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What's all this buzz about IP telephony? It promises to save you money in the long run and better integrate your phone calls and data traffic. But do a cost analysis and check whether your network needs beefing up first, says David Watson.

What's all this buzz about IP telephony? It promises to save you money in the long run and better integrate your phone calls and data traffic. But do a cost analysis and check whether your network needs beefing up first, says David Watson.

IP telephony proponents say the technology holds lots of promise to companies in terms of cost savings and added services for users, but admit the quality of calls may still be an issue.

In simple terms, IP telephony means having telephones connected to a network using IP (internet protocol) rather than the traditional phone system and being based on packets like the internet rather than switched via circuits.

New Zealand's biggest IP telephony project so far is the 8000-user, 200-branch Ministry of Social Policy (MoSP), Winz and Children, Youth and Family (CYF) system.

It was completed in October 2000, with equipment from Cisco and installation by Logical Networks.

MoSP information systems co-ordinator Neil Miranda says getting IP telephony for the three departments “was obviously the way to go forward”, and that the system is now handling "probably a lot more" than the 150,000 calls it carried in the early days after the installation.

Getting IP telephony for the departments involved replacing 164 PBXs with four sites with servers (though vendors do make IP PBXs for customers who don't want to go the whole hog).

IP telephony delivers cost savings in a number of ways, Miranda and Jeff Herbert say. Herbert is managing director of Auckland systems integrator Lanscape, which implements Cisco’s IP telephony products for organisations.

Miranda says that since the system was installed, the three departments’ staff and site numbers have increased by 33% with no increase in operating costs. He wouldn’t give figures on the cost savings achieved, but assures us that they are significant. "From that, you can deduce that we’ve achieved cost savings of at least 33%, but it’s actually more than that”.

Herbert says the benefits may not appear immediately on a customer’s balance sheet, but in the long term, savings will be made.

“Getting IP telephony isn’t a cost-cutting exercise – it’s about providing enhanced functionality. Digital phones will always cost more than POTS [plain old telephone system]-type phones."

However, efficiencies will emerge after IP telephony is implemented, he says.

“Most companies have a budget for data and a budget for voice. With IP telephony, they may spend 50% more on their data budget but cut the voice budget by 50% and find they reduce costs by having a single unified budget for all data, including voice.”

Cisco country manager Tim Hemingway says another advantage of IP telephony is that it reduces the telephony costs associated with moving staff within an organisation.

"A big part of the cost of telephony is moves and changes." With each IP phone having its own "address", it can be unplugged, moved and plugged in again anywhere in the network with ease, Hemingway says.

Hemingway says his company offers “IP telephony, as opposed to VoIP” products.

“If you have a PBX [private branch exchange] you could connect Auckland and Wellington offices with VoIP using the traditional phone system, but IP telephony means having ethernet-connected phones.

“You pick the phone up and use it as if it was a traditional phone, but it plugs into a port and acts as a switch – you can plug multiple devices into it and they’re all connected over ethernet.”

It's the network, stupid

Users and vendors alike agree on one thing – for IP telephony to be successful, the organisation planning to install it must have a robust network.

Herbert says a minimum requirement is a 100Mb ethernet switch to every PC on the network and for all network devices to support quality of service needs.

Logical Networks network consultant Kevin Frethey, who worked on the MoSP installation, says IP telephony and VoIP “won’t solve your problems if you’re using a network that isn’t adequate”.

Logical, also a Cisco reseller, does a readiness assessment of customers who want IP telephony, Frethey says.

Logical marketing general manager David Tse says “you don’t need to have a massively expensive, bleeding edge network to get IP telephony, but it does need to be reliable.”

IP telephony has applications beyond the traditional person-to-person phone call - in a report forecasting IP telephony uptake to 2005, research company IDC notes that besides conventional one to one calls, other possible applications include voice messaging, conference calls, voice chat, voice enabling, voice-enabled commerce and web-based customer support services.

The area of web-based customer support services is being explored by banks and other institutions which operate call centres, Herbert says.

“There’s a term, unified messaging, being bandied about, which means letting organisations create contact centres rather than call centres.”

Contact centres allow customer contact via email, fax and web-related queries as well as ordinary telephone contact.

IP telephony has been deployed and used within organisations, but for calls to destinations without IP telephony, the call is routed on to the PSTN.

Coming services

Predicting the future growth of any technology is like looking into a murky crystal ball, but IDC sees huge growth in the area over the next five years.

In the report, published in December, IDC predicts total global revenue from IP telephony will exceed $US59.1 billion by 2005 and that it will comprise approximately 47% of worldwide voice traffic by that time.

Other IP telephony vendors besides Cisco include 3Com, Avaya, Ericsson, Nortel and Alcatel.

Clearly, vendors and resellers are keen, but how do carriers feel? New Zealand's largest, Telecom, is examining VoIP (it prefers that term) but believes the real benefits of IP lie in providing multiple services, not just voice.

Telecom's long-term aim is to provide VPNs (virtual private networks) for customers, with data, voice, video and other services all carried on the one line.

Of VoIP alone, acting general manager for network investment Gavin Knight says "we see it coming in the future - we're testing some services and are modelling the economics of it."

The economics are different for enterprise space than for the carrier space, Knight says - in other words, it's easier for an organisation to get VoIP for its internal communications than for a carrier such as Telecom to roll it out.

"There are some real issues with functionality and quality of service and in the carrier space, the economics don't stack up for us."

Telecom group general network manager Simon Moutter says the driver of VoIP is the convergence of telecommunications and IT and he sees VoIP as an emerging technology, but says customers should be "very cautious" about adopting it.

"There are no networks available yet that are able to provide the customer service standards that a circuit switched environment would."

When it was pointed out that the Ministry of Social Policy, Winz and CYF has apparently put in a successful VoIP network, Moutter said "that's their decision".

It's "entirely logical" that a vendor such as Cisco would hold a different view of VoIP-IP telephony, he says.

The way forward?

Moutter and Knight both acknowledge IP offers great potential for cost savings, with voice, data and other information all carried on one line and coming under one budget. "We're definitely heading in that direction," says Moutter.

Telecom chief technology officer Murray Milner says IP networks are optimised for data and sending voice and video down it "is hard, but not impossible."

In the long term, however, IP is the way forward, Milner says, because it offers the opportunity to carry multiple services on one line.

"The future is about all-IP networking - over the next 10-15 years, the all-IP network will re-define Telecom's services."

Telecom's vision is of multiple services being sent over IP, creating VPNs managed by Telecom.

"VPNs will have the advantages of the internet without the internet's security and performance issues."

Giving the example of a petrol station, Milner says today, the business is serviced by the PSTN for voice calls to customers and suppliers, ATS for fire alarm connections to the fire service and yet more networks for eftpos and connections to head office and the bank.

"With an all-IP network, all services would be on one network with one access point."

Milner claims all-IP networks will deliver the profits that Knight says won't come from providing VoIP on its own.

"Profits will come from services that don't exist today."

Management and the addition of new services will be easier and cheaper because the all-IP network will be software-uploadable, with new services able to be trialled and added easily.

Clear and Cisco have an arrangement whereby Clear manages Cisco's AVVID (architecture for voice, video and integrated data) for customers with private networks, Clear network solutions general manager Susan Stone says.

Clear manages the MoSP/Winz/CYF IP telephony system and others around the country.

The problems of viruses from email getting into the phone system are non-existent with IP telephony, Stone says, because while voice and data share the same physical infrastructure, "they don't share the same logical structure - the telephone network doesn't go anywhere near the system that's been affected by the virus.

Just because you're using an IP data portal doesn't mean you're using the public internet, he says. "You have a data network over a physical connection instead of over ATM [asynchronous transfer mode] or frame relay. You're using IP to manage the information as packets on the network."

The voice must be managed properly, Stone says, "and that's why Clear provided a managed service -- data can handle the odd packet being dropped, but voice can't."

Due digilence

Anyone considering getting VoIP should first make sure they understand their organisation’s telephony requirements and the economics of such a move, says Clive Raines, director of computer telephony integrator Fusion Technologies.

“You should also should get independent advice before involving any vendors.”

Through Fusion, which is partnered with US networking provider Cierra Communications, Raines has helped telcos establish international routes.

At present, VoIP is suitable only for internal communications within an organisation, he says.

“With many systems, it is viable to put in a VoIP gateway and programme the least cost routing to utilise the available voice paths for internal traffic within the corporate network.

“There is definitely an economic argument for swapping the otherwise high toll bills of PSTN traffic being dialled between branch offices."

Problems can still rear their head, however.

“If the pipe is heavily congested, voice quality will suffer.”

VoIP is making some inroads as a means of external telephony in the US, but not on a standalone basis, Raines says.

“What’s starting to happen there is that carriers are using broadband connections to businesses and homes as a form of local loop by-pass – VoIP traffic is switched back into the public switch network before quality becomes an issue.”

It would be possible in New Zealand metropolitan areas, Raines says.

“A small carrier could set themselves up in Auckland and provide a good service using a broadband connection to any business in the Auckland area.

“As more bandwidth becomes available and with the advent of DSL [digital subscriber line] and wireless-based broadband services, then if the communication is within a metropolitan area in New Zealand and the bandwidth availability is good, it can be successfully argued that quality of service is going to be more than acceptable.”

Another advance is SIP (session initiated protocol), a recently developed call control protocol. (The original VoIP protocol is H323).

“With SIP technology developing and better broadband services, the VoIP industry is definitely maturing," says Raines. "With the advent of SIP, the local and national call market will be a space to watch as broadband becomes more available.”

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