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March 2005

Reinventing the telephone

Phones have been part of home and business life for over a century. During that time there have been very few real innovations: worth mentioning perhaps are automatic dialing, voice messaging and conference calls. Everything else has been cosmetic. But that is about to change.

IP everywhere

The reason is the relentless advance of IP – Internet Protocol, the basic technology of the Internet. Step by step, and so far largely behind the scenes, the telephone network is reinventing itself in the image of the Internet. Already, it is likely that some at least of your calls are being transmitted over part of their distance using Internet technology.

So far, most of this is invisible to telephone users. But the next step in evolution will bring it out into the open, as plain ordinary telephones turn into something new: digital network devices which do all the things that conventional phones do, but have an extra set of digital tricks up their sleeves.

VoIP and beyond

The first step in the IP invasion of telephony was a technology known as VoIP – Voice over IP. VoIP first emerged as a way of making cheap, or even free, phone calls over the Internet. Enthusiasts used it, though in its early incarnation it never became easy, or standard, enough to trigger mass market use. But since then, VoIP has gone mainstream.

VoIP has been used internally by telecoms providers to replace or augment parts of the telephone network – and to implement low cost international calls. VoIP has made possible new competitive services, and new approaches to pricing. As we reported last year (see View from the Fen December 2004), BT has gone even further than this and is basing its new 21st Century network entirely on IP technology. IP has become the standard building block from which next generation networks will be built.

The IP phone

But it is the next step beyond this gradual network takeover that is the critical one, and brings it home to users. You don't need to be a PC to connect to an IP network: all you need is a device that speaks basic IP protocol. So why not build the IP into the phone, and connect it directly to the network? That is an IP phone. And once you have an IP phone, you might as well let it do some of the other things that IP does so well.

What tricks can it perform? Give it a screen and it can transmit images, and even video, as easily as voice: it's all one to IP. It can show surveillance camera images – who's that at the door? It can display Web pages, access databases, show inventory or product pictures, display menus and instructions. It can integrate directly with corporate intranets without a PC in sight. (Or work hand in hand with PCs when the need arises.)

It can track orders and issue instructions – recorded and verified – to factory, warehouse or office. It can even make all of those underused features of PABXs – from conference calls to call forwarding – easy to use without needing to remember the magic key sequences.

Directories that work

It can record calls automatically, and digitally, on a network server. It can provide visual phone directories that are always up to date. It can search for people and employees by function, department, or by a half-remembered name. It can send, receive and store messages of all kinds, from text and voice to video. It can provide call centre facilities that are configurable at the touch of a button, so that extra staff can be drafted in at a moment's notice wherever they are, without a hitch in the workflow.

Since an IP phone effectively has a computer under the bonnet (or 'hood' for international readers) it can do many of the things that a computer can do, with a simpler interface and at a fraction of the cost. (And a fraction of the desk space.) Since its function is defined in software, it can acquire new features and facilities month by month and year by year, without major upgrades and replacements.

Convergence for real

The IP phone is one practical, and very real, example of convergence: the coming together of previously separate functions, and previously separate industries, based on common digital technology. Convergence between voice and data is already under way in corporate networks. Analysts predict that over the next five years most companies will introduce convergent technology.

IP phones from companies such as Cisco are already in use in large and medium-sized companies as replacements for PABXs, where they can give significant savings. In one recent example, a private investment management firm saved £250,000 in cabling and installation costs. The company estimates that convergence is saving approximately £100,000 a year in maintenance, staffing and office moves. If it is cheaper than conventional phone systems, yet does a great deal more, the business case is easy to make.

We predict that adoption by SMEs and consumers will quickly follow. With six million broadband users already in the UK, a simple device that can 'plug in' as easily as a phone, yet provide a wide range of functions without the complexity and cost of a PC, has a ready market. If it can provide low cost voice calls as well, it will be doubly welcome.

Mobile adds a further twist: mobile IP is the first technology to provide any challenge to the total dominance of cellular for mobile use, especially for data and voice/data combinations.

Business not as usual

One of the key reasons why the introduction of IP technology to the telephone network has been delayed, and has been more than a little traumatic, was that IP threatened to drive a digital coach and horses through the way that telecoms companies made most of their money.

Telephone companies charged by the minute, and rates increased dramatically with distance – especially for international calls. But on the Internet distance is no object; and you can stay connected all day and every day for a flat monthly rate. Naturally, telephone companies were not amused at the thought of most of their income disappearing down an Internet black hole. This was definitely not business as usual.

Fortunately for the telcos, it wasn't quite that simple. The Internet, as first defined, had no way of guaranteeing the continuous quality of service needed for a voice call, so early VoIP calls were often interrupted and of poor quality. But these problems have gradually been ironed out.

The iTunes effect

There are strong parallels with the music industry, where Internet file sharing services such as Napster threatened the income of recording companies. With the introduction of paid downloading services such as Apple's iTunes, ways have been found to square the technical and commercial circle, and keep everyone (reasonably) happy. In the telecommunications industry, telcos are now embracing IP: partly because it is inevitable and it can reduce their costs, and partly because it provides an opportunity to sell new kinds of services that can make money.

Early enthusiasm for the first VoIP systems never translated into mass market use, because it never reached critical mass. Telephony needs scale: ideally, millions of others with the same equipment, working to the same standards, and a common understanding of how to use it.

IP in the mainstream

IP technology is now being adopted by mainstream telephony providers, because it is in their interest to do so. With the technical and commercial arrows now aligned, evolution can move at a much faster pace. IP is being used, first, to implement the standard telephony functions we are all familiar with. But a wide range of new digital tricks will be included as part of the package, and more will be added, month by month and year by year. Over the next decade the plain ordinary telephone will evolve faster than it has over the past hundred years.

The IP phone will emerge, we predict, as a critical step in the evolution of digital technology, perhaps as important in its own way as the PC. As broadband networks – based on IP technology – turn into a multifunction channel capable of delivering TV, films, messages, video and all the multiple services of the Internet, the IP phone will become part of the furniture, and a permanent fixture on every desk.


©2005 Mediation Technology