When the University of Notre Dame began making plans for a new voice-communications system to replace its Centrex system, a hosted voice service from SBC Communications it's been using since 1992, school officials had to take into account big changes in the way people communicate. Cell phones with cheap long-distance rates are making in-room long-distance services less important. So are E-mail and instant messaging; at Notre Dame, as at many universities, people can access any location on campus through a wireless data system. And the growing use of voice-over-IP technology promises more changes in the future.

But a few things haven't changed: Notre Dame likes having the 631 dialing exchange exclusive to the school. It also isn't eager to run its own phone system. And it wants technology flexible enough to adapt to new services and applications.

That's why Notre Dame decided to stick with SBC, and in early November signed a multimillion contract for a hosted VoIP system that will be deployed over the next several years and eventually serve around 16,000 students, faculty, and staff. It is one of the largest hosted VoIP contracts to date, according to industry analysts and SBC.

With its Centrex contract due to expire at the beginning of 2006, the university looked at other options, including buying voice switches and setting up its own system, or bringing in another service provider.

"SBC convinced us they are very much committed to the digital revolution and that voice-over-IP is their future," says Dewitt Latimer, the university's chief technology officer. "We also had to ask ourselves whether there was value added by breaking ranks with SBC and whether that value was equal to the amount of pain. We were very satisfied with the service SBC had provided and eventually decided to renew our relationship with them."

The SBC PremierSERV Hosted IP Communications Service will be deployed in phases over the next several years, starting with a pilot for a few hundred users in the first quarter of 2005. If that works as expected, the university will begin to cutover buildings to the new system throughout next year and into early 2006. The new contract runs for three years and can be renewed for two more years. Latimer wouldn't provide financial details.

One key element is the ability to provide and charge for tiered services in a changing technology environment where it isn't clear what services students or the university will want. "I'm not sure that the traditional model of providing voice services to students is applicable in the future," Latimer says. The majority of students have cell phones with free or inexpensive long-distance calling provided under a contract paid for by their parents, he notes. Still, the university needs to provide basic phone service to dorm rooms, which are usually shared by several students.

Notre Dame also wants to be prepared in case VoIP shifts into becoming voice-over-Wi-Fi. The university has deployed a Wireless Fidelity data network around its campus, and some analysts and vendors think that making voice calls from Wi-Fi hot spots will be a big trend in the coming years. "We're very comfortable with the service we can deliver to students over a wireless infrastructure," Latimer says. "A wireline-wireless package is a future option."

The more sophisticated features offered by a VoIP system will be used by faculty and university employees who work in call centers or do fund raising, Latimer says. The system will offer a single in-box for voice and E-mail messages, "find-me, follow-me" call routing, and the ability to launch a voice call by clicking on a button on a computer screen. "The whole goal here is to position us in such a way that we can take advantage of new applications, even those we haven't thought about," he says.

Going with a hosted VoIP system lets businesses and organizations move to the latest technology without a lot of hassle, says William Stofega, a senior analyst at IDC. "In some cases it allows the IT staff to retain some control without the headaches of security and upgrades," he says. "The IT staff can handle the fun part: developing customized applications."

For the phone companies, which have been selling Centrex service to businesses for decades, a key measure of success will be how well they shift those customers onto newer, hosted VoIP services. Says Stofega: "On one hand, SBC loses a Centrex customer. On the other they gain a hosted customer and are selling managed services."