VoIP providers work to lasso smaller businesses

New products and services put Internet telephony into the reach of smaller companies.

SAN JOSE, Calif.--Gadgets and services on display at the VON Internet phone show reflect an effort to attract the growing number of companies, many of them variably small, that haven't yet made the move to Internet phones.

Many of the new products and programs demonstrated and discussed at the Spring 2005 Voice on the Net show are for corporations without the technical expertise or capital to upgrade to Net phones on their own.

Businesses were among the first to take to voice over Internet Protocol, in which phone calls use an Internet connection, thus avoiding regulation and sometimes entirely bypassing the traditional infrastructure of the nation's local phone networks, controlled by SBC Communications and three other Bell operators.

Despite such high-profile converts to VoIP as Merrill Lynch, the technology has hardly saturated the market. About 39 percent of U.S. businesses have indicated that they want to do something with VoIP, but only 5 percent actually have made good on those plans, according to analyst firm IDC.

"There's a lot of room out there," said SBC Vice President Mark Fishler.

Besides expenses, businesses are put off by VoIP's uncertain regulatory future, possibly made worse recently when Federal Communications Commission Chairman Michael Powell, a proponent of keeping VoIP calls unregulated, said he was stepping down. Businesses are also hesitant to dump old telephone systems, in which they've invested millions of dollars.

To capture new businesses, some providers are playing "host," which is less financially stressful. Hosting is a service model in which a company--say, SBC--provides the service using its expertise and infrastructure. This way, businesses aren't forced to make big capital investments.

SBC's Fishler claimed that SBC led the market for hosting business-class VoIP. But it'll soon get stiff competition from Lucent Technologies, which will begin selling a hosted VoIP service in the next few weeks, according to Lucent Vice President Stef van Aarle.

Hosting a phone service for businesses is a novel idea. It's one that might not be especially welcome among larger, more established businesses that have made huge investments in their own phone networks, using traditional circuit-switched technology. "Outsourcing is a brand-new idea for phones," said Michael Cooper, next-generation network-planning director at Bell Laboratories. "Corporate IT departments are used to running their own boxes in the basement."

Even so, there are a lot of companies out there with smaller staffs and lower established phone investments. Analysts at IDC say hosted VoIP will grow from about 75,000 actual users in 2004 to 12 million by 2008.

Things are also changing on the services front. Vonage, the nation's largest consumer VoIP provider--with an estimated 535,000 subscribers--recently introduced a 24-line phone service aimed at small to midsize businesses, said Mark Lyons, Vonage's vice president of sales.

Ma Bell AT&T, which SBC is planning to buy for $16 billion, has been developing several new business-focused services as well, though some may also appeal to consumers. For instance, the operator is now testing open-source software for Internet Protocol telephone switchboards. The open-source software is from Asterisk.

VoIP gear makers are also gearing up for a business blitz. Mitel Networks, which makes phone equipment for businesses, has come up with a new form for VoIP phones. Rather than looking like a traditional desk phone, Mitel's new Navigator is a 14-inch rectangular console on a base, designed to fit snugly underneath a monitor. While pricey at $450 each, a large U.K. retailer is using the space-saving Navigator in its calling centers, according to Mitel.

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