Investors have ponied up to the bar to fund VoIP companies; most major telecom manufacturers have largely abandoned development of new circuit-switching and time division multiplexing (TDM) products. But before we nail the coffin shut on the legacy of the digital telephone technology that was so widely hailed two decades ago, let's examine the strengths and weaknesses of VoIP.
In looking at VoIP as a technology, it's important to distinguish between the cost of building or running a network and the price a service provider charges. VoIP benefits from the Internet's pricing model. There is rarely a charge for usage or for distance. The incremental price of a call thus seems to be free. That's not quite true, of course; additional loading can lead to degraded performance, or require a fatter, costlier access pipe.
VoIP benefits from the Internet's pricing model.
VoIP is actually far more complicated than TDM, and thus more costly to implement. With VoIP, every packet needs header processing and buffering. The protocol stack is several layers deep. With TDM switches, on the other hand, the switching fabric is trivially simple. Bits are simply clocked on and off a time-division bus, or switched by clocking them through a memorylike crosspoint chip. Zarlink Semiconductor, for instance, makes a TDM switch chip for less than $100 that can connect 32,768 calls in to any of 32,768 outputs. Of course hardware and chip manufacturers would rather sell a VoIP solution--it's worth more to them.
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Sometimes, though, VoIP can be cheaper to implement than TDM. One reason is the cost of legacy TDM network interfaces. TDM components are often made in lower volumes, or may also need extra hardware. But even then, high-capacity TDM switch ports aren't all that expensive, given their capacity. Amortized on a per-minute basis, TDM switching cost is a small fraction of a penny.
TDM's lack of packet headers also makes it more bandwidth efficient than VoIP. Sometimes VoIP is compressed to make up for that, but compression reduces voice quality. If IP bandwidth supposedly is too cheap to meter, then why compress voice from its native 64 kbps down to about 9 kbps? The best-sounding VoIP systems use uncompressed voice, but need about 100 kbps per call, taking into account both header overhead and IP's buffering requirements.
Another purported advantage of VoIP is the ability to have one network carry both voice and data. It's clear that having a single network below the IP layer makes sense. But packet switching was invented precisely because data has very different traffic requirements (bursty, loss-tolerant) from voice (steady, loss-intolerant).
IP data is most efficient on a network that is not good enough for voice.
But those details aside, VoIP developers have made real contributions to telephone network technology. Modern "softswitch" architecture, for instance, was largely developed for VoIP. Softswitch software is capable of routing phone calls and other voice features typically handled by massive and expensive hardware.
Network control protocols such as SIP (Session Initiation Protocol), MGCP (media gateway control protocol) and Megaco (H.248) are real innovations, providing network operators with real flexibility, much more than earlier Signaling System 7 networks provided. And the best part is that modern switches don't all depend on having the voice encapsulated inside IP. Megaco can be used with VoIP, ATM or even TDM networks, on a flexible mix-and-match basis.
It's not fair to compare VoIP implementations with the predominant TDM systems found in telephone networks. The Lucent 5ESS and Nortel DMS switches used by the regional Bell companies are basically legacies of the VAX-11 era, decades-old technology that survives because of its huge base of embedded software. Modern switches, built with up-to-date hardware technology and softswitch internal architecture, can often support both TDM and VoIP, and sometimes ATM as well, at a fraction of the size and price of these legacy behemoths. But their lower cost is not a result of using VoIP; rather, it's the difference between a design from 1980 versus one based on today's components. Does anyone remember what a 1980-era packet switch looked like?
There are still good VoIP applications, both in the enterprise and in carrier networks. But don't write off TDM or ATM yet; they're looking better than ever, and are still the better choice for many applications.