by Jim Hanks

Not too long ago, before Ma birthed her Baby Bells and Working Assets Long Distance offered free pints of Ben and Jerry's, the long-distance telephone market seemed impregnable. Even today, because the majority of costs for telephone services are fixed and considerable, all but the largest companies are excluded from the market.

As a result, long-distance carriers have been cashing in on toll charges for decades. But once technology was invented, a relatively new entrant to the telecom world, Voice over Internet Protocol (VoIP), has threatened to take on the telecom giants.

As you'd expect, the battle doesn't come without controversy. On one hand, VoIP reduces inter-office and long-distance charges dramatically by transmitting voice calls through data lines instead of traditional networks. Since these lines—Local Area Networks (LANs), Wide Area Networks (WANs), or simple internet connections—are already in place, hardware expenses aren't prohibitive. On the other hand, VoIP's quality of service just isn't what most people want it to be.

Is VoIP a valuable service…or just another over-hyped technology?

How VoIP works
Traditional phone services transmit analog signals over closed circuits. Once digital technology was invented, this process was quickly deemed inefficient. By converting analog signals to digital packets and compressing them (using a codec), transmissions can be sent quicker using less bandwidth.

There are 2 different VoIP protocols that define how devices communicate with each other: Session Initiation Protocol (SIP) and H.323 protocol. Both work fairly well and each has its own advantages. SIP is specifically designed for voice transmissions and is better suited for VoIP use. Because H.323 protocol is used for data transmissions, videoconferencing, and a host of other applications, it is not as efficient. But since it has been deployed on a much larger scale, H.323 may be to SIP what the VHS was to Beta. In other words, though SIP is superior for VoIP applications, it isn't going to eclipse H.323 anytime soon.

How VoIP works in business
Initially, Private Branch Exchanges (PBXs) and key systems were designed to reduce the amount of human intervention needed to make and receive phone calls. They also kept the number of required cords to a minimum. But as data transmission technologies expanded, many PBX makers began to integrate VoIP to help their users save money. If your PBX isn't VoIP-enabled, not to worry—you can enable it yourself. By connecting an IP gateway between your PBX and your intranet, calls will be routed through your data line and will circumvent long-distance carriers.

PBX manufacturers aren't the only people dodging traditional phone lines. Long-distance carriers themselves—though careful not to abandon their lucrative circuit-switching business—have been using VoIP technology behind the scenes for years. Though you probably haven't realized it, a lot of your calls, especially international ones, are currently directed through data lines.

So how good is VoIP?
Businesses with extensive overseas contacts or high call volumes will benefit the most from VoIP. But many international companies and call centers have been reluctant to dive in because of significant previous investments in circuit-switched platforms. And then there's the issue of transmission quality…

During periods of high network congestion and limited bandwidth, digital packets are often dropped, making for poor call quality and lost connections. But if you're using VoIP over internal data lines (such as your intranet), bandwidth is more predictable and you should experience less data loss. Intranet users can also use more sophisticated VoIP programs that support full-duplex, real-time voice communications.*

Another reasonable complaint of VoIP is that when fully adopted, what happens when your network goes down? No computer. No phone. Unfortunately, this is a hazard you have to live with for now.

But then there are the undeniable advantages. Given that VoIP circumvents long-distance tolls, calls will typically cost from a few pennies per minute to nothing at all. Aside from this cost savings, the dream is to have the ability to collaborate with multiple people on projects without worrying about the different applications required. You won't have to call each other on the phone and e-mail each other revisions back and forth; you'll simply sit down at your workstation and collaborate on projects as if co-workers and clients are seated directly in front of you.

The future of VoIP
Overall, quality of service problems will improve as faster transmission systems become available. Microsoft has recently included VoIP software in their Windows XP and promises to make net-based calling as good as regular phone services. The software giant's presence alone should improve the VoIP market considerably. But even if their bold promise isn't fully realized in the near future, intranet users can still experience distinct advantages from VoIP technology right now.

* If you're looking to use VoIP without a LAN, WAN, or PBX, read my article "Which VoIP Service Is Best for You". Here you will find how non-intranet users can download applets and make free calls immediately through their standard internet connections.