This article first appeared in GSABusiness
Voice over IP is the buzz. Most people don’t know what it means, but they know that other people are doing it. Just last week a woman in leopard print pants walked up to me in a coffee shop and asked me if I knew anything about Voice over IP. She told me that it was the wave of the future and that a lot of people are going to get rich off of it. I think she is partly right.
Voice over IP, usually written as VoIP and occasionally pronounced “Voyp” describes a host of services that allow voice to be transmitted over the internet as little packets of data using the common protocol of the Internet. Big companies have been using technology like this for years to squeeze more simultaneous conversations out of a single phone line. A number of years ago I worked for a company with multiple offices and we used a similar technology to squeeze 24 conversations plus a lot of computer data into a T1 line that would have normally been packed full with 24 lines of conversation. Special hardware at each end of the line compressed the voice data into half of the space it would normally be allotted. We got a lot more use out of the line and the people talking over the line barely noticed that the voice quality was not as good as before we installed the compression hardware.
With high speed internet provided by cable modems and DSL, lots of people have the near equivalent of T1 connectivity in their homes. VoIP providers like Vonage, Net2Phone, Skype and others advertise that you can use the high speed internet connection already in your home or small business to carry telephone conversations. And, like the woman in the leopard print pants… They are partly right.
As mentioned above, I experimented with VoIP in a business setting a few years ago with a bit of success and a fair amount of frustration. The hardware we bought was among the best the industry had to offer but it was finicky and failed more often than we would have liked. Sometimes callers heard echoes on the line or the edges of their conversation got clipped and were difficult to understand. Sometimes we lost the ability to make calls over the line at all and we would have to call in an expensive technician with specialized training to repair or reconfigure the devices and bring them back to working order. Our use of VoIP was a balancing act. When it worked, we saved money. When it failed, we had unhappy customers.
VoIP is now available for home use. Several months ago, at the suggestion of a trusted friend and with the promise of remaining among the technological elite, I switched my home phone service from the local Bell company to an Internet VoIP phone company. I had two reasons for wanting to switch my phone service. One was the “cool” of the technology; the other was the vendor’s strong appeal to my inner cheapskate with ads like “Save lots of cash on your phone!” Since my local telephone service with all of its enhancements, taxes, fees, and mystery charges was running about $70 per month, yet did not include voice mail, I was ready to switch.
My trusted friend hand generally good things to say about Vonage. Vonage, an Internet phone company located in New Jersey, is the market leader, first mover, and darling of the internet phone business. In the midst of a dismally performing communications market, over 155,000 new customers have signed up for their fixed price offering of integrated local, long distance and enhanced calling services. With May’s price drop, subscribers now receive unlimited calls to anywhere in the US or Canada for $29.99 a month.
For me, signing up for Vonage was pretty easy. I pulled up the website, clicked a few links, entered a credit card number and received the required internet phone interface gadget in just a few days. That’s when the fun began…
The internet phone interface gadget I received from Vonage is called an analog telephone adapter (ATA.) It’s about the size and weight of my existing cable modem. As directed I plugged the ATA into my existing cable modem ahead of my router. I then plugged a test phone into the ATA and lifted the handset. Success! I could hear dial tone and make a call. If only everything else could be so easy.
When it works, which admittedly is most of the time, VoIP works pretty well. Once I connected it to my existing home phone wiring, I could pick up any phone, and dial eleven digits to reach anywhere in the US or Canada. I have just the basic service, but it includes all of the features that I previously paid extra for. I have Caller ID, voice mail, three-way calling, a very sophisticated call forwarding that can ring two numbers at once, and a clean, easy to use website from which to control all of these features. I can even have my voice mails emailed to me so that I can listen to them on my computer or again, I can listen to my voice mail via a secure website. The service is a technical marvel and when it works… It’s awesome.
When my VoIP service fails, it does it in spectacular ways. A few weeks ago I picked up the phone, made a call and just as the other party connected I could hear yet a third persons recorded message sliced into my call like all of our words were passing through a nut chopper and then being haphazardly reassembled on their way to my ear. I thought I may have intercepted a phone home from one of the Saturn space probes. It was spectacularly bad, and I used my cell phone to let customer support know of my troubles.
Vonage and its brethren are new and growing faster than they can expand their infrastructure and their growing pains can be frustrating for their customers. Vonage reports this week that many customers are not able to activate the click to call service and last week the voice mail website indicated it might be sending customers voice mails to random email addresses. It is probably good that calls to VoIP customer support are free. You may end up spending a lot of time on the phone with them.
A late comer to crowded marketplace of Voice over IP is local startup Champion Communications. While Vonage and others allow customers to earn referral fees by inviting their friends to join the network, Champion leads people to sign up with VoIP and sign up their friends for some network marketing as well. It sounds a bit like the opposite of Friends and Family. Now, even my mother can call me at home, ask me what I had for dinner, and follow up with “Are you happy with your long distance carrier?” I guess this is one way to get around the Do Not Call list. I will hate having to put Mom on notice with the FCC, but it’s the principle.
My own experience leads me to worry for Champion, Vonage, and the others in this market. They have all the troubles of a high tech startup and they have large, well financed competitors who would genuinely like to crush them.
The most recent blow in the war has been the entrance of AT&T to the VoIP market. AT&T’s CallVanage offers AT&T branded VoIP service at an introductory price of only $19.99 per month. The cable companies and the Bell companies are all close behind and they will bring a lot more than experience to the game. Any company which owns the last mile of cable to you your home or business can offer Quality of Service capabilities that the independent VoIP companies can not. Quality of Service allows these larger companies to give voice packets priority over email packets. Without this capability, sending an email with a large attachment to someone while talking to them on the phone can kill the conversation. Vonage and others say they will not re-architect for QoS. That is going to make the going difficult for them, especially if the carriers decide to play a bit of dirty pool and deprioritize Vonage’s VoIP traffic in favor of their own.
Vonage, Champion and others are also at a disadvantage as they can not bundle VoIP with the traditional offerings of the other providers. Cable providers bundle VoIP, broadband access, and television. Phone companies bundle VoIP services with broadband access and enhanced features. These techniques deliver better pricing and more convenience, which along with brand recognition may persuade customers to stay with their current providers.
My own experience as an early adopter of Voice over IP has been what I should have expected. I can not send large emails while I am on the phone. I have spent hours on the phone with support and I have no phone service at all when lightning knocks the power out. On the up side, I am paying half of my previous bill. I have a powerful voice mail system that allows me to forward received voice mails to family, friends and associates via email and I can hold myself forth as a technorati at any informal gathering. It’s seems a fair trade to me. And, the woman in the leopard print pants was partly right. Companies are going to sell VoIP. Early adopters are going to buy it, and someone is going to get rich… stress therapists.