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Voice-over-IP technology still has problems, but now may be the time to buy.
Switching to voice over IP isn't a slam-dunk based on cost. Most implementations have a two-to five-year payback. Once the network is up and running, businesses typically see a 10% to 12% annual operating cost savings, says Stephen Leaden, president of consulting firm Leaden Associates. It would take savings in the 15% to 20% range to make the return on investment widely compelling given the risk in switching systems.
Cheaper long-distance calling provided an incentive in the mid-to late '90s, but that argument faded for large businesses now that their long-distance prices are 2 to 4 cents a minute, down from about 8 to 10 cents. However, international calling rates haven't dropped as dramatically, so companies that do a lot of international calling save the most money. Organizers of the World Cup soccer tournament use Avaya's VOIP equipment and say they save about $200,000 per month on long distance.
Converged networks also aren't necessarily cheaper to manage, thanks to higher personnel costs. People with voice and data experience command a 10% premium over data-only experts, Nemertes' Johnson says. InChord's Jerig considers himself lucky to have hired someone with a telecom background shortly before the voice-over-IP implementation. "Don't get rid of your voice person," he warns.
Telecom providers are developing business models they hope will make the financial return more appealing--lower up-front costs and no equipment to manage. Such models treat voice as another application on an IP network. Customers plug IP telephones into standard LAN jacks or directly into their computers, use the same data-access lines, and send voice traffic to carrier servers that route internal calls over their IP backbones and calls to the outside world via gateways. WorldCom charges $300 to $2,000 per month per site, which includes router management, a quality-of-service device on the customer premise, and unlimited internal calls.
The quality of voice-over-IP calls isn't the obstacle it was a few years ago, when customers had to accept spotty performance. Now, the delay on domestic VOIP calls is about 100 milliseconds to 120 milliseconds on a good network, down from as much as 500 milliseconds in the mid-'90s. Today's performance isn't noticeably different from the 70-to 80-millisecond delay of a circuit-switched voice call.
But the transition to voice over IP can be difficult. Routing problems caused inChord occasional one-way voice connections. The company discovered that the main servers were losing track of the IP phones, causing them to receive packets but not send them back. Fannie Mae, which runs voice over a Cisco-based private data network, had similar problems and has delayed its rollout until the IT staff can reduce jitter, the change in delay from one packet to the next.
As momentum builds around IP telephony, developers will harness its power and create more compelling reasons for businesses to adopt the technology. "It's a crisis of creativity, not a crisis of technology," Nemertes' Johnson says. Who knows? Maybe developers can even think of a creative way to fill that dead silence during the next argument on a VOIP call.
Photo of David Yeh by Bob Stefko
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