Tuesday, February 24, 2009

IP Phones Are In Demand

Enterprise VoIP is growing like crazy, but consumer adoption of IP phones is lagging far behind. That's the assessment of a recent study of the IP phone market. Is it that residential users aren't embracing new communication technology the way businesses are, or is there another explanation?

IP networks have been chipping away at the switched telephone network franchise for years. The reasons for this are both technical and financial.

For the consumer, the primary impetus has been to leverage their relatively expensive broadband (compared to dial-up) Internet service to also provide telephone services. There are many residential VoIP phone companies that offer bundled local and long distance service along with a dozen or two calling features all for one bundled price. For many consumers that price is lower that what you get ordering from the incumbent local telephone company.

There have also been a wealth of bundled CLECs or competitive local exchange carriers that competed with the incumbents, but changes in the telecom rules make leasing the telephone wires to your house too expensive for CLECs to offer an overall cost savings.

How do VoIP providers compete? They avoid the cost of leasing phone wires by using broadband services you already pay for. That can be either DSL or Cable, but the point is that most people buy broadband for their computers. VoIP uses the same connection as an alternative "phone wire" without additional cost. They also let consumers save money by reusing the phone they already have. You unplug your telephone set from the wall and plug it into an ATA or Analog Telephone Adapter box that is provided by the VoIP company, usually at no extra cost.

This is one reason that there is little to no demand for consumer IP phones. The residential marketplace isn't sophisticated enough yet to take advantage of services, like computer/telephone integration, or additional phone services, like videophone, that are practical with VoIP but not over traditional analog phone wires. Most consumers are still using corded handsets or cordless multi-telephone sets like the ones offered by Uniden.

The enterprise VoIP marketplace is quite different. Companies have various reasons for migrating to VoIP, but almost all are related to saving money directly or improving productivity to save money. While it is possible to get a better deal on local dial tone and long distance minutes using SIP Trunking instead of analog lines or T1 PRI digital phone lines, the real driver is the in-house phone system itself.

Traditional PBX telephone systems are large, proprietary and expensive to buy and maintain. They are rapidly giving way to IP PBX systems that are more like computer appliances than dedicated phone systems. IP telephony in-house offers the opportunity to converge the telephone and data networks into a single Ethernet connection to the desktop. Administrative and technical support can be considerably less for one network versus two, once the engineering has been accomplished to ensure quality of service for both voice and data users.

Like consumer VoIP, a business can acquire analog telephone adaptors and continue to use their existing handsets on the company LAN. But many additional features become available by switching to desk sets designed for IP services. The phone itself contains the network interface plus text display, video, and other features that make it as much a computer peripheral as a telephone. These phones are called IP phones or SIP phones. SIP is the switching technology used by VoIP telephone systems. There are many vendors of business IP phones, with Cisco being a major player.

Another point the report makes is that corded phones are the standard now, but will be replaced more and more by cordless and wireless handsets. That includes cell phones that are integrated into the corporate IP PBX systems, and perhaps wireless VoIP phones that will operate over the new LTE cellular broadband and WiMAX wireless networks that are just now starting to be deployed.

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