Led by voice over DSL, packetized voice services have become viable options for smaller user organizations.

By Cassimir Medford
Network World, 09/11/00

After years of hoopla and ambitious but unfulfilled promises, it seems carriers can now get voice services to ride over just about any kind of packet data network.

These new packetized voice services are all variations of voice over IP, with specific designations including managed voice over IP, voice over frame relay, voice over cable and voice over DSL. The common denominator is that they all chop voice into packets or cells for WAN routing.

If you work at a small or midsize company, chances are good that you've already been approached by a new convergence carrier that offers voice and data services at significant discounts on what you currently pay. Many of these new service players are competitive local exchange carriers adding packetized voice to networks they've designed for data. Others are ISPs seeking higher ground in an Internet access market that is being overrun by "the Internet should be free" crowd. Some are wholesale carriers offering discounted international calls on routed data networks to underserved destinations in Europe, Asia, Africa and South America.

These independent carriers are quickly carving out a slice of the growing telecommunications services market. Cahner's In-Stat Group and Merrill Lynch Global Telecom Research expect IP to account for roughly half of the projected $140 billion telecommunications services market in the next five years. Currently, voice accounts for only a small percentage of IP's explosive growth, but analysts such as In-Stat's Laurie Gooding say that's changing rapidly. "A whole complex industry is developing around the voice-over-IP market. There is a lot of product being sold into the wholesale market, and we are starting to see the retail market emerging," says Gooding, a senior analyst and group manager at the market research firm in Scottsdale, Ariz.

The business segment targeted by convergence carriers accounted for $46 billion, or 40% of the overall $117 billion in voice and data services revenue generated in 1999, according to Merrill Lynch. Of that $46 billion, only $6 billion was spent on data communications. The rest went to voice.

The DSL direction

Voice over DSL, more advanced than other new hyped-up voice services, certainly makes sense costwise, says Steve Taylor, president of Distributed Network Associates, a consulting firm in Greensboro, N.C., and co-author of Network World's "Convergence" newsletter. "The key to DSL from the voice perspective is that there's a pretty direct relationship between the cost per voice line and the number of copper pairs you're using. With DSL, you can get from a handful to a whole lot of voice lines across a single copper pair. And to use the old term 'pair gain,' using DSL to transport voice makes a good value proposition," he explains.

For instance, Mpower Communications, a convergence carrier operating a DSL network in more than 40 metropolitan areas, offers an array of service packages that traditional circuit-switched voice carriers would find difficult to match. The most popular package includes eight voice-over-DSL lines, unlimited local calling, 500 minutes of long distance, high-speed Internet access with e-mail and Web hosting, and other value-added data features for about $350 per month. Depending on the business, that could represent cost savings of up to 30% on current bills for the same types of services.

Cost was the overriding reason why technologically conservative ChecKing Check Cashing Centers, a check cashing company in Glendora, Calif., switched its Pacific Bell voice and GTE data services to DSL services from Mpower, a 4-year-old carrier in Rochester, N.Y. "Once we complete the cutover, we are looking at $200 in savings per location per month. With 13 locations, that's more than $20,000 a year. For a small business, that's significant," says Harry Clouse, ChecKing's IT administrator. "It may seem like a risk, but basically the phones look the same and the quality of the voice is the same as when we dealt with PacBell."

Lozier, Thames & Frazier, a law firm in Pensacola, Fla., also switched to DSL and voice over DSL for cost reasons, but not those alone. "E-mail has become an important part of our business, so the 'always on' aspect of DSL attracted us," says Daniel Lozier, the firm's IT manager. "Depending on dial-up means you could miss an e-mail the same way you can miss a phone call. If clients can't find you, they find alternatives. Adding voice seemed logical."

Lozier, Thames & Frazier gets DSL service from Network Telephone, also in Pensacola. The carrier operates in 408 collocation facilities, matching BellSouth's footprint in nine states. It offers an array of options for two to 24 lines. Eight voice lines, a 160K bit/sec DSL data line and 800 free long-distance minutes costs $317. At the top of the pricing scale, at $1,371, is a 24-line package with a T-1 data line.

"Customers don't see themselves as early adopters," says Clare LaGrand, marketing director at Network Telephone. "They're using the same phone lines and copper loop as always, so [voice over DSL] is an easy sell."

It's an easy sell, but that can be a boondoggle for these carriers. Many are concerned about getting stuck in a highly competitive commodity market. So they're struggling to differentiate themselves. Mpower, for example, is adding pay-per-use and contracted services, such as videoconferencing and accounting. Users can only benefit.

Medford is a networking writer.

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