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I guess VoIP must now be real

By Scott Bradner

Fortune magazine has a "special report" on voice over IP (VoIP) in its July 26 issue. This report assumes that the "VoIP revolution" (in the words of the report) is now inevitable and the revolution will hit many of the current telephone players quite hard. I was surprised that important things were not covered in the report but since Fortune now says that VoIP is inevitable I guess it must be the case.

The idea of running voice over the Internet is hardly new; the first experiments were performed over the ARPANET back in the 1970s, and the VoIP standards (primarily the ITU's H.323 and the IETF's SIP) are more than five years old. Two other factors seem to have come together to finally cause people like the Fortune writer to think that they see some handwriting on the wall. The first factor is the increasing deployment of broadband Internet access in the US, which has now reached more than 20%. The second factor is the belated realization on the part of some pundits that VoIP will not just duplicate the limited set of functions that is all that the traditional phone companies and standards organizations were able to come up with even though they had a century to work at it.

I am surprised that the Fortune report said almost nothing about quality of service (QoS) for VoIP. I'm surprised not because QoS should be a determining factor for VoIP but because almost everyone in the traditional voice business claims that the lack of QoS dooms VoIP to a niche business. The Fortune report points out something that I've been trying to tell bell-heads for years, that the cell phone experience has taught telephone consumers that quality is only one factor to consider when evaluating voice services, and maybe not the most important factor. (See "It's a curve, not a point http://www.nwfusion.com/forum/0629bradner.html)

I'm also surprised that the Fortune report said nothing at all about the very busy and confused discussions about regulating VoIP. The report did talk about the fact that VoIP services cost less than traditional line-based or cellular-based phone services but somehow failed to note that some of the cost difference stems from the fact that VoIP is currently un-taxed. The U.S. Congress, urged on by the traditional telephone industry, is quite busily trying to figure out how to get VoIP customers to pay taxes like those that support the Universal Service Fund (http://www.fcc.gov/wcb/universal_service/welcome.html) and the federal line charge. Those fees along with state and local taxes easily make up for the lower VoIP prices.

It is not clear what commercial VoIP services should cost. The actual cost of providing VoIP service to a customer is likely less than a dollar a month. Even adding the cost of gatewaying VoIP calls to and from the normal phone system should only add a few dollars per month so the coming, according to the Fortune report, VoIP price war may result in VoIP service being offered for a quarter of what they are being offered for now. Of course, anyone calling directly between standards-based VoIP phones does not actually need to pay a carrier anything. An even more attractive price point as long as I do not have to collect taxes on my own calls to you.

disclaimer: As Harvard students can tell you, attractive price points are in the mind of the beholder, but the above observation comes from me - not the university.