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Is VoIP Dead?

TMCnews Featured Article

September 29, 2008

Is VoIP Dead?

By Jon Arnold, Principal, J Arnold & Associates

I’ll bet that got your attention.
Skype’s (News - Alert) Jonathan Christensen proclaimed so much during his keynote at TMC’s IT Expo earlier this month. It was one of the more provocative presentations during the conference, and is worth exploring further in this column.

First off, I thought it was great to see Skype doing a keynote at the IT Expo, which is not normally a core audience for them. However, times are changing, and this itself should be of interest to service providers. Skype has an important message to deliver, not just for the consumer market, but for the business world too. It’s really a matter of how far ahead you’re prepared to look. While most service providers are just catching up to the realities and potential of VoIP, pioneers like Skype are way past that, and for them, VoIP is so old, it’s dead for them.
This is important, not just in understanding what Christensen is saying, but also what he’s not saying. At face value, the title of his keynote – “VoIP is Dead” – could be taken to mean that the white flag has gone up, and the VoIP that most people are familiar with is all but over. There certainly is some truth to this in that the VoIP pure plays are no longer a threat to the telcos. Early on, Vonage (News - Alert) led the charge of many pure plays, and until the cablecos entered the space, they held a 50 percent market share, and were adding subscribers – at the telcos’ expense – at a healthy clip.
That changed quickly once the cablecos ramped up with their Triple Play (News - Alert) bundles, and now they pretty much own the residential VoIP market. Today, Vonage is the only VoIP pure play of substance left standing, but nobody views them as a major disruptor any more. With no serious challengers, the cablecos can effectively offer VoIP as a loss leader, and just bury it into the overall bundle. In this environment, VoIP becomes a secondary offering, which is death for innovation, and any hope of making VoIP the vital service is started out being in the beginning.
So much for the bad news.
The good news is that this is a short term view, and from Skype’s perspective, the death of VoIP is really a new beginning. For Skype, the longer term view is much more promising, where the VoIP we all know is really just 1.0 iteration. The VoIP service people use today does provide good value, and certainly has its virtues. However, it exists largely in a PSTN world, which by nature limits the true potential of VoIP.
The vision Jonathan paints, of course, is based in the world of IP, not TDM. VoIP can readily replicate the PSTN feature set today, but not much more. With end-to-end IP, not only can VoIP deliver an added layer of new services, and integrate seamlessly with Web services, but it can also deliver superior voice quality to what we’re experiencing today. Under these conditions, VoIP is actually a better product than TDM, and that’s where things get interesting. VoIP is still widely perceived as an inferior service, which explains why it is primarily sold on the basis of price rather than quality. Think of the possibilities for service providers when VoIP could actually be marketed as a premium service, and one that does not have to be sold as a way to lower your long-distance costs.
Well, by the time the incumbent telcos come around, Skype will be long past them. Skype has built up a sprawling international customer base that has embraced a communications platform that goes well beyond VoIP. PC-based VoIP and IM have been the backbone of their success, but Jonathan sees a richer experience emerging, and one that is much more than everyday VoIP. In the keynote, he talked about three pillars that will support this new mode of communications – presence, wideband audio and high resolution video.
Presence – and IM – is at the heart of this new experience. He views presence as the new dial tone, and for good reason. It simply has more intelligence than the PSTN. When you make a phone call, you often have no idea if the party being called will be there, let alone pick up the call. With presence – whether using IM or voice – you usually only initiate contact when you know the other party is willing and able to engage with you. It is often said that 50 percent of all calls end up in voice mail, so clearly, presence ensures a higher success rate for completing calls. Jonathan also talks about presence in terms being an “explicit trust model”, in that all parties are known to each other. This creates a stickier environment for communicating, something that all carriers strive for.
The second pillar is wideband audio, which refers to the superior voice quality I mentioned earlier in an IP environment. Not only do you get a better sounding experience, but the audio is inherently richer. Virtually all phone calls engage only one ear, and tie up one of our hands to when talking. PC-based VoIP calling is often done using a headset covering both ears, so by design, your audio sense is more fully engaged, plus you have the use of both hands. In addition to wideband codecs, higher-end stereophonic headsets can deliver a vastly superior audio experience that is more life-like than any conventional telephone call.
Finally we have video. This is the pillar that truly transforms the communications experience and takes it far beyond anything that VoIP can typically provide today. Video technologies have made great advances recently, not just for immersive experiences such as telepresence, but also on the desktop. Skype’s recently launched 4.0 version supports full screen video, allowing the PC to deliver an integrated multimedia communications experience. It is still early days for video, but as advances continue in areas such as dynamic bandwidth management, PC processing power and webcam optics, video will become a more integral – and natural part of how we communicate.
Taking all of this into account, one of Christensen’s key messages was that innovation is happening today at the network edge, not the core. Furthermore, it is not coming from the telcos, but from the disruptors from outside the voice world, such as Skype, Google (News - Alert) and the whole Open Source movement. Telecom, as we know it, is now software, and rapidly moving into the cloud and the world of Web 2.0. In this environment, voice becomes another data application, and telcos will no longer be able to build their business around it. This means walled gardens cannot last – and this includes Skype, by the way – and the end user will ultimately define what the optimal experience is, as well as where they choose to get it from.
This is the world Skype is building its future around, and to the extent that VoIP is offered as a standalone service, it will not have much of a future here. Service providers are certainly welcome to try doing so, but in my books, the voice of tomorrow will look a lot more like what Skype is talking about today. What does it look like to you?
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 white papers, case studies and other documents which are free to registered users. Today’s featured white paper is The Compelling ROI Benefits of Contact Center Quality and Performance Management Technologies, brought to you by Voice Print International (News - Alert).

Jon Arnold, Principal at J Arnold & Associates, writes the Service Provider Views column for TMCnet. To read more of Jon�s articles, please visit his columnist page.

Edited by Michael Dinan

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