At the ComNet networking industry trade show here, AT&T announced its first voice-over-IP retail offering for business, with unlimited calling available on a company's existing corporate network. WorldCom also announced an unlimited-use voice-over-IP service for both enterprise networks and virtual private networks working over the open Internet.
In both cases, the companies are seeking to help corporations that have a voice network and a separate data enterprise network to migrate their voice services, with more and more voice calling traveling beyond the company's private network out onto the Internet.
While neither company could claim that every voice-over-IP call will match the quality of a traditional call over the public switched telephone network, and although companies have been offering various forms of VoIP for some time, the possibility of major carriers offering quality voice service realizes a dream of many a chief information officer--the complete and total integration of a company's data and voice networks at significant cost savings.
"Many in the industry expect that in the not-too-distant future, voice over IP will be as common as making phone calls" over a traditional voice network, said Jay Patel, an engineer with Nortel Networks. It's that belief that is driving AT&T and WorldCom.
Executives of both companies said VoIP will be an add-on service for existing data customers, one that can work with a company's voice switch and that requires very little additional hardware on premises.
AT&T and its partner British Telecom are spending "about $2 billion" to build out for advanced IP services, AT&T's president for data and Internet services, Kathleen Earley, said in an interview. While not claiming that VoIP would always match the quality of service (QoS) found with traditional phone service, she said it offers economic advantages with its flat-rate pricing. "It all becomes an arbitrage situation," she said. "It's all about money."
WorldCom argued that its use of certain technology protocols assures better voice quality and easier adoption and upgrading by customers. "The service has to be more than a price play," said Barry Zipp, senior director of product marketing for WorldCom.
Teresa Hastings, WorldCom's director of IP communications engineering, said the company is instituting another method to ensure acceptable voice service: "Our enterprise routers give priority to voice." The company has no fear that growing voice traffic on the data network will tax bandwidth. "As voice traffic grows, it's still going to be a relatively small percentage" of total traffic, she said.
AT&T's VoIP services are available now, while WorldCom said it is aiming for a March debut for frame relay and ATM, and is eyeing the fourth quarter for VPNs (virtual private networks). Both companies said they have been running successful beta tests over the last year.
In other announcements, WorldCom said it is now offering wireless data access at an average of 128kbps through its partner Metricom in seven cities, with 30 expected by the end of the year. AT&T said it has opened two new data centers, expanded its Web-hosting offerings,launched a 2.5-gigabit-per-second, dedicated-access service and created a browser-based virtual communications service allowing telecommuters to access their corporate voice switch via the Internet.
AT&T's and WorldCom's goals are high, but their competitors are many.
"Our enterprise VPN market share is above 40 percent," about 15 percent in pure VPN offerings, Earley said of AT&T's positioning. She said the company is determined not only to maintain those market shares, as well as those in other IP services, but to grow them. "We have a 'refuse to lose' policy," she said.
But despite their market strengths, both companies are struggling. AT&T on Monday predicted a rough 2001 financially, while WorldCom is expected any day now to lay off as many as 10,000 workers. The companies have staked their futures on the high-growth IP market, but even if they fend off the sector's myriad competitors it may not be enough.
"Continuing declines in long-distance could easily more than offset growth" in AT&T's other areas, said Drake Johnstone, vice president for investment firm Davenport & Co. While AT&T predicted first-quarter revenues would match the 3 percent growth posted in the fourth quarter, Johnstone said it is more likely that first-quarter revenues "will be flat or...negative."
Sheer size may be an advantage for these companies, as both offer coast-to-coast fiber-optic backbones and multiple data centers. But that isn't stopping smaller competitors, as the high-growth businesses in IP continue to draw just about every company claiming to offer telecom services.
IP services make up about 25 percent of all data revenue services today, according to research firm CIMI Corporation, and the stake will increase to 87 percent by 2010. Cahners In-Stat predicts VPN services alone will be a $320 billion market by 2003. The Yankee Group predicts that by the end of this year there will be more than 2.4 million new VoIP extension shipments.