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Chapter 1: The Promise of Internet TelephonyWho has not seen those often annoying television advertisements featuring people whose lives have been made so much better because they use 10-10-555 or some other dialing prefix when they make telephone calls? In the United States, where telephones and telephone service are abundant and inexpensive, many viewers tend not to get excited about such services. Some are convinced that there is a hidden gimmick somewhere, while others cannot see the difference between 9 cents a minute and 8 cents a minute as being all that important in their lives. Yet many of the services are popular enough to at least stay in business, if not prosper (the cost of the ads alone, which run thousands of times, can be quite a drain on a company's resources).
Outside the United States, cost differentials matter more. Even within the United States in the not-so-distant past, saving money on telephone calls was something worth the effort to accomplish. And given enough volume, even pennies do add up. Businesses tend to look at telephony costs differently than residential users, and lower costs for higher-volume billing packages were offered much more commonly to businesses before telephone companies offered them to residential customers. Businesses are more cost conscious than even the most attentive families. Businesses always have an eye on the cash flow of the operation, but few families bother to compute their monthly rate of return or worry about the bottom line unless there is a real crisis when the time comes to pay the bills.
This book is about voice over IP (VoIP). This chapter is about Internet Protocol (IP) telephony. It mentions voiceover packet networks. What's the difference? In these pages, VoIP just means that the IP protocol is used to deliver digital voice over a network. The network could be a local area network (LAN), wide-area network (WAN), or public data network like the Internet. The term IP telephony is used here to mean that the IP protocol is used not only to deliver voice but also to perform some of the related functions that the voice network must include to make the whole network into a full system. Some of these functions include special features (e.g., call forwarding, call waiting, and so on), collect calling, gateways into the public voice network, and associated actions. As time goes on, and IP becomes more used for everything, VoIP and IP telephony will come to mean one and the same thing. Voice over packet (VOP) just means that the digital voice is delivered over a packet network of some kind, perhaps the Internet, but maybe not. Not all packets are IP packets. But unless otherwise noted, both VoIP and IP telephony are used here to indicate IP voice carried over the Internet, with gateways and special devices used to add functionality to the basic IP transport of digital voice.
But VoIP has something for everybody. While businesses look to save and make things more convenient for customers, residential users typically look for convenience first and cost savings later. There are exceptions, of course. Residential customers still used alternative telephony services in the early days when such use involved two separate dial tones and as many as 20 extra dialed digits instead of only 7. What the businesses and people had in common was a desire to use more cost-effective measures to make telephone calls. Perhaps the best place to begin, therefore, is with a look at the costs of telephony as a whole.
The Costs of Telephony
Telephony was not always the inexpensive commodity item associated with normal household and business costs such as coffee and electricity. Once telephony was a luxury, and an expensive luxury at that. Alexander Graham Bell invented the telephone as a business tool for manufacturers to call suppliers, hospitals to call doctors, and so on. Bell was astonished that ordinary people would want telephones in their homes. Ordinary people wrote letters to communicate (the mail then came twice a day except on Sunday, as in the Saturday Evening Post). In fact, to the day he died, Bell had no telephone in his office, mainly because he hated to be interrupted by the ringing.
However, being able to converse with someone who was not right there next to you in real time, like a kind of "interactive letter," fascinated almost everyone who experienced it. Mark Twain was among the first to have a telephone installed in his home, in Hartford, Connecticut, where it can still be seen today. Twain also was among the first to complain about the quality of service on the noisy line. Businesses did use the telephone as well, but usually only for the boss or high-level managers who had private offices in which to converse.
In the 1930s in the United States, local telephone service cost between $18 and $24 per year, depending on the region. The more urbanized Northeast had lower rates than the more isolated Midwest and Far West, at least outside the cities. This cost does not sound like much, but the amount must be put in perspective. The average farm worker in 1930 made less than $200 per month, for an annual salary of under $2400. A half-gallon of milk cost 28 cents, and a pound of bacon went for 40 cents. In 1929, three hot dogs could be bought for a dime, and a soft drink to go with it cost 3 cents. Looked at this way, $20 a year for a telephone could buy at least 160 meals, or enough food to live on for about 3 months. This is one reason that right before the United States entered World War II in 1941, only some 40 percent of Americans saw fit to have a telephone in their homes. And that was only because of extraordinary efforts by the telephone companies to keep subscribers during the dark days of the Depression in the early 1930s. These efforts included even more widespread use of party lines (access lines that supported more than one subscriber) and flat-rate local service to make monthly charges more predictable in the tight monthly budget.
As expensive as local service was, long-distance telephone calls were even more expensive, especially international calls. For example, in 1927, a 5-minute telephone call from New York to London cost $75. This is almost $700 in year 2000 dollars, so it is no wonder that international calling was mostly a business expense. Even domestic long-distance was awkward and costly to use until the mid-1960s. A long-distance call usually had to be set up by hand from operator to operator (the caller was told, "I'll call you back when your party has been reached") and could take anywhere from 7 to 12 minutes to route across the United States. By 1961, the cost for an AT&T coast-to-coast call was down to $12 per minute, at a time when minimum wage was about a dollar an hour. There were even cartoons showing people rushing from the shower, dripping wet, and wrapped in a towel to take a long-distance call. This was only etiquette: The caller was paying that $12 a minute, except for collect calls, and no one took a collect call unless it was from a close relative anyway.
It was only after World War II that even the business use of the telephone took off. The economy in the United States throughout the 1950s was booming, and the major business problem was how to find enough qualified people to open a new sales office, not downsize people to close one. No wonder older people look at the 1950s as some long-lost Golden Age. The gross domestic product doubled from 1945 to 1960, and this vast influx of wealth allowed businesses and people to view technology in a whole new light. The manager has a telephone and works more effectively because of it? Give all the workers a telephone!
The interplay between technology, economics, and social factors quickly became apparent in those days as well. A photograph of an office in the 1930s and 1940s shows pretty much the same thing: row upon row of clerks at desks with typewriters and the manager standing at his (hardly ever a her, except in the telephone company) office door in the rear. Only the manager had a telephone because only the managers had an office to talk in without disturbing those around him (not to mention the privacy issue). Now put telephones on all the workers' desks, as happened in the 1950s and 1960s. Suddenly, the noise level increased dramatically. The solution, of course, was to give everyone a small measure of privacy with the cubicle, which is the most widely lampooned aspect of office life today.
When it comes to telephony, in many cases trends start out in the business world and make their way to the residential marketplace. For instance, competitive long-distance services in the 1970s and 1980s targeted businesses and only slowly began to be offered to residential users. Thus many of the perceived advantages for VoIP apply to businesses first and foremost but should make their way down the chain to ordinary residential users quite quickly.
When it comes to the business advantages of VoIP, all of them boil down to cost factors in one way or another. Four VoIP benefits are usually cited with regard to business (and might apply to residential services soon enough). These are
1. Reduced long-distance costs
2. More calls with less bandwidth
3. More and better enhanced services
4. Most efficient use of IP
Consider each benefit in turn. ...