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Thursday, May 17, 2012
Feature: January 2006
Landlines heave ho!
Despite dropped calls and security scares, VoIP is overtaking traditional phone service
Story by Michael P. Scott
Since the days of Alexander Graham Bell, businesses have been purchasing telephone services in the same manner as they’ve been purchasing electricity — based on usage rates and time of day. That appears to be changing fast.
While the majority of companies still rely on standard landline phones, there appears to be growing interest in an emerging technology called VoIP, or Voice over Internet Protocol, which allows you to make telephone calls through the use of a broadband Internet connection to a regular, or analog, phone line.
Evidence of this new trend is becoming more apparent every day, with an estimated 10 percent of all international phone calls now traveling over the Internet. Even more telling is the fact that this year, for the first time ever, U.S. companies purchased more new Internet phone connections than traditional phone lines.
The sudden emergence of VoIP represents a poignant example of a phenomenon that author Malcolm Gladwell calls the “tipping point,” the point at which a small change suddenly triggers an avalanche of demand.
The evolution in how voice services are delivered has been brewing for well over 20 years as telecommunication companies have been building huge networks to transmit bits and bytes of data. These data networks led to the creation of new forms of communication, such as e-mail, that have become immensely popular because of their flexibility and their ability to offer low transmission costs.
Now enter VoIP, which allows companies to send voice calls over data
networks that traditionally have not been ideal for voice traffic. Among its many benefits: low internal costs, flexibility, high-value features and functionality, and easy billing.
“What we are currently seeing is a convergence of voice, data and video technology that is opening up a whole new range of possibilities in areas such as voice technology,” says Michael Ort, managing partner of Praxis Associates, a technology-consulting firm in Truckee. “Whenever technology becomes less expensive and easier to use, businesses tend to respond to it,” says Ort.
Anticipating the continued integration of voice and data technologies, traditional telecommunication providers and other vendor companies are lining up to offer seemingly unbeatable rates to businesses for these services.
The timing could not be better, according to a 2004 survey by Palo Alto research consultancy Frost & Sullivan, which found that cost savings are the No. 1 reason companies are investing in Internet telephone services. “Many businesses are even willing to tolerate the inconvenience of dropped calls to international destinations because of the low marginal costs when using this type of technology,” says Ort.
Many technology experts believe that it is no longer a question of whether VoIP will wipe out traditional telephony, but a question of when. And its advantages to business from a cost-savings standpoint can be significant.
“Many think VoIP simply involves making free calls;
this is not where the future of this technology is headed.”
— Gia McNutt, CEO, Special Order Systems
“We’re seeing a groundswell of interest in VoIP, particularly among small to medium-sized businesses,” says Rob McCarthy, general manager of the Northern California region for XO Communications Inc. Recently XO was selected to provide local and long-distance voice services to the King’s operations at Arco Arena as well as at the team’s training facility.
“What VoIP does for customers is take the time and distance factor out of a phone call and turn it into a flat rate,” says McCarthy. “Essentially, a local phone call would be no different than a long-distance call to anywhere in the world.”
McCarthy says that there is one other advantage that business customers are flocking to: ease in billing. “Customers really value the fact that the charges for their voice, data and video applications can all be combined onto one bill. And because it is a flat rate, there are no usage-cost fluctuations from month to month.”
Brad Jenkins, president of Sacramento-based O1 Communications, a VoIP and IT-solutions provider to small and medium-size enterprises, points out that business travelers can also realize major cost-saving advantages when they travel to destinations both domestically and internationally.
While in Mexico recently, Jenkins took the opportunity to personally experience the savings that VoIP has to offer. “I brought my home phone and an adapter, plugged into a broadband connection and called back to the U.S. without incurring usage rates,” says Jenkins.
“Many of the locals were curious and I tried to explain it, but it was all confusing to them.” Jenkins says we’ve just seen the tip of the iceberg relative to VoIP’s capabilities. “The possibilities are infinite with this technology.”
Despite the major benefits associated with VoIP, many technology experts caution that there are some glaring downsides as well. With some VoIP services, dropped calls continue to be an irritant. And if a power outage hits, service will go down with the network.
“If you lose your Internet, you’ll want to make sure that you have a standard, backup phone line,” says Mike Cook, president of Totlcom, a computer-networking, voicemail and telecommunication firm located in West Sacramento. “Some companies also run into problems when they overstretch their bandwidth capacity, which can cause some breaks, interference and distortions in the voice quality.”
Security is another issue that has yet to be completely resolved. Some technology experts predict that VoIP will be the next major target for hackers because most voice services are currently not encrypted. It is feared that when the technology goes mainstream, intruders who gain access to Internet traffic could easily intercept phone conversations. Experts agree that adding protections such as firewalls that monitor voice and data is a smart move for any business moving from traditional telephone to VoIP services.
“The possibilities are infinite with this technology.”
— Brad Jenkins, president, o1 Communications
While cost savings continue to be the primary factor driving the demand in voice technology, many information technology experts believe that this is just the beginning with respect to its value to business. In particular, many VoIP packages allow for the integration of applications that can enhance internal communications with staff as well as improve customer service. And end-user companies have reported increased manageability and reliability of their IT systems as a result of the ability to run voice and data through the same network.
Gia McNutt, CEO of Special Order Systems, which offers voice and data services, believes that there is much more to VoIP than reducing phone-usage costs.
“There are many who think that VoIP simply involves making free calls over the Internet, which leads to the perception that the primary benefits derived from it are toll-charge reductions,” says McNutt. “In my estimation, this is not where the future value of this technology is headed.”
Many of her customers are seeing huge savings in maintenance costs. Prior to VoIP, the only option for companies was to have separate voice and data connections, a setup that often required two sets of circuits at a cost of $250 to $750 a month and, in the case of midsize or large companies, two separate IT teams.
Enhanced outcomes are also being realized in customer service. The beauty here is that VoIP can allow a company to better integrate its customer-management and core business systems, thereby creating greater efficiencies in the flow of key strategic information.
“This is a particularly great benefit for help desks and call centers in that it allows service staff to have immediate access to customer information every time the phone rings,” says McNutt. “The system can also automatically log all outbound and inbound calls and attach them to the customer record, thereby reducing productivity losses associated with manual entries.”
Beyond traditional VoIP, another area of IP communication and telephony that is creating buzz these days are applications that allow companies to become more interactive with customers. When one considers the number of times a Web site visit turns into an 800 call for the purpose of live interaction, the value of this becomes apparent.
Instead of attempting to make contact with a live voice, customers can engage in real-time discussions via the vendor Web site, saving them the inconvenience of having to make that extra call. There are also tools that allow a service representative to take control of the customer’s browser for the purpose of helping him or her complete an online form properly.
McNutt believes growing numbers of businesses like her client Vegas.com, the largest booking agency in Las Vegas for hotels and shows, will see the strategic value of these types of applications and want to harness them. “There is no doubt that there are some big things on the horizon in the IP communication/telephony area that are going to redefine how companies do business.”
