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 Internet Telephony: A Management Perspective
Prepared By Dr. Mir F. Ali

The last couple of Comdex Shows were loaded with the booths that were representing and demonstrating the Internet Telephony Technology and it is expected that this year there will be more booths and activities on this technology. Internet Telephony was indeed a hot topic and it attracted thousands of enthusiastic visitors from all over the world. Several seminars were dedicated to provide an update on new and interesting products and applications that enhance phone and communications systems. The topics covered in these seminars were telephony user interface, tying desktop applications to phone system information, small office integrated telephony and new Computer Telephony Interface (CTI) initiatives that are designed to make the calling easier. This seminar confirmed the fact that the phone is disappearing, new desktop telephony applications, and computer telephony integration with PBX and local phone companies, have turned the phone from a painful tool into a computer-controlled communication center.

The Internet Telephony Magazine stated that Internet Telephony is revolutionizing telecommunications through the convergence of voice, video, fax, and data. This exciting new technology promises to drastically reduce long-distance costs and provide unprecedented opportunities for re-sellers, developers, service providers, and end users alike. Telecommuting office workers and call center agents as well as video-on-demand are but a few of the potential applications of Internet Telephony.

It is common knowledge that while the price of the hardware and software is dropping rapidly, resulting in significantly lowers computer-processing costs; the phone rates have not been dropping at a proportionate rate. The only price break the American public ever got was due to the fact that Federal Communications Commission (FCC) enacted laws that broke up the behemoth Bell system into AT&T and 22 Bell Operating Companies and this provided the American public with a number of long distance service companies competing with each other for a piece of the $90 billion long-distance market. However, since Internet Telephony is introduced, these long-distance service providers are terrified with the idea of being bypassed and losing business to Internet. They are also aware of the fact that the American public is very interested in exploring the possibilities of using this technology simply because they recognize the potential for substantial savings.

Michael Kennedy, the director of consulting services at Strategic Networks in Boston, noted that enterprise users would be the first to realize the benefits of this unorthodox approach to telephony because they have a ready-made community of interest. Most large enterprises already have an enterprise-wide Internet Protocol (IP) network in place and the business requirement for many internal voice calls. With this large centrally managed network and an existing community of interest, there is no need to wait for demand to develop or for carriers to rollout new services. Kennedy suggested that the payback on reduced telephone service charges will be two or three months or less. Currently, such enterprise networks pay about 8 cents per minute for internal telephone calling. With Internet Telephony, this cost can be driven to 1.75 cents per minute. Additional opportunities for cost savings are presented in those jurisdictions where prices are out of line with incremental costs. For example, many telecom monopolies charge more than $1.00 per minute for international calls, while in the same country; Internet service is priced on a flat-rate basis ($0/minute incremental cost.) Further savings can be utilized by tying the PBX to the Internet Telephony connection. With this setup, any enterprise user can make outgoing calls to the PSTN from any node on the enterprise network.

It is predicted by Forrester Research of Cambridge, Mass, spending on telephony is expected to reach $2 billion by year 2004. They estimate that in that year, consumers will save about $1 billion by not having used the traditional phone network and with the $2 billion in Internet Telephony revenue that translates to a loss of roughly $3 billion to the conventional telephone companies. This gives a reason for the communications companies to take notice of this technology.

The use of Internet Telephony is easy and straightforward. For instance, if a long distance telephone calls has to be made from USA to Australia. The Internet telephone caller for instance picks up a normal telephone in the USA with an intention to make a call to Australia, waits for a dial tone, then enters a personal identification code assigned to them by an Internet Telephony services company. The service then directs the analog call to a gateway device that converts it into digital code, which is then broken down into the packets of data. When the digital information reaches an Internet server in the destination country, Australia, it is converted back to the sound of the voice and typically, sent over local phone lines to the intended phone number in Australia.  Please click here to see the diagram which illustrates the phone to phone environments.

The servers, one for USA and another for Australia, indicated in the diagram are called Internet Phone Gateway (IPG). Its function is to take local circuit-switched telephone calls and turn them into long-distance packet-switched Internet connections, and vice versa. When used in pairs, one in the originator's city and one in the recipient's city, IPGs allow transparent telephone-to-telephone Internet calls to be established without requiring users to own a computer.

The experts claim that IPGs can, in concept, be built in many shapes and sizes, from private single-line units that tuck into the back of a PBX, to public, multi-line exchanges that can handle hundreds of simultaneous connections. Their use, moreover, will be impossible to detect, as the traffic patterns generated by IPGs will be virtually indistinguishable from a normal Internet Point of Presence (POP). After all, bits are bits.

The focus of Internet fax is to communicate with those organizations or people who are not Internet-connected. Faxes can either be initiated from a standard fax machine or from a computer. Typically, fax service providers supply the Internet faxing software. This software functions as a printer driver, enabling the user to fax any documents that can otherwise be printed.

As Mark Flaherty defined the process in his article published in the Internet Telephony magazine that the document file is converted into a Group 4 TIFF file that is then encrypted. First the TIFF data is RC4-encrypted based on a random seed generated on the desktop. Then the password and random seed are RSA 40-bit encrypted based on a public key. Finally, the encrypted file is uuencoded and attached to an SMTP compliant e-mail message directed towards the destination fax number @domain.com (where the domain is the fax service provider’s).  Please click here to see the diagram which illustrates a FAX Transmission.

In a dial-up Internet access setting, the software will communicate directly with the service provider’s network into an SMTP mail server. In a LAN setting with a fire-wall or proxy server, the software is configured to hand the e-mail message to an internal SMTP mail server, which then routes the fax to the network. The relative location of the sending computer and the network’s inbound fax/mail servers is irrelevant due to the use of the Internet as the ingress medium.

If the fax is originated from a fax machine, the process is slightly different. In this case, a hardware device is installed on the sending fax machine. This smart dialing device plugs in between the fax machine and the corporate telephone system. The user sends a FAX in the traditional manner, feeding a document and dialing the fax number. The device transparently calls a toll-free or local number, depending on the sender’s location relative to the nearest access point or fax node, with the goal that the sender not incur any additional cost above that charged by the service.

Businesses are excited with the possibility of enormous savings in sending international faxes, which this year will cost them upward of $7 billion. In a recent Forrester survey of 52 large corporations, 42 percent of telecommunications managers said they expected to use the Internet to send faxes or to make calls by the end of the century.

The diagram presented above illustrates the fact that regardless of whether a fax is sent from a computer-to-computer, computer to fax machine, fax machine to computer or fax machine to fax machine in all four cases the data is being transmitted and therefore there is no need for any conversation.

Michael Kennedy disclosed in his article that Internet Telephony offers more than cost reduction. Hot links from Web pages to call centers can now be constructed using technology from Dialogic, Inter-tel, Lucent Technologies, Micom, ViaDSP, and Vienna Systems among others. Internet telephony can be used to establish multimedia conferences among enterprise-users. Under this scenario, employees can share white-boards, documents, and voice conversations using the enterprise network and similarly configured workstations. This application is less likely to catch on quickly because it requires a great deal of compatibility among computers, software, and documents. These obstacles are not encountered when the telephone set is used as the I/O device.

While many people are convinced that Internet Telephony is revolutionizing the telecommunications, John Sidgmore, CEO of UUNet, noted, “we are not big believers that Internet Telephony is going to take over the circuit-switch phone network. Uunet is a large Internet service provider owned by Worldcom Inc. There are people who agree with Sidgmore that Internet telephone calls are of typically low voice quality as the data is sent over Internet in digital packets of information, instead of the steady stream used in analog phone service. There is a possibility that Internet telephone conversations can sound scratchy or can even break off unexpectedly. Furthermore, it is often still not possible for a user to call someone who uses a different Internet telephone service.

It is not surprising that telecommunications and computer giants started taking interest in Internet Telephony. They know that these initial inefficiencies associated with this technology will be overcome soon and they started positioning themselves strategically to capitalize on the potential offered by this technology. Deutsche Telekom A.G. of Germany paid $48 million for a 21 percent stake in Vocaltec Communications Ltd., an Israel-based maker of the gateways that are critical to Internet traffic.

Microsoft recognized and anticipated the need for a general telephony interface to enable applications to access all the telephony options available on any machine and the need for making the media or data on a call is available to application in a standard manner. The introduction of Microsoft’s the new version Telephony Application programming Interface (TAPI) which provides simple and generic methods for making connections between two or more machines, and accessing any media streams involved in that connection. It abstracts call-control functionality to allow different, and seemingly incompatible, communication protocols to expose a common interface to applications. TAPI 3.0 is designed to scale from the smallest business up to the largest organizations and indeed it was an excellent way of capitalizing the niche existed with Internet telephony.

AT&T is also becoming involved. It has helped finance the ITXC Corporation. The ITXC Corporation is developing technology to provide settlement and billing services for calls routed across gateways from one carrier to another. We intend to take a lead role in it,” said Tom Evslin, vice president of AT&T WorldNet, which develops Internet-related services for consumers companies. He also said that AT&T specifically elected to take the best coding and compression researchers from Bell Laboratories and put them into AT&T Laboratories to help develop Internet telephony products that would raise the level of sound quality and reliability of such services from what is currently offered.

AlphaNet Telecom, a Canadian company, has signed a deal with Sprint to connect IPGs in some 170 cities around the world, creating a unified commercial Internet phone network right on Sprint's 35-Mbps backbone. These 170 cities account for some 75 percent of the world's international long distance traffic.

AlhpaNet's strategy is to design its system to handle high-quality voice but enable it to distribute only fax. Users make a regular fax dial-up call to a local IPG, which transfers the call over the Internet to the remote IPG. The remote IPG then dials out to the recipient's fax machine. The point, of course, is to bypass the international long distance carriers, who charge in excess of $1 per minute for a service that costs a few pennies per minute to provide. Because fax is usually regulated as an enhanced service, operators are exempt from most restrictions that apply to anyone offering voice. Since one third of all telephone traffic crossing the Atlantic and one half crossing the Pacific is fax, AlphaNet believes it can make plenty of money without pushing the regulatory envelope.

Internet Telephony is providing telecommunications customers with additional choices. Mr. Sidgmore sees two markets are developing: one for the lower priced, and, for now at least, lower quality Internet telephony service, and the other for the greater quality and reliability of conventional phone services. The point is, we are going to let the end user choose how much they want to spent to call London, and what quality they want to pay for. He said.


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