VoIP transformation will take some time

In certain instances, voice-over-IP services can offer attractive prices and performance, particularly when calling to or from developing nations.

However, the cost and quality of business-class, public switched telephone network (PSTN) calls within and between industrialized countries is so attractive that the VoIP business case for most customers remains very difficult. The vast majority of enterprise calls are between developed countries.

Although pundits continue to proclaim that most global providers will abandon their PSTNs for VoIP networks as early as next year, I disagree. Many factors will impede such a rapid transformation.

Demand for international VoIP services, although growing faster than the PSTN, is modest and weighted heavily toward consumers. Based on current trends, IP will not become the predominant service supporting international voice calls until the end of 2007.

VoIP services targeted to the enterprise market are immature compared with similar PSTN services. They offer few features or service-level agreements.

The financial commitment required to transform global networks to VoIP is very high – it will take trillions of dollars.

Availability of business-class VoIP services is limited to no more than 55 countries today.

Regulatory barriers impede rapid expansion of VoIP services. In many countries, it will take years for the control exercised by government-run monopolies to wane.

Along select inter-regional routes, many of the largest global and regional providers already have begun to migrate voice traffic to quality of service (QoS)-based multiservice cores. There are strong advantages to building an all-IP backbone network on high-volume international routes wherever a carrier doesn’t have an infrastructure.

Global carriers such as AT&T Corp. and Cable and Wireless PLC rely on local carrier partners to deliver their voice traffic in most countries. Thus, these providers have strong incentives to build IP-only networks. Of the top five global providers, only C&W has announced its intention to abandon its circuit-switched net for IP, beginning in 2003.

But current business-class VoIP services do not mirror the functionality, scalability, performance or geographic reach of the PSTN. Given the economic climate, most providers will not have the resources to pursue anything other than an incremental VoIP build-out strategy for at least the next two years. Thus, like providers themselves, customers will use a combination of PSTN and VoIP services for many years.

It’s important to keep in mind that the biggest proponents of converged WAN services are the leading telecom equipment vendors and global network operators, not customers. By migrating traffic onto a unified transport platform, suppliers stand to achieve big cost savings before their enterprise customers. The majority of benefits to enterprise customers will follow – once the technologies mature in terms of availability, price, performance and features.

Companies that want to implement converged WANs must balance risks that include inconsistent service delivery against promised cost savings. Do the business case … and then consider the other factors I mentioned.

Pierce is a research fellow at Giga Information Group. She can be reached at lpierce@gigaweb.com.