Voice Over Internet Revolution Will Be Big but Quiet, Prominent Booster Says

Telecommunications is a witches’ brew of acronyms like TDM, FTTH, ISDN, PSTN, POTS and CDMA.

Another one is quickly catching on -- VOIP, for voice over Internet protocol, a technology that breaks up a voice call into data packets and sends it, like e-mail, along a high-speed connection.

Jeff Pulver has been promoting VOIP for more than a decade, longer than most of the companies offering VOIP service have existed. Through his frequent Voice on the Net conferences, he has brought together VOIP engineers, entrepreneurs, analysts, consultants, venture capitalists, vendors, providers and, most important, regulators.

Pulver won a key victory last February when the Federal Communications Commission held off regulating such services as his Free World Dialup, which offers no-cost calls over the Internet. Now the major telecom companies are offering their versions of VOIP. AT&T; Corp. has CallVantage, for instance, and Verizon Communications Inc. has just introduced VoiceWing.

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Question: Why is VOIP important?

Answer: Voice over IP does many things for people. Many people who use it wouldn’t know and shouldn’t care what the technology is. For eight years, for instance, in the world of wireless, Nextel has been using VOIP to offer its push-to-talk [walkie-talkie] service. You may notice that Nextel doesn’t call out that it’s VOIP, because it’s just technology that works.

If you see ads from some of the cable companies offering voice services, many of them do not call out to the fact that it’s VOIP. They’re just offering it as a bundle of voice services. Why? Because they don’t believe the consumers care.

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Q: What other advantages does voice over IP offer customers?

A: At the end of the day, a customer won’t know what voice over IP offers if the service provider doesn’t [add new functions and features that VOIP enables]. An example is, people who have graduated from high school since 1999 are part of what I call the instant messaging generation.

This is a generation of kids who have grown up and who now always have a virtual high school reunion. They always know when their friends are online. People are using mobile phones to do instant messaging. Sometimes instant messaging is just a chat. Sometimes it moves to a telephone call.

This concept called presence, knowing someone is online or available, means something. The whole voice over IP technology, if fostered properly, I think, will create a new revenue opportunity in the commoditization of presence.

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Q: Aren’t we seeing that already?

A: Today, there’s very little work that’s being done commercially to distinguish between a cheap VOIP telephone call on a regular handset and a cheap telephone call brought to you by your local service provider. In the near future, we will start to see some innovation come from the wireless side as well as from companies that have no incumbent land-line business. They’ll be the first to come to market with services that integrate instant messaging, presence and voice. In the labs, I’ve seen full demos, but I haven’t seen it turned into products.

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Q: What does VOIP give providers?

A: Well, fear. This whole industry is driven by fear and greed. And from a provider perspective, we’re really at a point in time of potentially end-use empowerment. I give you the example of 7-Eleven, Dunkin’ Donuts and Starbucks. For someone who drinks coffee with cream, I have a hard time going to Dunkin’ Donuts because they want to put the cream in the coffee for me. Every time I go in, I have to tell them what I like, and I always get a different kind of cup of coffee because they make their own guesstimate of what I want.

I go into a Starbucks or a 7-Eleven, I’m in control of how much cream I put in. And I know, based on how strong the coffee is, how much to put in. I use that as an analogy to end-user empowerment.

Today, with the advent of open source communications, if you wanted to have your own home-grown PBX [private telephone network], you can get one free. You just have to go to the computer and download it from the Internet. If you want to be a service provider, you can actually get production-quality, carrier-grade-quality software free off the Internet.

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Q: Are those cost savings going to be passed on to consumers?

A: Not necessarily. There’s no law that says if providers save money because of technology efficiency anyone’s going to save money. It just means they make more profit.

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Q: What’s the biggest obstacle to getting VOIP to the mass market?

A: There are several obstacles. In some cases, it’s the marketing and positioning of it. Over the next couple of years, hundreds of millions of dollars are going to be spent to get a $25-a-month customer. I don’t know whether the numbers are going to add up. You get to a zero-sum game. The consumer benefits because he’s getting it free. But even free, or close to free, may not be enough for some people to convert.

So there’s a mass awareness campaign going on. Companies have taken the philosophical approach that they want to encourage awareness of the technology and feel that if people knew about the technology they’d adopt it.

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Q: What are some of the major regulatory concerns?

A: Certainly there’s the issue of [enabling legal] wiretapping and who’s responsible and for what reasons. I don’t think there’s any American who would say no to a subpoena from a government agency.

There’s noise about universal service, the whole concept of funding [for phone service to the poor]. Certain people’s jobs are at stake. It’s the regulators’ jobs at stake. Because frankly, they’re the ones who suffer if the budget’s not there. And you have this whole issue as far as rural phone companies being disadvantaged. But it turns out that enabling technologies like wireless can help.

But somehow from a political perspective, people are going to always scream about universal service, they’re going to make noise about access fees, they’re going to make noise about regulatory issues on a state or federal level. This is what they do. It’s about government revenue. It’s about where the money is and where the tax base is and who should tax and when and where. These are not technology-driven issues. It’s all politics.

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Q: What’s the near-term future of VOIP, say over the next two years?

A: To some extent, I hope it becomes embedded into the noise, into the fabric of the way we live, so that people don’t worry about it. Today, in 2004, VOIP is a fashion statement. If you’re a fashion statement, you run the risk of being unfashionable. And I hope that instead of being a fashion statement, we move to a point where it’s a technology that’s understood and that it’s ubiquitous across a multiple of things.

VOIP will have a profound effect on our digital lifestyle, but most consumers are not going to know -- probably shouldn’t care. But they are going to start taking advantage of these technologies.

There’s a lot going on. The technology over the years is moving to silicon, the efficiencies are coming and things are just getting better.