The established power structures in the telecommunications industry are under bombardment from new, nimble, small companies, who are providing services with cutting edge technology and undercutting the traditional, pay-per-minute business model of the big phone companies. Here’s a look at IP-telephony, which may be the worst thing to happen to land line revenues since the mobile phone.

The New Regime
For as long as anybody can remember, there has been an apparatus in our homes, which has been our most important tool for communicating across distances. The telephone was a revolutionary device when it was released, making possible instantaneous conversation with friends in other cities, ending the reign of the asynchronous and slow letter as the preferred mode of interpersonal communication. This was a technological and cultural revolution, of a magnitude that has rarely been matched in human history.

When mobile phones began spreading in the late 1980’s, the wheels took a new turn – now phones were no longer bound to physical structures, but to people. A monumental achievement, and quite mind-boggling if you’ve ever talked to somebody skiing in Hemsedal while you were standing in a speeding Land Cruiser going through the middle of the Serengeti.

IP-telephony is no such revolution, in that it doesn’t really do anything new. It is a technology that addresses structural weaknesses in the existing business models of land-line telephony. All over the world, customers are growing increasingly dismayed with telephone costs. The time is ripe, in other words, for a cheaper alternative – and IP telephony may well be the big killer for traditional telecom revenues. In this context, it may very well be the start of a revolution.

IP telephony is essentially a way of taking analog audio signals, like the ones you hear in a regular phone call, and turning them into digital signals that can be transported over digital network. There are two kinds of IP-telephony, similarly named, but with some significant differences. VoPI – Voice over Public Internet – relies on the Net for connections, the same Internet used by you, me, and everybody else. VoIP – Voice over Internet Protocol – means a connection that can be set up over any private network, not only the Internet. VoIP is often referred to as broadband telephony – and this is the most common solution in the consumer market. The commercially available products I am talking about in this article are all VoIP.

So, Is It Cheap?
Yes. VoIP software lets you place free, or at least very cheap, phone calls over your Internet connection. You are bypassing the phone companies completely (unless, of course they are providing the service, which is a growing trend – they are thinking damage control at this point.) Instead of paying a certain cost per call, you utilise the broadband line for which you are already paying a fixed sum.

The math isn’t too advanced: If you already have a broadband connection, VoIP will lower your monthly costs. The same principle applies if you are planning on getting an ADSL line. Although most broadband ISPs charge a little extra for a “pure” or telephone-free ADSL line, you’ll make up the cost on the cheap calls. On the other hand, if you don’t have broadband, and don’t want it, then IP-telephony is not for you.

The most common business model is charging a fixed monthly cost for the service, with unlimited free domestic calls. Usually you are charged a little for calling mobile phones or calling abroad. Some providers offer different models, where you pay no fixed cost, but are charged a very small sum per call. Choose the first pricing model if you are looking for stability, or if you use the phone a lot. If you only make sporadic and short calls, you should go for the second option.

Everybody’s Doing It
Several Norwegian telecom companies now offer VoIP to their customers, including BlueCom and NextGentel. Telenor announced earlier this year that they are postponing their IP telephony launch until mid-2005, to ensure proper testing and quality of service – and to enable existing land-line customers to keep their phone number – a service for which other VoIP providers charge extra.

The market leader in Norway right now is Telio, who were the first to deliver a full-scale consumer product to the mainstream market. But competitors are popping out of the woodwork, with new companies, like IP24, Foon, TeleVoIP, and Onecall, all going for a slice of the cake. In this market, a price war is inevitable and already in the making. This could be very dramatic for the big established land-line providers, like Telenor. They may be forced to cannibalize their own customer base with a product they make less from. But they have no choice. In an ever-hardening market, every customer has to be fought over. Good for the customer, in other words.

How Does It Work?
In the earliest days of VoIP, you typically placed calls from your computer, sitting with a headset plugged into the PC. You can still do it this way, but most services now offer regular phones, hooked up to an adapter sitting between the phone and your broadband modem. You use a regular analog phone, cabled or wireless, just like you do today.

Quality is getting better. Many users have complained about static on the line, or being disconnected frequently, or sometimes just plain unable to place a call. And, as is normal with smaller companies, customer service has been abominable in many cases.

But here is no doubt that progress has been made. Quality is generally much better, if not as stable as the old phone. And we are used to the generally less stable user environments that come from more and more complex digital technologies. If we hadn’t been used to our PC’s crashing once in a while, we would never have accepted the level of quality currently being offered.

Some are afraid that widespread use of IP telephony could lead to more deaths from accidents and crime, due to slower reaction times to emergency calls. The reason for this is that the phone systems currently in use by police and emergency rescue call centers can’t record the incoming phone number from a VoIP call. So if you are in a situation where you are unable to speak, you could be in trouble.

Will it replace the old phone system entirely? Well, it might. Since VoIP reuses a lot of the infrastructure that was originally laid to support traditional telephony, there is a lot to be said for the new system – low start-up costs, cheap distribution, low-priced handsets. Keeping in mind the tendency of the older generation to hang on to what they know, it will probably take many years before it dominates. Besides, it will inevitably come up against mobile phones, which has the added benefit of being much more of a personal item, which may slow down the spread of VoIP.

The big question: should you do it? Sure – unless you already make most of your calls from your cell phone, and believe, like I do, that phones belong to people, not buildings. But one thing is certain: It could save you money, and there is no reason in the world to pay too much for anything. Go for it.