Playing games with VoIP

While the giants of the telecom industry scramble to stake a claim on the nascent market for making phone calls over the Internet, Microsoft and Sony have already discovered the first breakthrough application: talking smack to other virtual commandos.

Online services for Microsoft's Xbox game console and Sony's PlayStation 2 have created the first major consumer application for voice over Internet Protocol (VoIP) service, enabling thousands of hours of daily chat for online combatants. While a far cry from the business and home installations seen as the major market for VoIP services, online gaming is providing valuable early clues about how to deliver such services cheaply and effectively enough to entice consumers.

"It gets consumers more familiar with VoIP in a sort of sneaky way," said Billy Pidgeon, an analyst at research firm Zelos Group. "It's tough to think that would get consumers to go with VoIP to replace their normal telephone provider...but it provides a technical and social and behavioral laboratory for the use of VoIP within a certain context."

What Microsoft is doing is considered by some to be the same "training wheels" approach cell phone service providers used to prod their subscribers into using data services. Four years ago, cell phone service providers introduced wireless messaging, hoping the simple service would lead to subscribers devouring more complex and more expensive data services. By the end of 2003, the strategy showed signs of paying off, with text messaging at an all-time high and cell phone video-downloading services about to be unleashed in the United States.

But whether screaming taunts over the Internet is the first step of a broad Microsoft plan to become a telecom company remains to be seen. For now, online game intelligence is particularly valuable for Microsoft. The company's larger plans for VoIP include blending voice services into online collaboration and teleconferencing products. Xbox Live, the online game service Microsoft launched more than a year ago, gives Microsoft a low-pressure way to learn the ins and outs of running a voice service and other demanding online applications.

"Quality of service is still the main issue" holding back business adoption of VoIP, said Matt Rosoff, an analyst at research firm Directions on Microsoft. "But that's not a big concern with games. People are willing to accept a low quality of voice communication, because it's a game service.

"I think VoIP is just one area in which Microsoft is learning a lot from operating Xbox Live. It's really a classroom in what it takes to operate a fairly complex hosted service. It seems like Xbox Live has taken on a lot of the roles MSN (Microsoft's consumer Internet service) has served in the past."

The numbers are impressive by VoIP standards. Microsoft now has more than 750,000 customers paying an average of $50 a year to access Xbox Live and logging approximately 500,000 hours of online game play each day. Every Xbox Live game, whether published by Microsoft or a third-party game studio, includes broad voice chat capabilities.

Sony made voice chat an option when it introduced online games for the PS2. The company's voice support is currently focused on sports games and a few shooters. The most popular voice-enabled game for the PS2, the commando-themed "SOCOM: U.S. Navy Seals," has logged millions of hours of online play.

VoIP catching on
But VoIP isn't just for playing games. There are now about 2.5 million U.S. residents making phone calls via the Internet, whether with VoIP or a less elegant method of broadband telephony that relies on traditional circuit-switched telephone network equipment.

It's a pittance, compared with the hundreds of millions of consumers who use traditional phone lines to do the same thing. But that's expected to soon change. About 11 percent of all calls are at one point broken up into digital packets and sent out over the Internet. Synergy Research Group believes that by 2005, more than half of all telephone calls will be in packet form, as major carriers jump onboard the technology's bandwagon.

VoIP got a head start in game consoles primarily out of necessity. While players of online PC games can communicate via text messaging, consoles don't use keyboards. Communication between players is necessary in cooperative shooting games and enhances the experience in other types of games, said Scott Henson, director of platform strategy for Microsoft's Xbox division. Voice emerged early as the best way to enable such communication.

"We thought a lot about what's the essence of games, and so much of it is about sharing the experience with someone else," Henson said. "Without it, it's kind of flat. You don't feel who's on the other side; you don't feel the emotion. To a certain extent, you might as well be playing" against the machine.

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Getting voice to work was another matter, however. In VoIP, each second of a phone conversation is broken up into about 50 packets of data that have to travel over the Internet, arrive at the same Internet Protocol address, and then be reassembled successfully. Crowded networks and lost packets are common. "Voice had been tried in a number of PC games, and it was very cumbersome and difficult to configure," he said. "There was some healthy skepticism about whether we could get this to work."

The solution adopted by both Microsoft and Sony was to use a peer-to-peer version of VoIP, in which consoles connect directly to each other to exchange voice data instead of transmitting it over a network. Similar approaches have been promoted by a few VoIP carriers, including start-up Skype. But the peer-to-peer approach is considered generally inappropriate for business environments, where client software varies and multiple voice streams have to be accommodated.

Such concerns don't apply with game consoles, however, because the client software is identical on every system, and traffic is limited by the capacity of the game. For all the concerns about bad voice quality, Skype has resonated with consumers. It has been downloaded 6 million times.

"We had a big debate about whether voice should go all through the service or whether it should be peer to peer," Henson said. "Our ambition was to be serving many millions of users, and the topology of that design made it pretty clear peer to peer was the right choice."

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Sony's SOCOM series uses a similar peer-to-peer system to enable voice chat. Seth Luisi, senior producer at SOCOM, said one of the keys to making a peer-to-peer approach work was to develop efficient software codecs to compress and decompress voice traffic.

"When I was looking for a voice solution, there wasn't really anything that fit," he said. "There weren't a lot of good voice codecs out there, so we did our own...Once the service was running, I immediately got a lot of phone calls from people wanting to know how we did it."

Henson describes similar software tweaking to make Xbox Live voice-friendly. "We put some special sauce into our front-end servers--that let us do some magic," he said.

A winning play
The results have drawn attention from well beyond the game industry. FCC Chairman Michael Powell frequently cites Xbox Live as an early success story for unregulated VoIP. He also uses it as an example of the current hysteria over how, or if, VoIP services should be regulated.

And Xbox Live's voice implementation is being scrutinized, Henson said. "One of the organizations we partner pretty deeply with is our wireless team," he said. "They have a lot of interest in voice going across the wireless network."

Microsoft's larger VoIP ambitions are likely to center on business services such as Live Communication Server, the company's enterprise messaging server, and the Live Meeting teleconferencing service, Directions on Microsoft's Rosoff said. That makes Xbox Live more of a general test case than a laboratory for specific technology.

"The Xbox Live architecture is not like sending stuff over the Internet at large--it's a little bit of closed network," he said. "But it is a demanding network, and so far, it's been quite successful."

Zelos Group's Pidgeon said successful delivery of services via Xbox Live sets precedents beyond voice service. "It provides (Microsoft) with a laboratory to test all sorts of services delivered to the living room, as opposed to the (PC) desktop," he said. "It could be video on demand, music."