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Finding Value in VoIP

It wasnt long ago that hundreds of companies were making millions of dollars off of the Internet for “vaporware” that was of questionable value. When the bubble burst and the dust settled, the truly useful technologies began to emerge, reinforcing our reliance on the World Wide Web and generating revenue for innovators of well-designed products and services.

Such is the case for Voice over Internet Protocol (VoIP), the technology that enables one to treat telephone calls like e-mail. With a broadband connection and an adapter you can, from anywhere in the world, conduct phone calls via the Internet for a fraction of what it costs to place a traditional phone call. And, unless you are using peer-to-peer VoIP services such as Skype (, you dont even have to turn your computer on, and the person receiving your telephone call doesnt have to be a VoIP subscriber.

Heres how it works: services such as AT&Ts CallVantage or the Voice over IP services offered by telecommunications provider Vonage transmit voice signals into data and transmit them over DSL or a high-speed cable connection. All that is required is a phone adapter; depending on the company and the homeowners preference, these adapters can be installed by the customer or a professional company.

The benefits to the end user are, as anyone who dreads glancing at their phone bill would understand, numerous. First of all, most Voice over IP services are billed on a flat-rate basis (packages range anywhere from $20 to $50), making it easier to predict monthly telephone expenses and significantly decreasing long distance telephone expenditures (which average about $70 per household, according to the telephone companies). Plus, VoIP provides users with a long list of features that arent easily available on standard telephone lines, or even on mobile phones.

For example, calls may be forwarded to several different places at once. Voice mails can be transferred into email for more convenient review. Calls that are a priority will be put through while others will be sent directly to voice mail if you so desire. “It no longer feels like voice telephony; it feels like you have control over how you want to communicate, when you want to communicate, and where you want to communicate,” said Katherine Bagin, vice president of product marketing for CallVantage at AT&T. “From a convenience perspective, you can be on all the time, or you can shut yourself off.”

This flexibility has drawn an increasing number of users to the service, according to Louis Holder, executive vice president of product development at Vonage. “We have seen the market really change over the last two years,” he said. “At first, VoIP was embraced by early adopters that were very technology savvy, and today what we are seeing are ordinary households with broadband connections implementing Voice over IP systems. It has changed the competition as well, because we are seeing companies that didnt offer Voice over IP now offering services like we do.”

While we are still somewhat forgiving when mobile phone service is spotty, Voice over IP providers have had to work hard at improving quality and reliability to attract new users. “When Voice over IP first came out in the mid to late 90s, the quality was really terrible. Our computers werent very fast, and people had dial-up connections, which were slow, and we were trying to transmit the voice signal in real time,” Holder reflected. “The systems would sample the voice very infrequently, which gave it a metallic sound. People also had to use a headset and a microphone connected to their computer to talk. Since then, we have moved away from the computer and instead we have a dedicated adapter that will do that analog to digital conversion in real time.”

Critics point out that VoIP is only as reliable as your high-speed Internet connection, which is sometimes not that bulletproof. Still, those behind the technology are adamant about the improvements in quality.

“The quality and reliability of Voice over IP through a supplier like AT&T are extremely reliable, and I would defy you to hear the difference between a conversation that was traveling over Voice over IP and traditional circuit switch telephony,” declared Gary Morgenstern, director of media relations at AT&T. “A year and a half ago, people were telling us it was certainly better than cell phone quality, and now many people are telling us that they prefer it to their traditional phone.”

This is great news for homeowners seeking to improve their telephone service, but what does it mean for custom installation companies?

“This is the kind of solution that most people can figure out themselves,” said Gordon van Zuiden, president of cyberManor, a custom installation firm based in Los Gatos, California. “Most consumers can handle it fairly easily, so from that perspective, if somebody wants it, there isnt really much that we can add value to, as integrators.”

At the same time, VoIP is not something that integrators can ignore altogether. “Were putting in distribution panels where we are home running all of their phone wire, amongst other things,” van Zuiden acknowledged. “So, when they do get a Voice over IP service, we make it very easy to implement. Rather than trying to implement the service at the phone, you can actually put that box back at the head end, and then patch in whichever phones you want to take advantage of that IP service.”

Tobin Smith, founder of ChangeWave Research in Rockville, Maryland, believes that eventually custom installation companies will be forced to start offering Voice over IP. “They are not going to get rich doing it, but they are going to have to offer it,” he said. “If youre going to do data, youre going to have to do VoIP.”

Voice over IP may not promise huge profits for custom installation companies, but it is gradually becoming a standard system in both new and existing homes. “Over the next five to 10 years, the majority of homes will have a Voice over IP system,” Holder predicted. “As more people learn about the product, they will start asking for it.”

Carolyn Heinze ([email protected]) is a freelance writer/editor.