Tài liệu The Evolution of Internet Telephony pptx

Voice and Data – Convergence Has Been A Long Time Coming The promise of a single network carrying both voice and data is as old the first data networks themselves.. BellSouth who remain

White Paper:

The Future of Online Communication

Section I: The Evolution of Internet Telephony

H Mine, Executive Vice President, Probe Research, Inc.

Section II: AT&T’s IP Telephony Initiatives

October 1998

Section I: The Evolution of Internet Telephony

Hilary Mine

Probe Research, Inc.

Three Wing Drive, Suite 240

Cedar Knolls, NJ 07927

www.proberesearch.com

Tel: 973-285-1500

September 1998

TABLE OF CONTENTS

VOICE AND DATA – CONVERGENCE HAS BEEN A LONG TIME COMING 4

EMERGENCE OF THE INTERNET 6

INTERNET TELEPHONY - MARKET EVOLUTION AND DRIVERS 8

H OBBYIST P HASE - IP T ELEPHONY AS H AM R ADIO S UBSTITUTE 9

T ARIFF A RBITRAGE - C ALLING C ARD R EPLACEMENT 9

F EATURE P ARITY 12

N EW A PPLICATIONS 12

Conferencing Applications 12

Call Center Applications 13

IP Messaging 14

IP Call Waiting 14

C OST P ARITY 15

MARKET AND TECHNOLOGY BARRIERS TO INTERNET TELEPHONY AND THE NEW PUBLIC NETWORK 15

I NTEROPERABILITY C HALLENGES 16

Q UALITY OF S ERVICE 16

C OST TO D EPLOY IPT 17

O PERATIONAL S UPPORT S YSTEMS 18

REGULATION - THE VERY REAL THREAT 18

SERVICE MARKET OPPORTUNITIES IN INTERNET TELEPHONY 19

THE VALUE OF EARLY MARKET LEADERSHIP/ TODAY’S INTERNET TELEPHONY SERVICE PROVIDERS 20

Voice and Data – Convergence Has Been A Long Time Coming

The promise of a single network carrying both voice and data is as old the first data networks themselves The fundamental notion that a single network offers economic advantages, both in terms of upfront equipment costs, and with respect to management and administration costs, goes back literally decades Perhaps the most famous failure of convergence was ISDN

(Integrated Services Digital Network, or “It Still Does Nothing” as it is colloquially referred to), which is finally beginning to be deployed today, but which has been available to service

providers since the mid 1980s

Just as its name implies, the idea behind ISDN was integration of voice and data over the public network The expectation was that a customer would use one 64 Kbps B channel for voice, and the other for data But carriers did not deploy the technology in any significant way in the U.S.,largely because their business structures prevented them from being able to prove in business cases In addition, as is generally true of new technologies, the developments of true

interoperability and standards, as well as the cost of early customer premise equipment (e.g., modems) were also significant barriers to the success of ISDN

Finally, however, there was a lack of mass market demand for data networking This particular market barrier remains, of course, subject to much debate Despite the fact that 45% of US homes have at least one PC in use, and the majority of those are Internet subscribers, there are still those in traditional carriers (e.g BellSouth) who remain convinced that end users are not willing to pay the true costs to provide data network services, with the exception of a few large business customers

With the advent of the Internet, there is little doubt that end users in both the consumer and business markets are very interested in data services Willingness to pay has still to be proven in,since the mass market Internet is arguably being subsidized at this time Nonetheless, data traffic even prior to the rise of the Internet, has been growing dramatically faster than voice traffic, and this pattern is at the crux of the integrated network dream

Figure 1: GLOBAL NETWORK TRAFFIC

PSTN VOICE PACKET & PRIVATE WAN VOICE

PSTN DATA PACKET & PRIVATE WAN DATA

Source: Probe Research, Inc estimates

Figure 1 shows Probe's estimates of total global communications traffic PSTN refers to the public switched telephone network, or the traditional telephone network Private Wide Area Networks (WANs) refer to leased line and virtual private networks (VPNs) that large companies and institutions use for internal communications Packet refers to packet network based traffic Today, over 70-75% of this traffic is still voice, but as we have observed, data is growing much faster By the year 2005, data will account for nearly half of global traffic It is critically important to note, however, that voice traffic will be growing as well over this period, and will still be the bulk of traffic on many routes

A few service providers have begun to observe portions of their networks reaching the magic 50% data traffic threshold, and anticipate that on some segments (particularly international routes), data traffic will account for as much as 80% of traffic within the next 5-7 years This is generally true of routes (e.g., Tokyo to London) that are dominated by business traffic As a rule, the more local the traffic, the more it is dominated by residential and small business traffic, and consequently, the more it is dominated by voice versus data traffic

In the long run, multimedia applications that are targeted to consumers, such as interactive video, Internet TV, videoconferencing, and more, will radically alter the mix of voice and data Once the standards, customer premise equipment, applications, and above all the economics come together, then voice traffic will indeed be eclipsed Based on Probe's ongoing analysis of bandwidth to the home and small office, and all of the associated terminal equipment, standards, and other issues surrounding the take off of residential multimedia, we remain convinced that

mass market adoption is at least five years off even in the best of circumstances (e.g., in the

heart of Silicon Valley) This is not to say that there are not already many households that generate more data than voice traffic (e.g., in Silicon Valley), but rather that it will be some timebefore early adopters give way to mass market consumers For most communities, mass market adoption is even further away (7 years or more)

Emergence of the Internet

The overwhelming driver of data traffic today is the Internet, as well as wide area private/virtual private IP networks (e.g., Intranets and Extranets) While global voice traffic continues to grow

at less then 8% annually, data traffic is growing at roughly 35% Although the Internet Protocol has been defined for decades, its use became widespread only recently

The market for Internet services was born in great part due to the privatization and

commercialization of NSFnet Indeed several key players, including BBN Planet, MCI, Sprint, etc., originally became involved in the Internet as government contractors Others, including UUNet and PSINet, launched commercial services in 1991, as soon as the NSF allowed it, and were founded and staffed by NSFNet veterans While proprietary online services and Bulletin Board Systems (BBS') attracted aficionados and hobbyists for over a decade, the audience for these services remained limited due to constraints on content, incompatibility between networks,and exceedingly slow access, as well as the basic issue of limited PC deployment In the early 1990s, however, several factors coincided to cause the Internet to become a viable commercial platform:

1991 - NSF allowed commercial use of the Internet, and the first Commercial Internet

Exchange was launched;

1992 - The number of Internet hosts reached 1 million (largely academic and military);

1993 - WWW and the Mosaic browser were introduced; and

1994 - The penetration rate of PCs in US homes reached 33%; 28.8 Kbps modem standard

was approved

By year end 1998, PC penetration amongst US households is approaching 45% Importantly, this figure takes into account households with multiple PCs, and excludes those with inactive PCs

Internet Users Pass 10M

PC Penetration

in US Homes reaches 33%;

28.8Kbps Modem Standard Approved WWW and

Mosaic Introduced

OSP business model fails; OSPs become ISPs

By year end 1998, there will be an estimated 100 million Internet users worldwide (including business, consumer, students, etc.) See Figure 3 For perspective, there are well over 600 million telephone users worldwide Nonetheless, the Internet has proven to be the clear technology winner as a user interface to a global public data network

1997 1998 1999 2000 2001 2002 -

Figure 3: Worldwide Internet Users: 1997-2002

Source: Probe Research, Inc estimates

Internet Telephony - Market Evolution and Drivers

In its brief life, IPT has already seen two distinct phases of market evolution, and is on the verge

of a third In this section we describe the expected development of IPT as a market, and explore the factors that will drive each phase of adoption of the technology Figure 4 provides a general overview of the evolution, including Probe's projections of global voice and fax over IP in minutes of use

Figure 4: GLOBAL VOICE/FAX OVER IP TRAFFIC

AND MARKET DRIVERS

Source: Probe Research, Inc.

Tariff Arbitrage

Feature Parity

New Applications

Cost Parity

Hobbyist

Hobbyist Phase - IP Telephony as Ham Radio Substitute

In late 1995, a few technologists and hobbyists recognized the potential of the Internet to carry voice traffic Companies such as VocalTec, NetSpeak, Quarterdeck, and others developed a newclass of software that enabled any two Internet users to talk to each other from their PCs This approach, which relied entirely on the PCs at each end, required not only soundcards and high speed modems at each end, but also that end users use the same software Each solution was proprietary – a VocalTec user could not talk to a NetSpeak user Nonetheless, the draw of free phone calls was compelling By year end 1996, over a million copies of this class of software had shipped, and players like Microsoft and Intel had jumped in to develop standards-based client software as part of their larger vision of using the Internet as an alternative voice and conferencing platform

Not surprisingly, early adopters of this technology largely treated it as a chat room alternative VocalTec and other companies set up Internet relay chat rooms (IRCs), where users could go to find other users with the same software, or where users might set up private meetings Despite all the awkwardness of this form of communication, literally millions of conversations were completed between PC users over the Internet in 1996

Tariff Arbitrage - Calling Card Replacement

The long distance communications market is extremely price elastic This is important because

it is currently the underlying market driver for Internet telephony, and will remain so for the

next three to five years To support this statement, consider the impact of competition on the USlong distance market in the 1980s Figure 5 shows indices of price per minute versus minutes of use of interstate long distance in the US during the period 1981 to 1993 As prices fell, traffic grew considerably Indeed the highest rates of traffic growth occurred during the period 1984 through 1988, when prices were falling their fastest (an average of 7.3% annually).

Figure 5: Price Sensitivity in Long Distance

Early adopters of IP telephony quickly realized that the initial acceptance of the technology hinged on its ability to bypass regulatory regimes and tariff structures International call back service providers, such as IDT, were among those most threatened Their customers are

amongst the most price sensitive, and are willing to dial additional digits or suffer other

inconveniences to save money Consequently, these types of service providers were the first to develop IP telephony services Other service providers, such as AT&T, Sprint, etc also paid early attention to IPT as a threat and therefore also an opportunity

Simultaneously, vendors such as VocalTec, Vienna Systems, and Clarent Corp recognized that while the PC hobbyist market was a nice start, the installed base of multimedia computers was rather limited compared to the installed base of traditional telephones Moreover, the biggest problem with IPT, the quality of the voice, was seriously affected by the end user’s own ability

to configure their system (the PC, the software settings, etc), and the reality is that non-hobbyist

users are more interested in communicating than in understanding the finer points of codecs The market potential of phone-to-phone and PC-to-phone IPT drove the development of first generation of IPT gateways And service provider fear of lost revenues provided the demand that has fueled the next generation of IP telephony platform, the gateway.

IPT gateways, which enable end users to make IP calls from traditional wireline or wireless telephones, can be deployed in an end user or service provider network The function of these gateways is to packetize the voice signal on the originating end of a call so that it can be

transported over an IP network At the terminating end of the call, another gateway converts thepackets back, and re-assembles the voice signals for the traditional telephone network

In the past year, voice over IP has eclipsed the Internet itself as a source of hype There is littlequestion, however, that this market is no longer a vague fantasy shared by a few hobbyists andtechnologists Several service providers now report traffic in the millions of minutes per month,and many more are ramping up trial networks as well as commercial networks globally

There are a variety of factors driving growth in the internet telephony and fax market Amongsttraditional service providers/PTTs, voice and fax over IP has caught on the fastest driven largely

by fear Those with the most to lose are understandably the most aggressive in testing anddeploying new technology

ISPs are grappling with growing competition and declining margins in the plain vanilla internetaccess market Consequently, most are exploring a variety of value-added services to increaserevenue per subscriber Now that the technology is maturing, and large carriers have movedbeyond the announcement stage into the full-scale trial stage, ISPs are testing the water andbeginning to understand the true nature of the opportunity

Tariff Arbitrage - Enterprise Trunk Replacement

Amongst enterprises, IPT networks have been slower to take off This reflects several factors,including lack of properly packaged solutions for the enterprise market, skepticism about thequality of service afforded by IPT, and the immaturity of the equipment and software.Enterprises have voice networks that work today, and need compelling business cases to replacethose Moreover, the MIS and telecom purchasing decision makers still tend to be separate andoften at war Nonetheless, enterprises have deployed thousands of IPT gateway systems, and arealso trialing IPT services in growing numbers For many, IPT services are the point of entry rather than replace or overhaul the PBX, an enterprise might introduce cost efficiencies by usingIPT calling cards for traveling execs to call the home office for example

All in all, however, the market is largely a service provider market today, and is expected to continue to be for the next couple of years The tariff arbitrage opportunity is, however,

expected to wane As it does, we anticipate that feature parity and new applications will sustain the next wave of market growth

Feature Parity

The next wave of potential users of IPT that are attracted to lower prices will adopt the

technology only after it is equally convenient to traditional voice services This phase requires the next generation of IPT equipment Although the gateway market has evolved at a

tremendous pace, the IPT gateways that are available as of late 1998 are still lacking in several regards Today's gateways are not interoperable with each other, they do not interoperate effectively with the existing circuit switched network, they do not scale well, and they are extremely expensive when compared to the traditional public switched network However, network equipment vendors are working feverishly on these problems Probe estimates that the number of engineers and developers devoted full-time to IPT has grown fivefold in the past 18 months We expect to see substantial progress on all of these issues over the next 18 months Importantly, we are already seeing the beginning of feature parity, and this is what will drive thenext wave of IPT adoption by end users

In early 1999, several service providers will introduce IPT and fax services that no longer require the end user to dial any differently than they would for a regular phone call this is referred to as single stage dialing This and other key features that users expect of the traditionalvoice network will be available in IPT networks as vendors introduce SS7 integration into their IPT solutions As was true in the US with the introduction of long distance services, it was not until users had the option to do single stage dialing for their choice of carriers that competition took off

New Applications

While price is the key driver of the IPT market today, most observers agree that extending end user feature control and functionality are the real benefit that will drive the IPT market in the longer run Indeed the very future of IPT depends in part on the development of compelling applications There are a variety of potential applications, many of which we have probably not even conceived of, that leverage the integration of voice and data on a single network and user interface Internet telephony may well prove to be first killer application that finally drives widespread adoption of computer based telephony

Some of the applications that are already possible today include:

 Multimedia Conferencing;

 Multicast;

 Collaborative Workgroup applications;

 Call Center applications;

 Message unification; and

 IP Call Waiting

Conferencing Applications

The first three are closely related VocalTec, Nortel, and others sell software applications today,generally H.323 compliant, that enable end users to simultaneously talk and share data over a single IP connection, conduct videoconferences over IP, and share documents over that same