TECHNOLOGY I Just a couple of years ago, few of us even knew what VoIP is. Now there are so many telephone calls being made over the Internet, the telcos are abuzz
Peter Wilson
Sun
CREDIT: Bill Keay, Vancouver Sun
>Vonage customer Scott McInnes (left), president of PayKiosks, working with account manager Bruce Meli, says his long-distance business charges have dropped to between $300 and $400.
CREDIT: Ward Perrin, Vancouver Sun
Craig McKimm, who works for Visiphor Corp., utilizes video conferencing and Skype to keep in touch with the out-of-town offices. ‘Basically, I double-click a name in Skype and they answer pretty much simultaneously. That saves us a lot of money,’ he says
When Craig McKimm at Vancouver’s Visiphor Corp. wants to get in touch instantly with his co-workers in the firm’s Victoria or Dallas office he doesn’t reach for the phone.
Nor does he usually send an e-mail.
Instead, like almost everyone at Visiphor, McKimm uses Skype — the free software-based Internet phone service recently purchased by eBay in a $2.6-billion US deal that has the technology world abuzz.
“I call Victoria about five or six times a day and they call me,” said McKimm, who wears a headset attached to his computer to make the Skype calls. “Basically, I double-click a name in Skype and they answer pretty much simultaneously. That saves us a lot of money.”
McKimm and Visiphor are by no means alone in this. Fire up the Skype program these days and you’ll likely find close to four million users online worldwide, both individual and corporate, making calls around the world for free.
Skype claims to have 56 million registered users and says it’s adding them at the rate of 170,000 a day.
And along with Skype there are, in North America alone some 2,000 companies offering voice over Internet protocol (VoIP) phone service, 100 of them Canadian, including major telco and cable players such as Telus (business only, however), Bell, Shaw, Rogers and Videotron.
As well there are the virtual VoIP companies — ones that ride on the high-speed services of others — like Vonage Canada, Primus, Yak, Commwave, AOL TotalTalk and BabyTel that offer low rates for both their service and long distance.
A couple of years ago surveys showed that almost no one had heard of VoIP, much less knew what it was. Now it’s growing so rapidly in both awareness and attraction of subscribers that Britain’s Economist magazine announced on its cover that the era of the big telcos was almost over.
Why all the buzz?
Because, basically, it’s cheaper to make calls over the Internet than it is on telephone lines. And with the likes of Vonage and Primus you get a lot more services — like call waiting, call forwarding, call hold and caller ID — thrown in for free.
Primus’s Talk Broadband Service for home consumers offers a full-featured phone line plus unlimited long distance in Canada and the United States for $29.95 a month.
And Vonage prices its consumer-oriented Premium Unlimited plan (including free long distance to Canada and the U.S.) at $39.99.
And, if you wait a bit, you can even have your old number. Before Vonage business customer Scott McInnes, president of Vancouver-based PayKiosks Internet Terminals Inc., added Vonage service the company’s long-distance charges, largely for its sales force, were in the $2,000 to $3,000 a month range. Now he pays between $300 and $400.
“The cost of calling people internationally was just huge,” McInnes said.
“With Vonage, there’s a small cost for calling overseas, but it’s definitely not out of hand at all. And the quality is perfect.”
At Richmond’s Nature’s Path, where VoIP phones have been in place for a few years now, the savings are primarily in the ability to switch phones in and out without hassle.
Moving desks and offices is a snap, said Nature’s Path’s technology director Ron Boucher. All that has to be done is to move the VoIP phone to its new location. And employees working at home can take the phone with them.
As well, switching to VoIP has allowed Nature’s Path to operate with just one network for both voice and data.
And, aside from just price, home users have discovered another advantage.
Since they can order phone numbers with area codes for locations across the country, in the U.S. or even around the world, they can make calls to relatives in say Taiwan, for free. And those cousins in Taiwan can have a 604 area code to make calls back to Canada.
What all of this adds up to is a revolution in the phone industry, especially when it comes to landlines.
“There’s no doubt that this is really overhauling the industry,” said Canadian telephone analyst Brian Sharwood of the Toronto and Montreal-based SeaBoard Group, which issued a report in August showing that by the end of 2005 there will be 418,000 VoIP subscribers in Canada (out of a customer base of 14 million) and that 250,000 of those will be those of cable companies.
The report also said that the likes of Vonage and Primus will do well as will the smaller providers.
By the end of 2008, SeaBoard predicts there will be four million VoIP subscribers and, thanks to big marketing efforts and feature offerings that will be launched in a year or so, 40 per cent of those will get VoIP through the telephone companies.
“Until then, the consumer VoIP market will be dominated by the cable companies and, to a lesser extent, the independent providers,” the report said.
So far Shaw, although it offers VoIP service in Calgary and Edmonton, has not entered the B.C. market with a phone offering, but that is expected to change within the next year.
And Shaw’s prices are not all that low. Its bundled prices for unlimited Canada and U.S. long distance (depending on services you already have) are $45 and $50 a month. A stand-alone service costs $55 a month.
Telus — which offers business VoIP services through a managed network — is still thinking about just how it’s going to introduce VoIP for consumers in Alberta and B.C.
This, said Jim Johannsson, Telus’s director of new service development, is because there are still problems it sees with the quality of VoIP.
“On the open network there’s no controls there today,” Johannsson said.
“It’s a best-efforts network and when the network gets busy, packets get lost, speech gets choppy and all kinds of ugly things happen.”
Johannsson said that Telus has been taking “a very measured approach” to introducing a residential VoIP service and its monitoring the uptake of VoIP daily.
“We don’t want to deploy something that’s premature and then end up with an operational nightmare or a bad experience from customers that will turn them off the service,” said Johannsson.
Among the problems that Johannsson outlined are the lack of backup power for phones in the case of an emergency power interruption, 911 service not being at the standard of land lines and the disappearance of service if an Internet service provider goes down.
Johannsson said that Telus was more concerned about competition from cable operators like Shaw than it was from the virtual firms “which have quality of service issues and reliability issues considerably more difficult than what Shaw has.”
Johannsson said that Telus is thinking of deeply integrating — from a technology and not a bundling of services aspect — VoIP with its long-promised entertainment service, designed to compete in Alberta and British Columbia with Shaw.
“Picture that you’re watching TV and an incoming call comes up,” said Johannsson. “A little box will appear in the corner of the TV with the name, the phone number and a picture of the caller, potentially even live video.
“Then it will give you a range of options on how you want to handle the call. In one option your TV set turns into a video conferencing terminal. Or if you don’t want to answer you can send the caller to voice mail.”
Johannsson said that while Telus would never slow down a competitor’s calls on its high-speed Internet service, it might consider charging extra for a premium phone service.
SeaBoard’s report on VOIP said that the major telcos would likely have to use their record for reliability to defend against inroads by others. Even so, prices will drop over the next few years.
“Certainly people don’t change habits overnight,” said SeaBoard’s Sharwood. “It’s hard to change a habit like using the phone, which people have been doing for a long time. Certainly, the prices will start coming down fairly quickly.
Sharwood noted that this has already had an effect in the long-distance market where prices are at a tenth of what they used to be.
Joe Parent, vice-president of marketing and business development for Vonage Canada, said any suggestion that his company offers poor service is simply not true.
“We’ve got a great reliability record,” Parent said. “We’ve got independent research studies that show the voice quality of our service is superior to landline as well as wireless providers.”
He also said that most people now use portable phones for ordinary telephone service, so they would likely be left without a line when the power went out. And, he added, it’s been a long time since his Internet service has gone out.
What’s drawing customers, Parent said is not so much low long-distance rates, but the convenience of adding phones — simply by ordering online or going to a retailer to pick up a modem — along with the ability to have major features without extra costs.
“All these things are why the IP world is turning the typical telco world on its head,” Parent said.
He said that the Telus labour dispute has meant a surge in business for Vonage from those who have moved to new addresses and can’t get a phone installed.
“With VoIP none of that is required,” Parent said. “You can walk into your favourite retailer or go on to our website and order the service. You can configure features, you can add numbers, you can move things around, you can unplug your phone and plug it in someplace else if you have to move. It’s all under your control.”
Parent was also dismissive of Telus’s plan to integrate its VoIP offerings into its entertainment package.
“They need to convince the public that they actually want to empty more of their dollars out of their wallets and give them to Telus,” he said. “I think you would be hard pressed if you did a man-in-the-street interview to find people who were looking for more ways to spend money with their telco or their cable company.”
Parent does admit that services like Vonage Canada need to get the message out about how easy it is to use and that it’s not a software-based service, like Skype, that runs in a computer.
In a recent U.S.-based survey by Level 3Communications, 66 per cent of the respondents said that they imagined that switching to VoIP would be a hassle.
“Once people realize, wait a minute, it’s my existing phone, I just plug it into a box, it’s exactly the same jacks, I don’t have to do anything, 90 seconds and I can get a dial tone, then all their concerns just melt away.
In Eastern Canada, where cable operator Videotron — expected to have 125,000 customers by December — and Rogers are offering a VoIP service, Bell has reacted to competition much more quickly than Telus has in Alberta and B.C.
Bell, which has no immediate plans to enter the local consumer market, now offers two distinct VoIP offerings to home customers. The first of these, for $39, is Digital Voice Lite, a VoIP service with extra features that offers 1,200 minutes of free long-distance calling within Canada and the U.S.
The second, Digital Voice, at $40, plus another $18 for 1,200 minutes of U.S. and Canada long distance, allows users to keep their present equipment and phone number. Calls travel over Bell’s normal network and only go out on to the Internet when they reach a central point.
Digital Voice also includes extra features like those offered by other VoIP services.
Bell said that the Light service is good but not quite as good as normal phone service where the more expensive part-telco, part-VoIP service is the equivalent of what subscribers have now.
As for Skype — which eBay may eventually use to help connect buyers with sellers when voice contact is necessary — Greg Parker CEO of Vancouver-based Wavigo notes out what he sees as a major disincentive to using the service.
Skype, he said, has what it calls Skype Supernode architecture, which means that your computer can be used as a digital waystation for passing on the phone messages of others, which can introduce security issues.
“Your computer will run more slowly and your network bandwidth will be used for other communications and not yours,” said Parker, whose own Wavigo product sold worldwide allows users to connect directly.
THE VOIP REVOLUTION:
Internet telephony is becoming more common, with Skype, a voice over Internet protocol, saying it has 56 million registered users with 170,000 people joining the service everyday. Here are a few numbers that are giving telephone executives cause to think.
– 100: Firms in Canada offering VoIP, including Telus (business only), Bell, Shaw, Rogers and Videotron.
– 2,000: Firms offering VoIP in North America
– 418,000: Estimated number of Canadian VoIP users by the end of this year.
– 250,000: Estimated number of VoIP users who’ll be using cable companies.
– four million: Estimated number of Canadian VoIP subscribers by the end of 2008.
WHAT’S ON OFFER AND FOR HOW MUCH
Comparison of costs between Vonage VoIP and Telus landline service:
Remember, users must have a high-speed Internet connection — which costs in the range of $35 to $45 before they can use VoIP.
Vonage: Phone service plus unlimited long-distance calling in the United States and Canada, plus features including voice mail, caller ID, call waiting, call forwarding, three-way calling, call transfer, call return, caller ID block, international call block.
Cost: $39.99 per month.
Telus:
– Basic monthly phone service in the Lower Mainland, cost average; $25.66.
– Monthly long-distance administration fee: $4.95
Thirteen-feature bundle — including call display, call return, call waiting, three-way calling, talking call waiting, caller reveal, voice mail, anonymous caller ID, call screening, call forwarding do not disturb, advanced call forwarding, Internet call director and smart ring — per month: $19.95
– Your Way Canada plan for long distance up to 400 minutes a month to anywhere in Canada with calling to the U.S. at 10 cents a minute: $17.95
Total Cost: $68.51, reduced by a $5 off deal for Telus Internet service, or $63.51.
If you go with Telus’s new six-feature bundle — choice of six of 19 features — cost is $64.85, minus $5 for Telus Internet or $59.85.
© The Vancouver Sun 2005