SBC Communication's new voice-over-IP service is the next in a long line of such offerings, which we believe will continue for the foreseeable future.
For VoIP to be useful today, the underlying network must have plenty of bandwidth to spare, and user expectations must be fairly low. This is true in some private networks or in very remote international locations where call quality is poor across the board and costs are very high.
However, in most cases, business-user expectations for call quality and availability make sending business-related voice traffic over the Internet an unnecessary risk that is not offset by clear business value. Voice-over-IP is not suitable for use by most businesses today.
At best, VoIP is useful internally, but even then requires a potentially expensive upgrade of corporate networks to support hand-offs between IP-focused and more traditional telephone network technologies. One of the challenges with VoIP is that, unlike the circuit-switched line technology used in voice networks, data networks break up data streams into discrete packets to enable multiple data exchanges to share one pipe. In a data transfer, if some packets are delayed, the worst that happens is that someone has to wait a few seconds longer for a Web screen to build. However, a multisecond delay in voice packets can make conversations incomprehensible.
VoIP networks avoid these problems by either provisioning networks so that congestion never occurs or by prioritizing packets to ensure that conversations are handled ahead of data. Both excess capacity and prioritization can be added to networks, but are often more expensive than the savings or other value of sending VoIP.
If a company wants to experiment with VoIP and wants a telecom company to install it, SBC (formerly Southwestern Bell) will do that, as will most other service providers, integrators and network-hardware firms. But the Internet does not have ubiquitous packet prioritization, so this is not appropriate for making calls to clients or business partners unless their call-quality expectations are low or the traffic stays on portions of the Internet that have excess bandwidth or support prioritization.
The larger significance of this is that new network services for businesses will be driven largely by the telecom upstarts, with major carriers lagging two to four years behind in offering new services that users then find ways to exploit. This is another tentative step by one of the major carriers into this area. As the telecom service providers move further into the converged services arena, their offerings will help determine what equipment businesses need to install and the speed with which various new communications services are adopted.
VoIP is a niche market. There is no reason for a business to use VoIP today unless it has a lot of unused bandwidth, which not many people do these days, or unless it simply wants to experiment. Someday, however, we expect voice-over-IP to become common across public and private networks.
Corporate users should always view new telecom company services with high levels of skepticism. It is relatively easy for these large players to throw a few of their experts at a demonstration. It is brutally difficult to get thousands of line employees to actually provision and support new services broadly and consistently.
In general, users need to understand the real value proposition of voice-over-IP. If the goal is to save money, we believe users should focus on converging traffic in monopolistic local loop environments or on international lines where costs are still high. This does not necessarily require voice-over-IP, and users must keep in mind that payback periods on equipment expenditures will change dramatically as per-minute rates continue to decrease.
However, we do believe that there will be much more value to be gained from voice-over-IP from a business standpoint in call centers. Being able to converge interactions with customers across multiple points of interaction has strong potential for customer service and other call-center businesses. The trick for users will be to know how to judge when a large-enough percentage of a target user segment will have the appropriate infrastructure available to them.
Near term, users should merely focus on using the option of voice-over-IP as a negotiation tactic and deploy it in small pockets to prove they are serious rather than plan on broad deployments. Longer term, we all need to be on the watch for real business applications that require converged network capabilities, such as next-generation call-center functions.
META Group analysts Val Sribar, Dale Kutnick, Peter Burris, William Zachmann, Jack Gold, and David Cearley contributed to this article.
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