VocalTec head says VoIP adoption coming slowly to U.S.

VocalTec CEO Elon Ganor talks about what net executives should be looking for in VoIP and how to prepare for it.

The past two years have been tough for VocalTec: Revenue dropped from $41.9 million in 2000 to $28.4 million in 2001, and through three quarters of this year sales are $13.1 million. Despite this, the Israeli company expects conditions to improve as more carriers adopt voice over IP, first along international routes and later in national and local networks. VocalTec Chairman and CEO Elon Ganor recently spoke with Network World Senior Editor Tim Greene about the prospects for service provider IP telephony.

How do you view U.S. carrier interest in voice over IP?

The advantages that VoIP provides are really in reduction of operating expenses. But in the times that we live, most companies are looking for new sources of revenue and not necessarily just in reduction of operational expenditures and capital expenditures. So on domestic long-distance, we have not seen – we, the VoIP industry – a tremendous push within the country.

What we are seeing is that the initial drive is really in markets in which you see deregulation happening with new commerce coming in as competitive or alternative carriers. Moving forward, we are starting to see applications such as prepaid calling cards and additional ones that can be done much easier, quicker and sometimes only on VoIP systems. So we are starting to see carriers that are looking at VoIP for substitution of traditional infrastructure. It’s not moving very fast, but it is moving. It is, without any doubt, coming.

When?

The majority of experts said by 2006 50% of the world’s traffic will be using VoIP. I talked to carriers, the large carriers, and I can tell you that their view is similar.

What will drive the major local carriers to VoIP?

Regional Bell operating companies with existing infrastructure have less need to compete for a while because of the death of the competitive carriers. The urge to protect is not as strong as it was. On the other hand, though, you see that the fixed-line guys are losing quite a bit on the traditional fixed line. SBC Communications showed a 9% decline in the number of fixed lines in 2001. So the real competitor for them is the mobile.

If you want to compete against home lines with mobile phones, the only way to go is packetized telephony. It’s a question of scalability, of gaining confidence that the softswitch-based systems can really replace traditional switches.

What should corporate telecom people be looking for in terms of VoIP? How should they prepare for this eventuality?

They will start adding the voice communication for their organization on the data network. The traditional carrier will be acting for them as an application service provider providing them with maintenance – and maintenance means the maintenance of dialing plans, supporting of the equipment just as they do for PBXs and so forth – but generally the voice will be running on their own corporate data network. They may expect a very significant reduction for their voice costs. Today, they are paying quite a bit of money on long-distance, domestic phone calls. Now some companies are . . . pushing a displacement of PBXs by introducing IP PBXs. Most organizations don’t like that today because it is a displacement of a reliable product that they like which has not amortized itself yet. Our proposition to them would be to add on a customer premises equipment gateway as an adjunct to their PBX. Then suddenly from your regular phone in the office, you may dial four or five digits to any employee in the organization worldwide, without extra cost.

What should the concerns be about voice quality? Aren’t service-quality guarantees necessary?

They are necessary for Cisco to be able to sell their products. Obviously, they want to differentiate, but the fact of life is that there are ways of guaranteeing and improving quality using the public Internet that will continue improving.

Can those ways of improving it be done from the edge?

Yes. The system is checking connection quality by pinging delay and congestion on that particular Internet route. It has the time to divert the call via another channel over the open Internet, or if it still cannot find anything it will bounce it back onto a switched network.

What can the dialing switch do to determine what path traffic takes through the Internet?

You have different gateways in different locations. And the gatekeeper is doing mapping so it can determine where to route the call if another route is congested.