VoIP's BACKGROUND

A. VoIP, Internet Telephony, Voice-over-the-Internet: What are they?

The terms Voice-over-Internet Protocol (“VoIP”), IP telephony, Internet telephony, and Voice-over-the-Internet (“VoN”) are given different meanings by different commentators and in fact have no universally agreed-upon meaning. There are, however, distinctions to be kept in mind, for IP can be used in various ways for the transmission of voice.

· VoIP is a generic term that refers to all types of voice communication using Internet protocol (IP) technology instead of traditional circuit switched technology. This includes use of packet technologies by telecommunications companies to carry voice at the core of their networks in ways that are not controlled by and not apparent to end users.

· VoN, also called Internet telephony, on the other hand is a service that end users decide to use -- it is a specialized form of VoIP in which a regular voice telephone call is transmitted via the public Internet, thus bypassing all or part of the public switched telephone network (PSTN). Internet telephony can occur between computers (computer-to-computer), between a computer and a phone (computer-to-phone), and between phones (phone-to-phone).

B. Transmission Of Voice Using IP Networks: How Does It Work?

Here is how a VoIP transmission is completed:

Step 1: Because all transmissions must be digital, the caller’s voice is digitized. This can be done by the telephone company (which is how carriers use IP in their networks), by an Internet service provider (ISP), or by a PC on your desk.

Step 2: Next using complex algorithms the digital voice is compressed and then separated into packets; and using the Internet protocol, the packets are addressed and sent across the network to be reassembled in the proper order at the destination. Again, this reassembly can be done by a carrier, and ISP, or by one’s PC.

Step 3: During transmission on the Internet, packets may be lost or delayed, or errors may damage the packets. Conventional error correction techniques would request retransmission of unusable or lost packets, but if the transmission is a real-time voice communication that technique obviously would not work, so sophisticated error detection and correction systems are used to create sound to fill in the gaps. (This process stores a portion of the incoming speaker’s voice, and uses a complex algorithm to “guess” the contents of the missing packets and create new sound information to enhance the communication.)

Step 4: After the packets are transmitted and arrive at the destination, the transmission is assembled and decompressed to restore the data to an approximation of the original form.

As this explanation suggests, technology that works fine for sending data may be less than perfect for voice transmissions. The technology is improving, but still the quality of a voice transmission using packet technology is inferior to a circuit-switched connection, and that difference in quality would normally be obvious to any listener. As IP technology improves, the quality advantage for voice communication enjoyed by the circuit-switched will decrease, but most experts see parity in quality as still a distant prospect.

C. Advantages of IP for Voice

Telecommunications carriers around the world have already introduced IP into their networks because it provides economic benefits over traditional telecommunications networks.

Greater Efficiency: The conventional circuit-switched technology of the PSTN requires a circuit between the telephone company’s switch and the customer’s premise to be open and occupied for the entire duration of a call, regardless of the amount of information transmitted. In contrast, on IP networks, all content -- whether voice, text, video, computer programs, or numerous other forms of information -- travels through the network in packets that are directed to their destination by diverse routes, sharing the same facilities most efficiently.

Lower Cost: IP systems will offer a more economical means for providing communication connections. Also -- and this is one of the sources of concern on the part of incumbent voice long distance carriers -- Internet technology makes available to anyone with a personal computer and modem the ability to bypass the long distance PSTN.

Higher Reliability: In some respects, IP networks also offer the potential for higher reliability than the circuit-switched network because IP networks automatically re-route packets around problems such as malfunctioning routers or damaged lines. Also, IP networks do not rely on a separate signaling network, which is vulnerable to outages.

Supporting Innovation: IP is a nonproprietary standard agreed on by hardware and software developers, and is free to be used by anyone. This open architecture allows entrepreneurial firms to develop new hardware and software that can seamlessly fit into the network. In contrast, the circuit switched network operates as a closed system, thus making it more difficult for innovative developers to build and implement new applications.

Telecom carriers using IP for their internal networks can reap these benefits. However, individual users seeking to use VoIP over their PCs encounter other limitations. Specifically, IP technologies currently lack a guaranteed quality of service. The ordinary telephone network (if properly installed and maintained) is designed to offer end users a very high quality of service for real-time communications. The Internet Protocol was not designed for voice; instead, it is based on a "best efforts" principle, which means that some packets are "lost" and have to be resent, introducing time delays that are inconvenient at best for voice communications.

Despite quality of service concerns and the policy issues that need to be resolved (discussed more fully in the next section), there are several arguments why carriers stand to benefit from VoIP even in end-to-end applications:

· Faced with an uncertain landscape and increased competition, incumbents must retain customers. By offering VoIP, in and of itself, carrier's can retain customers and increase traffic.

· Moreover, introduction of IP allows carriers to offer integrated services (voice, text, audio, and video) over a single connection, thereby further enhancing value to their customers and contributing to profits.

· Especially given the possibility of long distance savings, VoIP can boost consumer demand for local telephone service.

· Carriers stand to realize substantial cost savings as the IP switching equipment becomes less expensive.

· IP helps spur innovation and development. Infrastructure development on IP can take far less time and cost much less compared to the enormous costs of building out and maintaining a state-of-the-art PSTN network.