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Microcap & Penny Stocks : DIGITCOM (DGIV-OTC-bb)Information Thread
DGIV 0.00010000.0%Jan 21 4:00 PM EST

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To: Howard C. who wrote (509)4/4/2000 7:52:00 PM
From: Zack Lyon   of 530
 
The IP telephony juggernaut
DeVeaux, Paul
America's Network (Duluth) Vol. 104 Issue 4 Mar 1, 2000
SOURCE TYPE: PERIODICAL
PM_ID: 10138 ISSN: 10755292

Cheap long distance calls, service level agreements and the promise of revenue-- generating applications - there seems to be nothing to slow the advance of IP telephony.

Simply put, Internet Protocol (IP) telephony allows the Internet to be leveraged for telephony applications - and more. It offers a bridge from the existing public switched telephone network (PSTN) to the new world of the Internet. From mere novelty five years ago, IP telephony has become serious business.

Market enthusiasm for IP telephony continues to increase. Probe Research predicts a tremendous increase in worldwide voice over Internet Protocol (VOIP) traffic (see Figure 1), while International Data Corp. forecasts an $8.5 billion global market as soon as 2000, growing to $24 billion in 2002.

Houman Moudarres, director, product management, IP Telephony, at 3Com Carrier Systems, also expects IP telephony to receive a lot of attention from service providers.

"Today, 750,000 [VOIP] ports are being used worldwide," Moudarres says. "If expansion continues at its present rate, that number will mushroom to 2,500,000 by the end of next year. The growth can be attributed to several factors, but the most obvious factor today is the significant cost savings companies can achieve when bypassing local toll charges".

Because of the tremendous savings offered by IP telephony, Forrester Research estimates that by the year 2004, 4% of American phone company revenues - $3 billion - will shift to IP telephony; $1 billion of this will go to consumers in cost savings (see Figure 2, page 62) and $2 billion will go to the IP telephony industry.

According to a study by The Strategis Group, Long Distance Competition: IP Telephony, RBOCs, IXCs and Fiber, IP telephony's immense opportunity in converged networks and value-- added applications is driven by increased Internet usage, vendor initiatives and product interoperability.

Countless companies are attempting to make inroads to IP telephony. This article looks at the success experienced thus far by three very distinct IP telephony players, an equipment manufacturer (3Com), a telephony wholesaler (iBasis) and a provider of secure Internet telephony (Nx Networks). Before focusing more closely on these companies, a brief review of the history of Internet telephony is in order.

HOW WE GOT HERE

According to a report by U.S. Bancorp Piper Jaffray, IP Telephony Driving the Open Communications Revolution, the IP telephony industry began in 1995 with the invention of a computer telephone by VocalTec. VocalTec created a software client phone with a graphical user interface (GUI) that allowed a softphone user who was connected to the Internet and equipped with a multimedia PC to speak directly to another user. VocalTec soon found itself with many competitors. By the end of 1995, nearly 10 additional vendors had announced products.

The IP telephony industry evolved very quickly (see Figure 3). In 1996, the first gateway was developed to interface with the PSTN. The gateway was designed to transform a digital/analog signal into a data packet and compress the packet so that it could be handed off and rerouted over an IP network. By 1998, Internet telephony experienced a revolutionary year, according to Piper Jaffray. It was then that the work of standards bodies became more widespread, and a more mature, longer term outlook was taken on the value of IP telephony.

IBASIS: OFFERING SLAS

Voice quality concerns have tended to hobble VOIP's progress toward widespread acceptance. Providers, however, have been working to alleviate those concerns. One such company is iBasis (Burlington, Mass.), a wholesale provider of international Internet telephony services. iBasis recently introduced the industry's first service level agreement (SLA) for Internet telephony.

iBasis' SLA for international termination services promises much. Customers sending calls over the iBasis network are guaranteed call completion rates equivalent to, or better than, those rates provided by alternative networks, including the PSTN.

Internet telephony typically has meant lower cost, but at a price, says Margo Wald, marketing manager at iBasis. "Initially, Internet telephony was 'high savings' and the compromise made for that was lower quality. What we've been able to do with our assured quality routing and our network operations center is make it a no-compromise situation."

iBasis' proprietary Assured Quality Routing (AQR) technology is used to monitor call completion rates, as well as other indicators of service quality. iBasis contends that AQR can dynamically reroute traffic from the Internet to the PSTN, as necessary, to ensure seamless, high-quality service. The company's network operations center (NOC) in Burlington is a 24 x 7 global traffic-monitoring facility that offers remote access to each node.

The iBasis network has strategically located points of presence (POPs) across the globe for quality assurance, reliability and worldwide coverage. To bolster the efficiency of its network, iBasis uses Cisco gateways and switching equipment. The equipment has built-in redundancy to handle the large demand for wholesale international service now being carried by the network.

iBasis recently offered Internet Telephony Hosting services. With this turnkey solution, international Internet service providers (ISPs) can begin selling voice, fax, prepaid calling and other value-added VOIP services, with minimal capital investment.

"iBasis Internet Telephony Hosting combines our Internet telephony expertise, global footprint and our operational support services to deliver a modular, turnkey solution," says Ofer Gneezy, president and CEO of iBasis.

iBasis is poised to achieve great success, agrees Mark Winther, group vice president at Worldwide Telecommunications IDC.

"There is a huge wave of traffic moving to the Internet," he says, "and iBasis, with these new Internet telephony hosting services and its proven global network, is well positioned to do for international telecommunications providers what UUNet has done for ISPs."

To meet the rapidly growing demand for its core voice and fax services, as well as to deliver new hosting solutions, iBasis is expanding its global infrastructure. The company currently has Internet central offices (ICOs) in Frankfurt, Germany, Hong Kong, London, Los Angeles and New York and plans to quadruple that number from five to 20 by the end of 2000.

3COM'S THREE-PHASE PLAN

According to Cahners In-Stat Group, 3Com Corp. is among the world's top three providers of carrier-class IP telephony equipment. The company hopes that the recent announcement of the newest version of its CommWorks IP telephony platform will strengthen its market position. CommWorks Enhanced Services Phase 1, the first part of a three-- phase strategy unveiled by 3Com last September, delivers an array of new services, including retail IP telephony applications, fax-over-IP and interactive voice response.

Service providers now will have several new revenue streams, Moudarres says.

"The convergence of voice, data and video into a packet-switched IP network lowers the entry costs for new service providers and enables them to quickly and cost-effectively introduce new value-- added services," he says.

3Com reports that its CommWorks IP telephony solution is currently in trials with several service providers around the world. More than a dozen VOIP and fax over IP trials using the CommWorks architecture are now underway in North America, Europe and Asia. Availability of CommWorks Enhanced Services Phase 1 is scheduled for April 2000.

3Com's IP telephony system is based on a three-tier architecture of gateways, gatekeepers and back-end servers, interconnected by open standards-based protocols. The first two tiers address universal connectivity requirements and signaling protocol mediation; the third tier creates an environment for application and service development.

3Com contends that its platform easily integrates into multiple environments with a family of gateways, and that it augments PSTN capabilities by leveraging efficient, cost-effective, packet-based networks for delivering toll-quality voice and value-added services. Key features include a transparent trunking application that seamlessly interfaces with the PSTN, including the Signaling System 7 (SS7) network.

According to 3Com, a major advantage of transparent trunking is that it enables service providers to migrate their existing system to a combined nationwide voice, data and fax infrastructure without disruption in service or inconvenience to customers. Customers simply continue dialing as they normally would, while experiencing the same toll-quality voice provided by the PSTN.

Moudarres adds that the 3Com CommWorks IP telephony platform also functions as a service creation engine, which can generate increased revenues and promote customer loyalty and satisfaction.

"The solution is based on open, standards-based application program interfaces [APIs], and provides the ability to maintain traditional services, while allowing companies to offer new, next-- generation services that give them the ability to distinguish themselves from the competition," he says.

New services offered by 3Com and its enhanced services partners include:

* 3Com/LANSource IP fax, a solution that leverages IP networking to provide a comprehensive suite of enhanced fax services;

* 3Com/NeTrue Communications Inc. retail IP telephony, which enables a complete retail IP telephony portfolio, including pre- and postpaid calling, international long distance, PC-to-phone and roaming services; and

* 3Com/Call Technologies Inc. unified messaging, which follows the one-stop solution concept, giving service providers the ability to offer the unified messaging features of voice, fax and e-- mail from a single mailbox.

NX NETWORKS: HOW SECURE IS VOIP?

Internet telephony technology provider Netrix Corp. and OpenRoute Networks, a provider of Internet access and solutions, merged last fall to form Nx Networks. Nx Networks announced that it expects to become a dominant player in the secure Internet telephony and data virtual private network (VPN) markets.

The company will fill an important void, says Dick Sterry, Nx marketing manager.

"What we saw," Sterry says, "was the ability to take the VOIP and voice over packet technology that Netrix had developed and merge it with some fairly robust router technology that had been developed by OpenRoute and combine those. We think that there is going to be a need to provide secure voice and data connections through the Internet and provide the encryption and authentication capabilities."

The market for secure solutions for IP telephony is expected to be a lucrative one. According to a recent study by Frost & Sullivan, this market generated $279 million in revenue in 1998 and is anticipated to surge to more than $ 10 billion by 2005.

According to Nx President and CEO, Bryan Holley, the company will deliver the technology that service providers and corporations need in order to reap the benefits of the secure convergence of data and Internet telephony.

"This market is largely untapped due to two concerns - voice quality and inadequate security," Holley says. "The strength of our merged product allows us to deliver solutions that eliminate these concerns."

Nx's flagship product, the 3000 Series, delivers a secure solution for converged Internet telephony and data. According to the company, the 3000 Series is a combined voice over packet gateway and network router in a single, compact, rack-- mountable unit.

Additionally, the 3000 Series is a modular voice-over-VPN unit that secures voice and data using industry-standard firewalls, encryption and authentication protocols. It offers "pin drop" voice quality, along with interoperability and security.

"The 3000 really combines the router and the VOIP capabilities into a single unit, at a fairly aggressive price point, Sterry says. "We think that it is going to be the first product which will leverage this market space."

With the 3000 Series, Nx Networks is focusing on the edge of the network, Sterry adds. "This is a piece of equipment that will go in at a customer premise location and provide the capability to use a packet network to support either data or voice from that CPE location."

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