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Fax Over IP: Alive and Well


TMCnews Featured Article

February 25, 2008

Fax Over IP: Alive and Well

By Mae Kowalke, TMCnet Contributor

For a long time now, people have been predicting that faxing will eventually die out as other forms of business communication—like e-mail—take over. Yet fax keeps hanging on, and now a new version of the technology has been spawned: fax over IP.

To get some perspective on the tenacity of fax, and its evolution in an IP-focused communications environment, TMCnet turned to two veterans of the telecom industry: Max Schroeder, Senior Vice President at FaxCore (News - Alert) and Peter Davidson at Davidson Consulting.
TMCnet: When did fax first take off as a business communications technology?
PD: It was in the early 1980s, when Federal Express brought out a service that used Group IV fax technology and allowed people to fax documents between FedEx offices. Group IV used ISDN technology and sent a fax at 64 Kbps. Because it cost about as much to send a FedEx Group IV fax as to send an overnight package, corporations took a look at that and compared it to buying a $2,500 Group III fax machine (which used conventional phone lines and sent faxes at 9.6 Kbps at the time). They decided en masse to buy the G3 technology and within a year or so everybody had a fax number on their business card.
TMCnet: Why does the viability of fax keeping surfacing?
MS: I was first asked this question in 1990 at a time when many IT staff did not even know what a fax server actually did. The Internet existed but, other than a small number of university or government personnel, it was a well hidden secret. In fact, Cisco (News - Alert) went public in 1990 as a six-year-old company. I thought for people to say “e-mail will kill fax” was just not a logical statement at the time.
PD: Fax is seen as a non-coded technology and therefore inferior to computer-based
technologies. I remember back in the 1980s the idea surfaced that communicating word
processors would wipe out fax. Of course, it’s the communicating word processors that no longer exist.
TMCnet: Do you still get asked whether fax will continue to survive?
MS: Yes, and this spring I included some information in a presentation including the following figures:
  • 78 percent of telecom managers don’t know the cost of sending a fax.
  • More than 100 million fax machines are installed worldwide.
  • More than 400 Billion documents were faxed in 1998.
PD: Yes, constantly. But fax retains a reputation for delivering critical data as perfect facsimiles and doing so immediately and without security threats. Fax appears to be doing quite well and my research predicts a strong growth in the fax server industry over the next several years. The report predicts that the fax server industry will grow from $280 million in 2006 to $510 million in 2011, a compound annual growth rate (CAGR) of 12.7 percent.
TMCnet: Does FaxCore’s experience with the fax market bear out research predictions?
MS: Unquestionably, and Davidson’s report definitely shows some of the key reasons such as the fact that virtually all of the fax server market is running on legacy board technology.
PD: Besides creating a booming replacement market for Dialogic (News - Alert), which just purchased
Brooktrout and now has a 95 percent share of the worldwide market for fax boards, this trend will cause the fax server market to increase rapidly as well. This will happen, despite any opposing trends for companies to not buy fax boards or to buy boardless IP fax servers rather than new fax boards. The market will also grow because IP fax servers will grow throughout the forecast period, gaining primacy in the market in 2009. Davidson Consulting found that the FoIP market grew from $65 million in 2006 to $285 million in 2006, a growth rate of 39.2 percent.
TMCnet: When e-mail first entered the scene, why did people think that the newer technology would kill off fax?
PD: E-mail was always going to kill fax and still supposedly is. But people have their routines for using fax. Anytime they need to send a document that requires a signature, they use fax. Distributors almost always use fax because it gets the document into the face of the retailers they communicate with. Medical personnel continue to use fax almost religiously. Financial institutions use fax to get mortgage information out to all their branch offices. Everybody says e-mail will win out because it uses coded information and it’s free. But the coded information can be stolen by hackers who wait at the edges of firewalls and intercept every e-mail coming in or going out. E-mail will always have its security issues and fax will always find its niche.
TMCnet: What actually happened—did e-mail kill off fax?
PD: E-mail always has it security issues and there is a significant portion of the
population that doesn’t use it or doesn’t use it to send critical information. Nothing’s safe
anymore. Now the hackers have a method for stealing encrypted data off of portable computers. So, now, even if you send secure e-mail, it can be compromised if the laptop is stolen.
TMCnet: Do you think e-mail will ever replace fax?
MS: No. E-mail has been around for about 50 years and during most of that time it used for internal company communications as the Internet as we know it today was not yet operational. However, for the past 10 years, although e-mail has become ubiquitous fax continues to grow. The reason is simple. Fax is a facsimile of an actual document such as a legal contract. It is an image that cannot be easily altered and is accepted as a legal document in most countries.
E-mail is text-based and is not fully recognized as a legal document when compared to fax. For example, consider how it might be received if you send an e-mail saying: “ I just signed the stock purchase agreement so please execute the purchase today.” With a fax, the sender will have a record of the date and time the fax was sent and if it was received successfully. This is why brokers and banks require their clients to fax trade orders.
PD: E-mail probably will never entirely replace fax. It will continue to edge into the fax
marketplace. E-mail, after all, completely replaced the cover-page fax – where people wrote notes to each other on the cover page of a fax. That type of fax has proved to be completely an e-mail application.
But e-mail will not touch the “invoice” type of document where there is all kinds of variable information and it is all formatted onto a business form. This type of document is now production faxed, where a company puts a batch of documents into a series of faxes and every one is perfectly formatted and every fax is sent out an unattended basis. This type of fax actually competes more with snail mail than e-mail. E-mail won’t touch this application until digital signatures are very widely used. Right now, digital signatures aren’t used much beyond firewalls.
So, it will be a generational thing, and it will be at least 20 years before we see digital signatures so widely used. By then, who knows what other security issues will keep fax going.
TMCnet: It seems like people have been saying for a while now that fax will eventually be killed off by some newer technology. Do you think that will happen, and why or why not?
PD: Digital signatures are the dangerous technology. But it will take 20 years or so for that technology to gain such broad usage that it will threaten fax. A lot can happen in 20 years. By then, fax will be free and faxes will be sent as quickly over the Internet as e-mail. 33.6 Kbps faxing, which is the main speed used today, will be superseded by broadband Internet fax. Fax will live through every challenge it will ever face.
TMCnet: Why do you think fax has stuck around for so long?
PD: I think its just such a simple technology. First of all, you absolutely know whether a fax was received or not. Second, you know that a perfect replica of your original document was sent. Third, you have a sense that the information is there at the recipient end and it is safe.
TMCnet: How would you summarize the current status of fax as a business communications technology?
PD: First, I think that fax machines are going away. They’re being replaced by multifunction devices and by fax servers and fax services. In fact, all the growth in the fax industry is in fax servers and services. Fax services are expected to grow at a 17 percent compound annual growth rate (CAGR) through 2010. Fax servers are expected to grow at a 13 percent CAGR through 2011. The fax industry remains quite strong.
TMCnet: What changes do you see happening with fax technology and the fax market in the next 2-5 years?
PD: In fax servers, the market will transition from conventional fax servers to IP fax servers. FoIP servers will gain primacy in 2009. By 2011, FoIP servers will account for $285 million in sales to only $170 million for conventional fax servers. Conventional fax servers will go the way of the PBX. In services, broadcast fax is becoming a much smaller market. But that decrease is being offset by the Internet fax services industry which is growing at rates in excess of 20 percent per year. Virtually every VoIP service provider has gotten into FoIP and the market is booming.

Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers whitepapers, case studies and other documents which are free to registered users. Today’s featured white paper is IP Enabled Contact Centres , brought to you by Avaya (News - Alert).

Mae Kowalke is an associate editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. To read more of Mae’s articles, please visit her columnist page. She also blogs for TMCnet here.

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