

Naked DSL is not widely available, and until that time comes, residential subscribers taking up VoIP with their RBOC will inevitably scale back their POTS lines to bare minimum. In markets where POTS is decoupled from broadband (such as with Qwest), we expect to see an increasing rate of dropping POTS as consumers become more comfortable--and confident--with VoIP.

As the major players make their moves into VoIP, the window for startups and virtual operators becomes smaller. On the bright side, there is still plenty of room for all types of providers, especially since overall U.S. broadband penetration is fairly low. However, as the majors shift into high gear, facilities-based operators may hold too much of an advantage, and will ultimately control most of the market. Furthermore, as VoIP matures, success will driven more by marketing and brand recognition than the underlying technology, which plays into the majors' favor. In that scenario, some of the virtual operators will be acquired or driven out of the market, and others will find a viable niche, probably on a regional basis. VoIP is still evolving, and we have not even begun to address the potential of wireless IP, or peer-to-peer offerings such as Skype or Free World Dialup. As such, we expect VoIP will support a rich and diverse ecosystem for some time to come.

IPCC Chair discusses major initiatives, and why there will be VoIP winners and losers

As Michael Khalilian, chairman of the International Packet Communications Consortium, sees it, the move from TDM to IP is analogous to a switch from black-and-white TV directly to HDTV. Senior Editor Sean Buckley recently sat down with Khalilian to discuss the future of the IPCC and its role to advance the VoIP industry.

SB: What are the IPCC's major initiatives for 2005?

MK: The new IPCC is focused on IP technology deployment issues, including peering guidelines, which we are writing with our members, partner organizations and service providers. We're also looking at the implementation and definition of SBC (session border controllers), OSS, billing, CDR records and SLAs.

SB: What's your sense of the VoIP market as it stands now?

MK: The problem is that VoIP means different things to vendors, service providers and end users. This is a challenge and an opportunity. If VoIP means to me as end user flat, lower-cost long-distance service with an ILEC/RBOC, Vonage or a cable company, I really don't care if you're doing it via TDM or VoIP. Vonage is taking advantage of the all-you-can-eat concept. By bypassing the traditional process of meeting CableLabs-based infrastructure for broadband, Vonage changed the whole perspective of the market last year.

MK: You have a lot of good companies such as Net2Phone and Level 3. On the other side you have the cable industry and the wireline companies working with wireless guys to take advantage of VoIP to allow businesses to bundle services over PDAs and Wi-Fi. The commonality between all these service providers is IP. Voice is an application taking advantage of this IP infrastructure. We're going through an evolution where it does not matter whether you are a telephone company, cable company, wireless operator or a satellite provider--everyone wants a bundle of services. Voice is like a utility service, and the Internet is sitting right next to it. So, how do you integrate these two things? VoIP is the ideal application for it.

SB: The IPCC developed six working group initiatives. What are these working groups looking to accomplish?

MK: We built a project working group to prioritize and solve VoIP issues. Service providers came to us and said: 'There are no guidelines for VoIP peering.' We put a number of service providers and members together to draft guidelines, and that draft will be ready by the end of this year and in Q1 2005 we will publish it. The second issue was session border control. What does it mean, what is the value proposition, and how do SBCs work with various softswitches and gateways, no matter the brand or protocol. We paired SBC vendors with the service provider members in a working group to define all aspects of this in a format of the guidelines.

MK: Initially, VoIP was designed for offloading Internet traffic, and then it was used for Class 4 long-haul sitting on top of frame relay and ATM using different QoS elements. Then, with all of the network upgrades to fiber, it was easier to use VoIP from point A to point B by using a different codec, which cut traditional 56 kbps bandwidth for voice down to 32 kbps. Then, the industry came up with the idea of offering enhanced services. Traditionally, a PBX would sit in your building and the telephone companies said they could do the PBX functions remotely via Centrex. An emerging group of third-party service providers such as Telverse or GoBeam said they could do all of this and more with IP Centrex. Now, the cable companies want to offer voice service to residential over either a primary-line or secondary-line connection. When you are in the primary-line business, regardless if you are a cable company or a telephone company, you have to meet E911 operator assistance and other traditional requirements. Companies that just focus on offering E911 such as TCS, which designed E911 for cellular companies, offer a similar concept for VoIP. The solutions are there, and in 2006, we're going to see a lot of VoIP deployments. The value proposition of VoIP is not to replace traditional TDM, which improves network efficiency, but rather in delivering new services.

MK: The VoIP industry is going through an evolution, and we're going to have a lot of good news and a lot of bad news, but not everyone is thinking of the VoIP definition correctly. VoIP means different things to different people and there are a lot of challenges for VoIP deployments, but there are also solutions. You can design a VoIP network to have QoS. That will push VoIP to the next level, but you have to have the right architecture and implementation plan.

IT'S ABOUT AS EXCITING AS THE WIRING IN your walls. Actually, Fiber to the Premises (FTTP) is wiring in your walls--specifically, a new blend of fiberoptic and Ethernet cable.

Still not that exciting, huh? But what you do with it could be, and it may already be headed for your neighborhood. FTTP is one way broadband providers plan to extend the benefits of the superwide national fiberoptic backbone the "last mile" to your wall outlets. Unlike today's aging copper phone lines, it promises virtually unlimited bandwidth.

Verizon figures that, by year-end, it will be able to offer 1 million Americans in a handful of Southern cities either 5Mbps downloads over fiber for less than $40 per month, a 15Mbps pipe for less than $50, or a 30Mbps connection not yet priced. BellSouth has quietly pulled fiber past 1 million homes and is using it for some of its "DSL" services. SBC will spend up to $6 billion on it over the next several years.

For obvious reasons, the best time to add fiber is during construction--and it's happening nationwide at new developments such as The Pinehills in Massachusetts (more on that later). But it's no more complicated to add later than cable TV, and the BelLs are by no means the only ones doing it. According to the Fiber to the Home (FTTH) Council (www. ftthcouncil.org), partnerships between local ISPs, utilities, builders and city governments have already brought fiber to neighborhoods in more than 128 communities in 32 states.

Fiber already handles the largest file downloads, voice calls, videoconferenchag or streams of anything from music to movies to high-definition CSI: Crime Scene Investigation episodes. Early providers, like Bristol Virginia Utilities (www.bvub.com), say they could easily increase that to gigabit speeds if and when anyone needs that much bandwidth.

Eating Each Other's Lunch

Even if your area never gets upgraded, you'll still benefit because this technology is one of the set pieces in an epic competitive struggle between phone, cable and other companies that currently own the wires to our homes and businesses. Basically, the days of those voice or data monopolies are numbered. They may never be dismantled. But their influence over how you communicate and what you pay is waning in the face of alternatives like cellular, voice over broadband, 802.1xx and soon, FTTP.

Yes, the Bells have finally beat back competitive provisions in the 1996 Telecommunications Act to become undisputed masters of the traditional telephone network. But victory comes just as nontraditional phone companies are turning wireline phone services into a low-margin commodity. Among them, you'll find the cable companies--which enjoy one of America's most lucrative monopolies. But that won't protect them. DSL providers made huge strides this year signing up broadband customers by undercutting cable prices, while satellite companies have had similar success with TV service.

But you don't even have to choose DSL, satellite or VoIP to benefit from heightened price competition--a fight that's just starting. Next year, Verizon (for one) plans to sell a triple play brindle of voice, broadband and TV, just like cable companies do, but over an FTTP pipe with much more potential. Some communities are already trying out highly interactive applications like distance learning and even online medical diagnosis.

Change of this magnitude takes time. But the days of buying phone, internet and TV services separately seem to be fading. Coincidentally, so are the days when you lived in one place and worked in another, and the two trends support one another.

Surveys by distal communications market research firm In-Stat/MDR reveal that nearly one-third of American employees work from home on at least some days. Of those who do show up at the office, more than half spend 20 percent of the workday outside it, adds The Yankee Group, a communications and networking research and consulting firm. A highly mobile work force drives demand for faster internet connections, and wider availability of broadband connections permits still-greater mobility.

Future Focus

You could say Erin Lootz, founder of The Office Extension (www.officeext.com), has the right business for the 21st century. As one of the first business tenants at The Pinehills (www.pinehills.com), a master-planned community south of Plymouth in Massachusetts, she provides an office away from the office for other entrepreneurs moving into the development.

"Get up in the morning, and e-mail us what you need done," says Lootz, 41. "Whether you re on the road or playing golf, we'll type up your documents, print your brochures, bill your customers, and set up dinner with a client. If you get a call, we'll page you."

Hidden amid 3,060 acres of pine trees, homes in The Pinehills have that desirable combination of modern convenience inside and rustic exteriors. E-mail, web pages and bulletin board listings zip between them over fiber, as does programming from the development's TV station. One day, it may carry phone calls, too.

Not every mobile worker in America make makes it back to the office every day. But everyone goes home eventually,, and when they do, there's inevitably e-mail downloading and report uploading For good or ill, we're looking at extended workdays, and communities like The Pinehills aren't bad places to do it.

Technologies like FTTP are what give people the choice to live where they want. And, of course, a little more bandwidth never hurt entrepreneurship.

MIKE HOGAN is Entrepreneur's technology editor. Contact him at mhoyan@entrepreneur.com.

by Mike Hogan

WHEN IT WAS time to start hosting his online restaurant guide on in-house servers, Terence Chow, 44, was surprised to find that broadband didn't reach his little corner of San Francisco.

So the founder of Restaurants.com, which was launched in 1999 and has $50,000 in annual sales, looked across the bay to Fremont, California-based NextWeb; the next day, his servers were transferring data at 1.5Mbps for about half the price of a same-speed T1 line. Chow doesn't connect over a line--his data travels through the air, care of a new technology that dozens of ISPs like NextWeb are rapidly adopting.

WiMAX is a new wireless option for entrepreneurs either unserved or underserved by fixed-wire cable, DSL or T1. It may not be in your town yet. Technically, it won't be anywhere until year's end, when the WiMAX Forum starts certifying the interoperability of this kind of transmission gear.

But pre-WiMAX services are already available in dozens of cities nationwide at the kinds of cut-rate prices Chow enjoys (see "Where's WiMAX?" on page 52). Both startup and long-standing wireless ISPs are switching over to better wireless transmitters at a pace analysts expect will bring WiMAX to America's 50 largest urban centers and countless rural areas by the end of the year.

In 2006, once WISPs can mix and match gear from multiple suppliers, commercial rollouts will zoom, says Jeff Thompson, president of Tower-Stream in Boston. WiMAX users won't notice that watershed because, unlike Wi-Fi, customers don't buy access points. But the point of standardization is to drive down equipment costs--and in open markets, those savings tend to filter down to customers.

Ultimately, Thompson says, you'll pick up a small WiMAX modem for Wi-Fi prices at Best Buy or CompUSA, then choose from a variety of service providers. Early wireless entrepreneurs also plan to broadcast to portables and handhelds when Intel starts shipping WiMAX radios for those devices--by 2006 or 2007.

The Air up There

We tend to assume that America's cities are covered by wired broadband service, but many urban pockets aren't close enough to a telephone switching office to get robust SDSL, and TV cable doesn't reach many business districts. Also, neither truly serves small communities in much of rural America.

T1 is an option [in rural areas], but [it's] extremely expensive," says Philip Solis, senior analyst for ABI Research. "The cost is several times that in cities, and installation typically takes 60 to 90 days."

For businesses too large for low-bandwidth/ low-quality consumer services and too impatient for T1, WiMAX otters a range of bandwidth, quality of service and easy installation. When Mass Connections of Cerritos, California, needed to back up its T1 line, it chose wireless service from Aiirmesh Communications in addition to a second T1 line (cable doesn't reach it). A designer of in-store marketing promotions in shopping centers nationwide, Mass Connections needs to maintain direct, high-speed connections with clients and subcontractors, even on nights and weekends. And Mass Connections pays Aiirmesh less than half the monthly rate of its T1 line.

Wireless transceivers still cost enough that most WISPs will initially focus on high-bandwidth business customers. But it's so much cheaper to add wireless points of presence than to lay cable that some of these small ventures are already challenging the large, better-capitalized telephone and cable companies, says Solis.

For example, advantaged by its license to a prized portion of the radio spectrum, Clear-wire offers consumers and home offices in Florida data rates of 512Kbps for as little as $25 per month. Similarly, NextWeb has been surprised by how many requests it gets from customers supposedly served by fixed wire, says NextWeb's Eric Warren. NextWeb now reaches 175 cities in California's most urbanized areas, with a guaranteed minimum 512Kbps symmetrical service that can burst to 3Mbps for $159 per month.

Short-term, expect WiMAX providers to offer a little more for a little less than wired services, says In-Stat/MDR senior analyst Keith Nissen. Although WiMAX has the potential to beam data 70Mbps, WISPs will do so only as data appetites rise for applications like video on demand, videoconferencing and VoIP. IP phone service, in particular, is likely to be a part of most wireless service plans.

It's impossible to predict WiMAX's future. Broadcasting is challenging, but the stage is set for the kind of entrepreneurial gold rush and unforeseeable innovation that we saw with WiFi and VoIP. It's a now-familiar paradigm: An open market meets a better technology, and new levels of productivity break loose.

WHERE'S WIMAX? Areas where WiMAX-ready wireless broadband service is available and their monthly service rates:

* AIIRMESH COMMUNICATIONS [HTTP://AIIRMESH.COM] provides Los Angeles-area communities data speeds of 512Kbps to 5Mbps for $150 to $800.

* CLEARWIRE [WWW.CLEAR WIRE.COM] offers Abilene, Texas; Daytona Beach and Jacksonville, Florida; and St. Cloud, Minnesota, a menu of 512Kbps to 1.5Mbps data speeds for $25 to $66.

* NEXTWEB [WWW.NEXTWEB. NET] guarantees California's most populated areas 512Kbps connections that burst to 3Mbps for $159 or 1.5Mbps hookups bursting to 6Mbps for $399.

* TOWERSTREAM [WWW.TOWER STREAM.COM] gives Chicago, Los Angeles, New York, the Providence/Boston corridor, and San Francisco 1.5Mbps bursting to 5Mbps for $500.

MIKE HOGAN (mhogan@entrepreneur.com) is Entrepreneur's technology editor

Enhanced 911

-- Local Number Porting (LNP)

-- Online Management & Billing

-- Personalized Voicemail

-- Phone Based Management

-- Toll Free Services

-- Unlimited In-Network Calling

-- Virtual Phone Numbers

-- *69 Call return

-- *70 Call Waiting Disable

*77/*87 Anonymous Call Blocking

-- *78/*79 Do Not Disturb

8x8 offers a thirty (30) day trial period to new subscribers for their first Packet8 account. If dissatisfied, subscribers are entitled to a full refund of the equipment cost, activation fee and monthly service fee.

About 8x8, Inc.

VoIP (voice over internet protocol) service provider 8x8, Inc. offers internet-based telephony solutions (www.packet8.net) for individual residential and business users as well as small to medium sized business organizations. In addition to regular Packet8 VoIP service plans, priced as low as $19.95 per month for unlimited anytime calling to the U.S. and Canada, 8x8 now offers the Packet8 DV 326 VideoPhone, the industry's first stand alone broadband consumer videophone. Packet8 Virtual Office, 8x8's VoIP system for small to medium sized businesses, is a hosted PBX solution comprised of powerful business class features. For additional company information, visit 8x8's web site at www.8x8.com.

NOTE: 8x8, the 8x8 logo, Packet8, the Packet8 logo and Packet8 Virtual Office are trademarks of 8x8, Inc. All other trademarks are the property of their respective owners.

CONTACT: Joan Citelli of 8x8, Inc., +1-408-687-4320, or JCitelli@8x8.com

Packet8 broadband telephone and videophone service includes phone-based management for call routing and voicemail configuration. Subscribers can manage configuration of account by phone following voice prompt instructions. Subscribers can also acquire toll-free number service for business or personal use in conjunction with any calling plan. Both 411 Directory Assistance and Reverse Directory Assistance are available to Packet8 users.

********************

SANTA CLARA, Calif., Feb. 10 - 8x8, Inc. (NASDAQ:EGHT) the Packet8 voice over internet protocol (VoIP) and videophone communications service provider, announced the addition of three new calling features for its residential broadband telephone and videophone services.

The new features enhance the functionality of the Packet8 service while providing subscribers with greater flexibility in managing their phone service options. They include: Phone-Based Management for Call Routing and Voicemail Configuration -- With this feature, Packet8 subscribers can manage the configuration of their account by phone following voice prompt instructions. Options include turning voicemail on or off, setting the number of rings before going to voicemail, and forwarding calls to an alternate number. These configuration changes can also be implemented online by logging on to the "Account Settings" page at www.packet8.com.

-- Toll Free Service Plan -- Packet8 subscribers can inexpensively acquire toll-free number service for business or personal use in conjunction with any calling plan. The Packet8 Toll Free Service Plan includes 100 minutes of inbound toll-free calls and 3.9 cents a minute thereafter for inbound calls, regardless of the caller's location. A monthly service fee of $4.95 and one-time activation fee of $9.95 applies.

-- Directory Assistance -- 411 Directory Assistance and Reverse Directory Assistance is now available to Packet8 subscribers for a $.75 per call fee. Both local and national directory assistance are accessible by dialing 411.

Still the only residential VoIP service providing true E911 functionality, Packet8 offers unlimited local and long distance calling to the U.S. and Canada for $19.95 per month along with videophone service priced at $29.95 per month. Features currently available to Packet8 subscribers include:

-- 3-way Conferencing

-- Area Code Selection

-- Call Forwarding

-- Call Waiting

-- Call Waiting ID

-- Caller ID

-- Caller ID Blocking

-- Directory Assistance

That debate over the need for VoIP regulation is gaining momentum in the U.S. Congress as lawmakers grapple with how to manage new IP telephone services that allow users to bypass the traditional phone system. Whatever the final outcome this year, the VoIP dialogue already is setting the stage for a political battle between states and the federal government, as well as framing an early debate over what telecom reform will look like after the November election.

In late July, the Senate Commerce Committee ended up gutting a key bill sponsored by Sen. John Sununu (R-N.H) that would have banned states from regulating and taxing Internet phone calls at all. The committee amended the VoIP Regulatory Feedom Act to allow states to regulate VoIP services ro collect a universal service tax and to compensate telcos for using their facilities. Final Senate action is uncertain before the session ends this year. The original measure was controversial because it would pre-empt the states from regulating VoIP services. California, New York and Minnesota are among the states contemplating taxing and regulating VoIP. Some rural carriers also prefer that regulation be left a local matter.

Sununu, however, has forcefully pushed for a hand-offs approach to VoIP regulation on both the state and federal levels. "It is a simple choice ... vote to establish a clear legal regime based on technological innovation and consumer choice, or vote in favor of multi-layered regulation of VoIP that will let chaos reign," Sununu said in a statement. "Those who use e-mail and instant messaging should know if members vote to regulate Internet applications such as VoIP, those technologies are next."

A companion bill has been introduced in the House by Rep. Chip Pickering (R-Miss.), who warned that a lack of consensus on VoIP could delay telecom reform by as much as three years, which in turn would result in the market leapfrogging any regulatory efforts.

Separately, U.S. Rep. Cliff Stearns (R-Fla.) and Rick Boucher (D-Va.) introduced in early July legislation that would create a broad regulated framework for IP telephony. The Advanced Internet Communications Services Act would have the FCC, rather than state governments, regulate VoIP and other advanced services. More significantly, the legislation would provide a possible framework for next year's expected rewrite of the 1996 Telecommunications Act. "Our goal is to treat all advanced IP applications, including VoIP, with a light regulatory touch," says Boucher. Because Internet users have a broad choice of service providers, there is plenty of competition so the existing rules governing monopoly networks shouldnot apply, Boucher reasons.

The bill also requires the FCC to impose minimal regulation for IP telephony services in just four areas: emergency services, universal service, compensation for use of public-switched networks, and access for the disabled.

"The disparate rules which currently govern different categories of telecommunications service providers have distorted investment and impeded the deployment of new services for consumers," Boucher added.

Many industry executives favor a light federal regulatory touch, arguing a state regulatory approach would likely harm the future of a still fledgling industry by discouraging innovation and raising costs. Executives from seven telecom firms, including Vonage and Level 3, told House telecom subcommittee members in early July that they favored pre-empting the states from becoming involved in VoIP regulation.

FAST FACTS: Congressional telecom debate: Advanced Internet Communications Services Act: * Sponsored by Reps, Stearns and Boucher. * Provides framework for Internet telephony. * Facilitates rapid deployment of new services like VoIP. * Requires "light" FCC regulation in four limited areas. VoIP Regulatory Freedom Act: * Sponsored by Sununu (Senate) and Pickering (House). * Protects VoIP services from any regulation. * Amended to allow state taxation in certain cases.

NEW YORK (AP)—Cable and phone companies are hustling to offer new services that route calls over the Internet, a technology that eventually will make the 125-year-old telephone system seem about as advanced as sending smoke signals.

That day bounded closer this week as three major communications companies—Time Warner Inc.'s cable TV unit, Qwest Communications International Inc. and AT&T Corp.—announced plans to sell Internet phone services to consumers.

The plans promise to lower the cost of phone service and include new features, like the ability to check voice mail or program call-forwarding requests on the Web.

Internet phone technology has already made serious inroads in big companies and as a means of carrying international calls.

But while Internet phone services for consumers have been available for more than a year from some cable companies and startups like Vonage Holdings Corp., it has remained a niche technology.

Fewer than 200,000 Americans use Internet phone service as their primary line, according to TeleGeography Inc.

That figure could soar in 2004. Besides the announcements made this week, the nation's biggest phone company, Verizon Communications Inc., plans to deliver a consumer Internet phone offering within six months.

"The giants getting into the business gives Voice Over IP credibility," said Guzman & Co. analyst Pat Comack, using the technology's official name. "People will give it a shot now. All of a sudden, this is not a toy anymore."

But while the Internet phone bandwagon swells, the full-fledged revolution seems several years away. For now, only the roughly 20 percent of U.S. households that have broadband Internet access can use the technology.

Perhaps most importantly, special steps have to be taken to make the Internet phone systems connect to 911 dispatch centers or work in blackouts like the old-fashioned phone network can.

"I'm not going to pretend that we're ready to solve those problems," AT&T spokesman Gary Morgenstern acknowledged Thursday. "We're working on that."

Other providers say they have addressed those issues. Internet phone pioneer Net2Phone Corp., which is focusing on helping cable companies deliver the service, boasts that it also has overcome the technical hurdle of letting law enforcement officials set wiretaps, which phone companies are required to allow.

The VoIP industry pioneers such as Vonage, Packet8, Voice Pulse and others are seeing their market share hammered as top brand names such as AT&T, Cablevision and others move forcefully into the consumer telephone space, according to a new research report released by the Yankee Group.

The report, prepared by Kate Griffin, Yankee Group senior analyst for consumer technologies and services, finds that the smaller "alternative voice" providers will see their residential VoIP market share plunge from 66% at the end of 2003 to just 19% by the end of next year. Traditional telcos, primarily RBOCs, ILECs and IXCs, will drop in market share from 34% in 2003 to 25% in 2005. A new breed of player--the cable MSOs--will grab a 56% market share next year from virtually nothing last year, the report says.

"Alternative voice providers lose market share every day to the major players," Griffin concludes. "MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers." Griffin sees evidence that the smaller industry pioneers already are sniffing out new approaches, business models and features to stay competitive. Vonage, for example, added a lower-tiered, lower priced VoIP offering. Nuvio launched its consumer VoIP service in January, but now focuses on developing private-label partnerships with telecom, wireless and cable companies. VoiceGlo, which launched broadband VoIP service in the third quarter of 2003, now focuses on a PC-based VoIP service that resembles that of Skype.

More industry pioneers could head for the exits as they are forced to compete in a more demanding mass market that favors big brands offering services like 24/7 customer support, truck rollouts to simplify provisioning and new, more efficient billing systems.

MASS MARKET APPEAL

The market share shift is occurring at a time when the VoIP industry is booming, and cable companies are moving much more aggressively into the phone market to compete more effectively with regional Bells. In many cases, the MSOs are turning to big names like AT&T to provide their VoIP services. Overall, VoIP subscribers will hit 1 million by the end of 2004, according to the Yankee Group, up from just 131,000 last year. However, the firm expects 17.5 million U.S. households to go with VoIP by 2008.

The VoIP industry pioneers such as Vonage, Packet8, Voice Pulse and others are seeing their market share hammered as top brand names such as AT&T, Cablevision and others move forcefully into the consumer telephone space, according to a new research report released by the Yankee Group.

The report, prepared by Kate Griffin, Yankee Group senior analyst for consumer technologies and services, finds that the smaller "alternative voice" providers will see their residential VoIP market share plunge from 66% at the end of 2003 to just 19% by the end of next year. Traditional telcos, primarily RBOCs, ILECs and IXCs, will drop in market share from 34% in 2003 to 25% in 2005. A new breed of player--the cable MSOs--will grab a 56% market share next year from virtually nothing last year, the report says.

"Alternative voice providers lose market share every day to the major players," Griffin concludes. "MSOs, IXCs and ILECs are joining the VoIP game, and their available resources dwarf even the largest of the alternative VoIP providers." Griffin sees evidence that the smaller industry pioneers already are sniffing out new approaches, business models and features to stay competitive. Vonage, for example, added a lower-tiered, lower priced VoIP offering. Nuvio launched its consumer VoIP service in January, but now focuses on developing private-label partnerships with telecom, wireless and cable companies. VoiceGlo, which launched broadband VoIP service in the third quarter of 2003, now focuses on a PC-based VoIP service that resembles that of Skype.

More industry pioneers could head for the exits as they are forced to compete in a more demanding mass market that favors big brands offering services like 24/7 customer support, truck rollouts to simplify provisioning and new, more efficient billing systems.

MASS MARKET APPEAL

The market share shift is occurring at a time when the VoIP industry is booming, and cable companies are moving much more aggressively into the phone market to compete more effectively with regional Bells. In many cases, the MSOs are turning to big names like AT&T to provide their VoIP services. Overall, VoIP subscribers will hit 1 million by the end of 2004, according to the Yankee Group, up from just 131,000 last year. However, the firm expects 17.5 million U.S. households to go with VoIP by 2008.

That huge growth might allow many of the early industry pioneers to survive if they adopt realistic business plans, says Griffin. "The early adopters aren't going to single-handedly overturn the RBOCs," she notes. "But if they set their targets on realistic growth, they can still be a profitable business." One factor helping is their broad national reach. The MSOs typically are limited to specific geographic areas where they have the cable franchise.

Even so, the smaller pioneer providers face dangers from escalating price wars, limited resources and unknown brand names that limit their addressable market to niche segments, according to the report. With the window of opportunity in the VoIP provider field rapidly closing for new entrants, the focus needs to be on quality, customer service and differentiated functionality to thrive. "Vonage's success has shown there is a market for a best-effort, lower priced telephone service," says Griffin. "However, in the next several months these early market entrants will face tough competition from battle-tested telephone and cable MSO ready to fight for local VoIP leadership."

FAST FACTS:

Challenges to small VoIP players

* Brand recognition--dwarfed by large companies' brand name investments

* Minimal resources--major players have deeper technical, telephony expertise

* Demanding mass market--users expect RBOC-like, seamless phone experience

VoIP Market Shake-out

2003

Alternate provides lose market share

Traditional Telcos -04%

Alternate Providers 66%

Cable MSOs 34%

2005

[projected]

Alternate provides lose market share

Traditional Telcos 25%

Alternate Providers 19%

Cable MSOs 56%

Source: The Yankee Group

THE ANALOG phone may soon be relegated to the world of 8-tracks and brick-size cell phones. When you look at moving up to VoIP, those old desk clunkers will be the first to go. In their place, you'll get something new, and there's a good chance it will be a SIP phone. SIP stands for Session Initiation Protocol, a signaling protocol that establishes sessions in an IP network. A session may be a simple two-way voice call, or it might be something more advanced, involving conferencing or multimedia. Most important, it's become a hot choice for VoIP systems.

One nice feature of SIP is interoperability. You're not necessarily tied to one vendor. You could install a SIP-based IP PBX from one vendor and SIP phones from another. That's good news for growing businesses that already have an IP-PBX system and are looking to upgrade or expand their stables of desk phones. You have a wide variety of choices, so you can shop for features, voice quality and price.

What's really glamorous about SIP is that all its extra feature potential makes your standard, plain-old-telephone-service phones look like old appliances. We're talking about unified messaging, click-to-call and teleconferencing, among other features. Chances are, you can find one to fit all your business needs.

The Zultys Technologies ZIP 2x2, a $230 (all prices street) upper-midrange phone in their line, features two Ethernet ports, Power over Ethernet and three-way teleconferencing. The phone also sports advanced encryption standard, a good idea for sensitive conversations and for entrepreneurs working in the legal field.

The $280 Cisco 7940G comes stocked with a large display, a built-in headset port and a speakerphone. Cisco aims this particular phone at "transaction type" workers, and it comes with two programmable line and feature keys. In the same price range, the $300 Siemens OptiPoint 410 Standard also comes with PoE, a speakerphone and a built-in LAN

switch.

In the budget range, the Grandstream Networks GXP-2000 comes in at a very affordable $110. You still get two Ethernet ports and multiparty conferencing, and you can add PoE with an optional cable kit. The Avaya 4602SW IP Telephone, on the other hand, lands in the middle of our price range at $170, with 12 programmable call appearance/feature keys, two Ethernet ports and a speakerphone. All the major SIP phone manufacturers have a variety of models, with differences coming down to features like display size, ability to customize and number of call appearances.

ZULTYS TECHNOLOGIES ZIP 2X2

Other considerations include whether you prefer physical buttons to access most features or don't mind scrolling through a display menu. Voice quality is always a top priority, so look for phones with good jitter-buffer technology. Also, if you have Cisco equipment and want to use PoE, be sure the SIP phones you buy support Cisco's pre-standard proprietary version of PoE.

Other manufacturers to check into include Alcatel (www.alcatel. com), Nortel Networks (www.nortel. com), Polycom (www.polycom.com), Snom Technology (www.snom.com) and Tiger Netcom (www.tigernetcom. com). Some IP phone manufacturers are planning to make SIP upgrades to some of their existing phones via a firmware update. Talk to your IT consultant or value-added reseller and fellow business owners for information and recommendations.

Shopping List PUT A SIP IN YOUR SETUP, AND TAKE YOUR TELEPHONES TO A WHOLE NEW LEVEL. MANUFACTURER/ ENTHERNET MODEL CONTACT PORTS Avaya (866) GO-AVAYA 2 4602SW IP Telephone www.avaya.com Cisco (800) 553-NETS 2 7940G www.cisco.com Grandstream Networks www.grandstream.com 2 GXP-2000 Siemens (800) SIEMENS 2 OptiPoint 410 Standard www.siemens.com Zultys Technologies (408) 328-0450 2 ZIP 2x2 www.zultys.com MANUFACTURER/ STREET MODEL FEATURES PRICE Avaya PoE, speakerphone $170 4602SW IP Telephone Cisco PoE, speakerphone, $280 7940G built-in headset port Grandstream Networks PoE, speakerphone, $110 GXP-2000 built-in headset port Siemens PoE, speakerphone, $300 OptiPoint 410 Standard built-in LAN switch ZultysTechnologies PoE, speakerphone, $230 ZIP 2x2 call encryption

The 4D Talk business VoIP service has been unveiled by 4D Internet Ltd, a communications company based in the UK, providing a replacement for existing small PBX or FeatureLine installations for managing and routing calls.

The service provides businesses with a telephone adaptor enabling them to use their usual BT/analogue phone over any broadband Internet connection, using advanced VoIP technology without needing to make calls via their PC.

According to 4D Internet Ltd, the service enables VoIP calls to be made for less than the cost of standard calls made via BT, a UK telephony services provider, while avoiding the need to use traditional voice services for inbound and outbound calls. Features offered by 4D Talk include voicemail, caller return, caller display, caller ID blocking, address books, number blocking and call waiting, with fax2email and non-geographic numbers services offered to businesses.

Calls made with the 4D Talk business package to other 4D Talk users are free of charge and the service is suitable for companies using up to eight analogue lines. An unlimited 2Mb/s business broadband and business VoIP is being offered for GBP49.99 per month rather than the usual GBP69.99 per month as a special launch offer, for companies signing up by 30 June 2006.

 

VoIP is everywhere these days, and is arguably the hottest thing since the tech bubble of 2000. So, right away there should be some cause for concern. Depending on what hat you're wearing, this is true, but it is also an exciting time for anyone close to this market. With low barriers to entry and minimal regulation, VoIP is attracting new money and new players. The market will go through its natural--and necessary--cycles of speculation, investment, exits and consolidation, but there is an undeniable sense that VoIP is poised to fundamentally alter the telecom landscape.

[ILLUSTRATION OMITTED]

So, what is happening with VoIP? At the consumer level, broadband telephony is redefining voice communications, and the benefits of IP are going mainstream. VoIP has had numerous false starts, and has simply moved outward from the network core to the edge and access space, where it becomes real for the end user. IP technology has proven itself effective at reducing network operating costs, and the focus has now shifted to revenue generation via IP services.

VoIP is really just a technology, or an application in a data network. VoIP is not really an industry; it's an enabling technology that supports something much bigger--IP communications.

Why Now?

The simple answer on the timing of VoIP is the "V" word: Vonage. The "Vonage effect" is real, albeit far out of proportion to its impact in taking market share away from the RBOCs. No other virtual operator has come close in demonstrating proof of concept and bringing a consumer-friendly value proposition to market. By doing so, Vonage has had a substantial impact in accelerating the deployment plans of all the Tier 1 service providers.

Underlying that, however, is a more pervasive factor: broadband adoption. There is no VoIP market without broadband, and penetration has finally reached a critical mass where a number of offerings can be supported. By year-end, one in four U.S. homes will have broadband, and with the RBOCs finally making a serious push into DSL, the take rate will steadily increase over the next few years. In fact, VoIP itself may soon become a driver for getting broadband.

Just as voice and data are converging at the desktop, Frost & Sullivan sees several other factors converging that makes today such a dynamic environment for VoIP:

* It works. This sounds like an obvious statement, but residential VoIP did not work well for a long time. VoIP has had several false starts since its inception in 1995. Although it is not 100 percent ready for prime time, it is certainly good enough now for mainstream use.

* Regulations. So far, the FCC has taken a laissez faire approach to VoIP, which has been critical for early-stage success. Had cellular been regulated in its early days, it may well have not evolved to where it is today. Regulation will come to VoIP, but not likely until it becomes more established.

* Competition. This is a crucial driver that was absent in telecom until last year. Rising broadband adoption and the cost efficiencies of IP have led all types of service providers to offer VoIP, and begin competing for customers who previously were the sole domain of incumbent telcos.

* End user demand. In the long run, the laws of supply and demand rule, and we are now truly seeing signs of VoIP demand from consumers. VoIP has been a supply-driven market to date, but as services are rolled out, consumers are quickly recognizing the value proposition of IP services.

* Triple play. For the cable operators, VoIP completes the triple play, which is their main strategy for taking on the RBOCs. To counter this, the RBOCs are adding video to their triple play, along with voice and high-speed Internet. This sets the stage for the "battle of the bundles," which we expect will determine who wins control of the broadband home.

* Wireless substitution. This trend impacts telecom on many levels, but in terms of VoIP, the key issue is the unprecedented decrease in access lines for the RBOCs, which are largely migrating to cellular. With the declines in wireline subscribers and long-distance revenues, RBOCs are under heavy pressure to offset these losses with new services, which brings us to VoIP.

Who Is Leading the Charge?

The United States has seen tremendous activity in 2004, both in terms of VoIP subscriber uptake, and the variety of operators coming to market. At this point, five operators have demonstrated notable success in attracting subscribers: Vonage, AT & T, Primus, Cablevision and 8X8. There are several others, of course--some who are in the market now, and others who are very close to entering. However, these five account for the vast majority of residential U.S. VoIP subscribers.

* Vonage. Clearly the market leader on many fronts, including subscribers, service coverage, mind share, channels, money raised, first mover, etc. Vonage has been able to sustain a healthy growth rate even as new offerings come to market, and is currently in the range of 250,000 subscribers. Vonage's main vendor partner is Cisco for media gateways, and for applications, dynamicsoft (soon to be part of Cisco) is the engine upon which it develops its own features. On the premises side, Vonage has adopted a strategy of supporting multiple ATA vendors, including Motorola and Linksys.

In terms of 911, Vonage has a partial solution, and it also offers 411. Vonage provides LNP (local number portability), which allows subscribers to keep their existing phone number. However, unlike the Tier 1 carriers, Vonage does not operate its own network, and cannot assure end-to-end QoS.

Aside from an aggressive advertising presence, which includes print, radio and Internet, Vonage has developed extensive channel coverage, including RadioShack (over 3,700 locations), Staples (over 1,100 locations), Circuit City, Best Buy and Office Depot. It entered Canada in April, but has done little active marketing yet. Despite this, Vonage appears to be gaining good traction, largely due to the absence of any strong VoIP competitors in the Canadian market.

* AT & T. Although subscriber numbers are not known, CallVantage has firmly established itself as a strong alternative to Vonage since its launch in March. AT & T operates the largest IP network in the United States, and can provide all the requisite features for full primary line replacement--QoS, LNP, 911 and CALEA compliance. Its network is powered by Sonus gateways, and its ATA partner is D-Link. AT & T is rapidly developing channels, and is in over 600 locations, primarily with Best Buy, as well as online with Amazon. For the DSL market, AT & T has partnered with Covad for local access. More than any other VoIP provider, AT & T has the brand name; a critical intangible that gives it an edge for long-term growth. Furthermore, of all the VoIP operators, AT & T might have the most at stake to succeed in this market.

* Primus. Primus' VoIP offering, Lingo, was launched in June, and like AT & T, it is entering the market primarily to counter the decline in its core long-distance business. While not as well known as AT & T, Lingo actually has a broader footprint across the United States, although AT & T is quickly expanding its rollouts. Similar to AT & T, Primus operates its own network, and has an edge over virtual operators such as Vonage and 8X8 in terms of QoS. Lingo provides LNP, and currently provides native mode 911 (called ECS). An upgrade variation called V911 is coming, which Primus feels is a better solution for VoIP.

Primus is adopting a price leader approach, with an attractive rate of $19.95, which includes unlimited calling to Western Europe. It operates an extensive global VoIP network, which allows it to market Lingo as an international offering. One example of this is the ability for subscribers to choose overseas area codes from 12 major cities, such as London or Tokyo.

* Cablevision. Optimum Voice was launched in the Long Island area in September 2003, and since then has far and away been the most successful VoIP launch among MSOs. Cablevision's larger rivals--Comcast, TWC, Charter, etc.--have been in trials for some time, but are only just coming to market now, especially Charter. Using the Siemens soft-switch platform and PacketCable standards, Cablevision can deliver end-to-end QoS with E911 support. With an aggressive and attractive $90 bundle for voice, video and high-speed access, Optimum Voice has attracted some 120,000 subscribers. This is an impressive number, not just for its sheer size, but also because it represents roughly a 10-percent penetration among its 1.1 million broadband subscribers.

Aside from the competitive price point, Cablevision is offering to set up VoIP for up to five phones in the subscriber's home for free. Considering the prevalence of multi-phone homes, this is a very nice sweetener. Cablevision's $90 bundle is for a 12-month period, and we expect this offer will continue to fuel its strong growth while it is in effect. That said, it remains to be seen if Cablevision can retain these subscribers after 12 months and higher rates kick in. If the growth rate then slows, it could be argued that the company's success is not based on normal market conditions, and that the effectiveness of bundling has not yet been proven. On the other hand, Cablevision's results have been surprisingly good, and may be a harbinger of the success that MSOs will enjoy when the other majors roll out VoIP.

* 8X8. This is by far the smallest of the group discussed here, but 8X8 is included to illustrate the challenges faced by all virtual broadband operators. Despite being a public company, 8X8 does not disclose its subscriber counts. However, we believe it is maybe one-tenth of what Vonage reports, making it the second-largest operator. The low cost of entry has attracted many virtual operators, and 8X8 competes with several others--namely Voiceglo, VoicePulse and BroadVoice--who can't match what 8X8 has accomplished. These operators are all capable of providing a competitive VoIP offering, but are faced with the major challenge of acquiring subscribers on a cost-effective basis. To achieve this, 8X8 has chosen the price-leader approach, and is not out to duplicate Vonage's heavy marketing push to attract subscribers. As such, its growth has been on a more modest level and pace. 8X8 has also tried to keep costs down by developing much of its software and endpoints in-house. As a result, its offering is low priced, but really only suitable for second-line service. It offers E911 as an option at $3 per month, and to provide this, it has partnered with Level 3. Furthermore, it can only provide limited LNP.

Like Vonage, 8X8 has developed several channel partners, including Zones, CSI and Fry's Electronics, but on a smaller scale. Interestingly, 8X8's main point of difference is a videophone offering. This is having some success, but the high price point for video (even after rebates) will keep this from being a mainstream service for some time. 8X8 is arguably the most successful virtual operator after Vonage, but clearly it is difficult, if not impossible for any of them to duplicate what Vonage has done.

The Bigger Picture

Mapping out the broader competitive landscape would require a separate article, and here we can only say that the residential VoIP market will become more crowded and more dynamic. Consumers will be the big winners, benefiting both from cheaper telephony and the first wave of innovation that will give them a taste of what multimedia IP communications is all about.

Essentially, there are four basic types of subscriber-based VoIP service providers (see Figure 1). In addition, there is a sub-group of wholesalers, who provide platforms that enable others to offer VoIP. The best-known example is probably deltathree, who provides the platform for Verizon's second line variation of its VoiceWing offering. Other wholesalers of note include Net2Phone and Level 3.

That said, each type has a distinct set of strengths and weaknesses, and at this time, there is room in the market for all of them.

How Will the Market Play Out?

In short, as long as the market remains lightly regulated, VoIP is on track for healthy growth over the next few years. That said, it is too early to tell how much of this growth will be at the expense of existing POTS lines, as opposed to ex-panding the wireline market through the growth of second lines. Either way, it is clear that the revenue picture for POTS is not bright.

Naked DSL is not widely available, and until that time comes, residential subscribers taking up VoIP with their RBOC will inevitably scale back their POTS lines to bare minimum. In markets where POTS is decoupled from broadband (such as with Qwest), we expect to see an increasing rate of dropping POTS as consumers become more comfortable--and confident--with VoIP.

As the major players make their moves into VoIP, the window for startups and virtual operators becomes smaller. On the bright side, there is still plenty of room for all types of providers, especially since overall U.S. broadband penetration is fairly low. However, as the majors shift into high gear, facilities-based operators may hold too much of an advantage, and will ultimately control most of the market. Furthermore, as VoIP matures, success will driven more by marketing and brand recognition than the underlying technology, which plays into the majors' favor. In that scenario, some of the virtual operators will be acquired or driven out of the market, and others will find a viable niche, probably on a regional basis. VoIP is still evolving, and we have not even begun to address the potential of wireless IP, or peer-to-peer offerings such as Skype or Free World Dialup. As such, we expect VoIP will support a rich and diverse ecosystem for some time to come.

IPCC Chair discusses major initiatives, and why there will be VoIP winners and losers

As Michael Khalilian, chairman of the International Packet Communications Consortium, sees it, the move from TDM to IP is analogous to a switch from black-and-white TV directly to HDTV. Senior Editor Sean Buckley recently sat down with Khalilian to discuss the future of the IPCC and its role to advance the VoIP industry.

SB: What are the IPCC's major initiatives for 2005?

MK: The new IPCC is focused on IP technology deployment issues, including peering guidelines, which we are writing with our members, partner organizations and service providers. We're also looking at the implementation and definition of SBC (session border controllers), OSS, billing, CDR records and SLAs.

SB: What's your sense of the VoIP market as it stands now?

MK: The problem is that VoIP means different things to vendors, service providers and end users. This is a challenge and an opportunity. If VoIP means to me as end user flat, lower-cost long-distance service with an ILEC/RBOC, Vonage or a cable company, I really don't care if you're doing it via TDM or VoIP. Vonage is taking advantage of the all-you-can-eat concept. By bypassing the traditional process of meeting CableLabs-based infrastructure for broadband, Vonage changed the whole perspective of the market last year.

SB: Everywhere you look there seems to be a new VoIP service provider emerging. What's your take on these players?

MK: You have a lot of good companies such as Net2Phone and Level 3. On the other side you have the cable industry and the wireline companies working with wireless guys to take advantage of VoIP to allow businesses to bundle services over PDAs and Wi-Fi. The commonality between all these service providers is IP. Voice is an application taking advantage of this IP infrastructure. We're going through an evolution where it does not matter whether you are a telephone company, cable company, wireless operator or a satellite provider--everyone wants a bundle of services. Voice is like a utility service, and the Internet is sitting right next to it. So, how do you integrate these two things? VoIP is the ideal application for it.

SB: The IPCC developed six working group initiatives. What are these working groups looking to accomplish?

MK: We built a project working group to prioritize and solve VoIP issues. Service providers came to us and said: 'There are no guidelines for VoIP peering.' We put a number of service providers and members together to draft guidelines, and that draft will be ready by the end of this year and in Q1 2005 we will publish it. The second issue was session border control. What does it mean, what is the value proposition, and how do SBCs work with various softswitches and gateways, no matter the brand or protocol. We paired SBC vendors with the service provider members in a working group to define all aspects of this in a format of the guidelines.

MK: Initially, VoIP was designed for offloading Internet traffic, and then it was used for Class 4 long-haul sitting on top of frame relay and ATM using different QoS elements. Then, with all of the network upgrades to fiber, it was easier to use VoIP from point A to point B by using a different codec, which cut traditional 56 kbps bandwidth for voice down to 32 kbps. Then, the industry came up with the idea of offering enhanced services. Traditionally, a PBX would sit in your building and the telephone companies said they could do the PBX functions remotely via Centrex. An emerging group of third-party service providers such as Telverse or GoBeam said they could do all of this and more with IP Centrex. Now, the cable companies want to offer voice service to residential over either a primary-line or secondary-line connection. When you are in the primary-line business, regardless if you are a cable company or a telephone company, you