Momentum is building for services that let consumers make phone calls over the Internet. In 2005, the consumer market for voice over Internet Protocol, or VoIP, calling grew by more than 250 percent, with over 3 million people subscribing to a VoIP service, according to Yankee Group Research. This figure is expected to jump yet again in 2006, to a projected 8.4 million subscribers. And by 2009, there will be 28.5 million VoIP users in the U.S., according to the Yankee Group.
For the past couple years, VoIP pioneers such as Vonage and Skype have accounted for the majority of consumer subscriptions to Internet telephony services. But now other players, such as cable operators, are entering the market. Time Warner added 270,000 digital phone subscribers in the first quarter of 2006, its biggest gain ever. And Comcast, the largest cable provider in the U.S., added 211,000 new phone customers during the quarter, more than it had signed up during all of 2005.
Internet companies such as AOL, Google, EarthLink and Yahoo are also getting into the game with services that let PC users make calls not only between PCs but also from their computers to regular phones.
VoIP is attractive to consumers because it's a cheaper alternative to traditional phone services. But as the saying goes, you get what you pay for. Many of these services suffer from intermittent lapses in quality. While some users may tolerate echoes or a dropped call, analysts say improved quality of service is needed to attract more mainstream consumers.
"When you start addressing the mainstream market, people just want to be able to pick up the phone and have it work," said Marc Itzkowitz, director of product management for SupportSoft, a company that makes software that helps VoIP providers improve the quality of their networks. "A lot of early adopters are willing to put up with the reliability issues, but as we start to see people like my mother use VoIP, they may be less willing to accept it."
An expectation of reliability
The traditional telephone network was developed more than 100 years ago and used dedicated circuits to connect callers. While this network ensures top quality, it is inefficient and thus expensive to operate. By contrast, the Internet was designed to maximize efficiency. It allows different applications--voice, e-mail, video, Web surfing, etc.--to share the same network. The Internet also operates on a "best effort" standard to deliver streams of voice and other data, which are sent over the network in formatted packets: The packets are sent out on the network and essentially jockey for resources as they travel toward their destination. Sometimes packets are delayed or dropped if they hit congestion.
For text-based communications like e-mail, packet delays don't affect the experience much. But voice, video or interactive gaming services require packets to show up at their destination in order and in a timely fashion. If packets are lost or delayed, the sound or picture is distorted.
"It helps when there is a quality-of-service layer in the network to help latency-sensitive traffic get through the network faster," said Joe Laszlo, an analyst with Jupiter Research.
But guaranteeing that VoIP packets get priority is difficult when the company providing the service doesn't control the underlying network. This is the case for companies such as Vonage, EarthLink and SunRocket, which offer services that allow consumers to turn their broadband connections into phone lines. It's also an issue for Internet phone companies such as Skype, Google, Yahoo, AOL and EarthLink, which also let people make calls over the Internet using their PCs.
"If you are Vonage or any unaffiliated VoIP service provider, you will always be susceptible to problems on the network," said Jeff Pulver, a co-founder of Vonage and a VoIP pundit. "Over time it will become very important for traffic to be prioritized, especially as video is added."
This could be part of the reason cable VoIP customers are almost twice as confident about the reliability of their IP telephony service as customers who use a service from a VoIP provider that doesn't own its own network, according to a survey conducted back in March by SupportSoft. Cable companies offering Internet-based voice are better able to shape traffic, because it rides over their own access network.
While prioritizing packets could help improve quality, companies such as Vonage, EarthLink or Skype are wary of the approach. They fear that if carriers give their traffic priority, it'll come with hefty fees for the upgrade, fees the VoIP providers would then have to pass on to their customers. They also fear that network owners might deprioritize a third-party provider's traffic in order to improve the quality of their own voice services.
A Net neutrality issue
To ensure this doesn't happen, Internet companies have been lobbying Congress to pass legislation that would make it illegal for network owners to give priority to anyone's traffic--a policy called network neutrality, or Net neutrality.
"I think best effort works," said Michael Jackson, director of operations for Skype, which is owned by eBay. "We believe in the open Internet. Skype is actually designed to work around congested networks."
But even Pulver, a strong Net Neutrality supporter, concedes that prioritizing traffic in the network could be helpful.
"Eighty percent of the time, I think VoIP over the public Internet works great and people get great quality voice calls," he said. "But there are times during peak traffic times--assuming that the carrier isn't deprioritizing traffic--when quality of service could help if the network is congested."
Even though cable operators may be in a better position than other VoIP providers because they own their network, it doesn't mean they're immune to quality issues. About 34 percent of cable VoIP users said in a recent survey conducted by SupportSoft that a technician had to visit their home within 90 days of the initial service installation due to a problem. About 16 percent had a technician visit their home two or more times, according to the survey.
Itzkowitz said a lot of VoIP issues are caused by broadband connections that have not been installed correctly. In fact, one cable operator, whom Itzkowitz declined to name, found that 51 percent of its broadband installations were not up to specification when the technician left the house, he said.
"Faulty installations where the signal is slightly degraded may not be a problem if you're just surfing the Internet," he said. "But if the signal is weak and packets are out of order on a voice call, it's painfully noticeable."
Itzkowitz said software tools from his company and others can help carriers detect trouble in their networks and remedy problems before they become issues for consumers.
While most people who have used a VoIP service agree that IP telephony still suffers from occasional reliability issues, optimistic VoIP service providers point to the adoption of cell phones, which have also been plagued with quality issues for years, as an example of consumers' willingness to give up quality for convenience.
VoIP providers hope consumers are as willing as cell customers to accept their occasional echoes and dropped calls for lower-price services that offer more features than traditional phone service.
"Do our VoIP services have the 99.999 percent reliability of the regular phone network?" asked Jim Bagnato, EarthLink's director of voice services. "No, but we think the service meets the expectations of large numbers of our customers, who are very happy with the service."