How VOiP Will Rock Your World

Eric Mack takes a deep dive into the near future of of VoiP, and the future for traditional carriers does not look pretty.

Eric Mack, Contributor

August 9, 2011

8 Min Read

The growth is nothing short of meteoric.

I'm not talking Apple, I'm talking VoIP. Voice and video over Internet protocol is exploding -- via both new consumer apps and enterprise-targeted services. Already most PBX systems use it, and now with carryover from consumer platforms has pushed a once fringe technology to critical mass.

Products from Microsoft,Google and Amazon will hit business soon. If you haven't seen it already, you will.

VoIP is on the brink of ubiquity. The floodgates are opening. Already Skype is available across almost every conceivable platform and device. And more options are on their way.

I easily can imagine a future where Google and its abundant fiber become the de facto telecom company. Traditional carriers will have to fight to keep up -- how fast can they go full-digital and video-capable? The road for them looks rough.

The VoIP landscape is rapidly evolving and change is lightning quick. To help you and your business make sense of it all, here's my deep dive into VoIP tech now and as it evolves in coming months and years.

The State of VoIP in 2011

"We appear to have the most acceleration right now to move off of traditional analog voice to full digital," analyst Rob Enderle tells BYTE. "This isn't voice but integrated service so that you can easily bridge to video -- and you can connect voice back to something related to e-mail and message management.

"The term we've been using for well over a decade is convergence, but for whatever reason the industry has come around to the idea that this stuff needs to be done quickly," Enderle says.

Why the sudden rush? Power players like Microsoft and Google have likely pushed the surge, moving VoIP beyond second-tier players offering edgy services and toward truly ubiquitous, mainstream availability.

"Now we've got A-class companies that are behind it and that makes a difference," Enderle says. "Traditional voice is going away… that particular part of the (traditional carrier) business has become obsolete and now we're just waiting for the market to finish the process" to turn everything digital.

It's not the first time pundits have predicted the death of old-school landline service. But now, with executioners like Microsoft and Google and their sharp, high-powered axes, it's happening. The signs are all around us.

The Estonian Endgame?

As of this writing, a week after being released, Skype for iPad remains among the top free apps in the iTunes store. More than 27 million people are currently logged in to Skype's network at this writing, a number that doesn't even include the millions of potential Skype video chats going on via Facebook. And it doesn't take into account the Google+ video moves or what Amazon is planning for its high-powered video-capable quad core tablet, code-named Hollywood, which sources tell BYTE Amazon is trying to rush to market by the holidays.

Skype expects to be the standard, and certainly its early lead sets it up for it. "We're a company that crosses different ecosystems, that supports multiple platforms, gives users lots of choice, and we sort of want to become the standard for IP communication," Skype executive Rick Osterloh tells BYTE.

As for the challenge of competing with traditional wired and wireless carriers, Osterloh emphasized the distinction between IP communication and traditional telecoms.

"Skype is really an additional communications tool that's added on to (a customer's) portfolio," Osterloh says. Specifically, he sees Skype's video component as a prime example of adding to users' existing roster of tools without taking anything away from the carriers.

It's a nice sentiment, probably driven by Skype's need to stay friendly with the existing carriers. After all, Skype relies on those carriers and must play nice.

But notice that countries like Belize, with powerful and centralized telecom carriers, have shut Skype out. And Skype's rhetoric doesn't really jive with some of the other services it now offers, such as the option to SkypeIn to a dedicated number. That's a clear replacement option for traditional home phones.

Gartner analyst Ken Agress says the company is obviously positioning itself as an alternative to the traditional analog phone network.

"There's definitely downward pressure (on traditional carriers)," Agress says, "because as we move into an IP-enabled voice era, it becomes easier to establish international connections without having to do lots of dedicated trunks, so you gain efficiency."

That all translates to the single feature that has driven consumers to Skype and other VoIP providers more than any other so far – cheaper prices to call more numbers worldwide.

Costs and Critical Mass

Last week, a rash of VoIP announcements had pricing at the core -- a clear move toward expanding VoIP beyond early adopters and into the mainstream. Google Voice lowered rates to 150 dialing destinations. Vonage's new iPhone app provides fifteen minute calls for under two bucks to a hundred countries with a free trial. Goober Networks announced it is offering free ad-supported VoIP calls.

All of those new options could actually be good news for the lifespan of the analog phone network, because such a fragmented and varied menu of options could keep the VoIP reaper away for a while longer.

Rob Enderle says that while neither Skype nor any of the other VoIP providers have yet reached critical mass, VoIP itself has, leaving only generational barriers and general aversion to change as the remaining barriers to a mainstream VoIP revolution.

"It's not going away and now it's just a case of folks moving from the way they were doing things to a new thing," says Enderle.

Vonage, more than any other VoIP player, has been working to make that transition as simple and seamless as possible.

The company has a national footprint, 2.4 million customers on its home phone replacement plan. Vonage VP Gavin Macomber tells BYTE it's looking at three frontiers for growth: international long distance from home and mobile phones, international service for customers who don't already have accounts via the iPhone app or for Android, where Vonage is soon to land, and a move into more countries, beginning with Canada and the United Kingdom.

And this is where the true nature of the race emerges. The analog system cannot survive in the midst of this explosive move toward ubiquitous VoIP. That's clear.

All that remains is which player and strategy will come to finish it off. Vonage seeks to co-opt users of all technical abilities with an analog replacement strategy. Soon to be Microsoft's Skype continues to push a whole new communications suite up the demographic chain, with younger users bringing more parents and grandparents into the fray.

Google is attempting an end-run around both using a different model with Google Voice's sexy multiple number aggregation feature, along with its Gmail and Android integration.

Even more smaller players dither around the edges with ad-supported models, products targeting the enterprise and more. And they may not be small for long.

But there's still another force at play in the mainstream transition to VoIP – the traditional carriers themselves.

Carry Us Into the Future

"If (carriers are) smart, they can occupy an important piece of the future public switched telephone network by putting a strong IMS platform in place and integrating well with their (VoIP providers), the question is whether they're going to be that smart or nimble," says Gartner's Agress.

IMS stands for IP Multimedia Subsystem, an architectural framework most closely associated with 3G and 4G networks. Agress describes it as a set of standards that will take VoIP and allow it to be implemented on an industrial scale.

It could also be the carriers' best hope for staying relevant in the long-term, although none has brought an IMS-based offering to market just yet.

If the telecoms don't manage to remake the public switched telephone network into something VoIP-friendly in their own image, there is the remote possibility another company may be able to.

"Google already owns a substantial amount of the national fiber in the United States…putting themselves in the position where they could be a carrier," says Rob Enderle, noting that Google would still have last-mile difficulties in providing services. Nevertheless, he figures the company already has 80 percent of the infrastructure it would need.

Gartner's Agress is skeptical about whether Google will move further into the telecommunications business because of the regulatory headaches it would face by becoming an actual carrier.

Everyone BYTE spoke with for this story agrees that the traditional phone system will remain in place for some time. No other single network penetrates as many homes and businesses worldwide yet, but Enderle believes the younger users of the products announced this month will continue to push the generational movement towards VoIP forward.

They're also likely to continue bringing them into offices at an increasing rate. It may not be long before corporate VoIP goes the same way that corporate Blackberry accounts seem to be heading.

For now, BYTE will sit back and continue to watch the battle for king of the ever-taller VoIP hill. And for the analog phone system, it's not looking good. Take care, guys. It's been fun and don't call us, we'll call you.

Michael Doornbos and Mike Rothman contributed reporting to this story.

Eric Mack is BYTE's Executive Editor for News. Follow him @ericcmack or email [email protected].

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