Dumb gets smart with VoIP and P2P

Alternatives to the traditional telephone company are now available that capitalize on the previously broken promises of voice over IP: cheap, hassle-free local and long-distance phone service. Business models built around providing services from the centre of the network delivered out to devices at the edge — such as telephone services — are being changed irrevocably.

On a recent business trip to Southern California I was able to avoid cellular roaming and long-distance charges that on previous trips had cost at minimum $150. With my laptop functioning as the cell phone keypad and handset, a wireless hotspot as my mobile access to the network, and through the magic of Skype VoIP software, I paid nothing for some calls back to Canada. For one as parsimonious (a.k.a. cheap) as myself, the freely downloadable Skype has become a life-changing technology.

My monetary proclivities aside, there is an important trend embodied in Skype. There is a power struggle brewing between the traditional telco model of providing smart services at the centre of the network (to dumb devices at the edge) and new P2P (peer-to-peer) models, such as Skype. VoIP is an important element in this struggle, but the real disruptive technology to the traditional telco is P2P.

Most popularized (and understood) as the heart of file sharing software, such as Napster, P2P bypasses the need for big central servers and storage facilities; it pulls from the combined power of the connected devices instead. Although today I’m using my laptop as an oversized cell phone, smaller handhelds can be used in the same manner. And with more processing power, storage capacity and available network bandwidth being stuffed into smaller and smaller devices, software such as Skype, and not the typical service providers, may become the norm.

Being one of some 35 million users of Skype, and given that P2P is a fairly commonplace Internet technology, I feel slightly behind the times with this discovery. But, my saving grace from embarrassment is that VoIP isn’t yet widely deployed. Issues including unreliability, poor sound quality and access to 911 limitations, have justifiably curtailed VoIP adoption in the past. More broadband access and better network configuration, however, have dealt with the first two points, and there are some efforts to deal with 911 access concerns: be prepared to send an email to the fire department if you smoke in bed.

An alternative to Skype is a VoIP offering by Vonage (available in Canada) that lets you convert your everyday telephone handset into a VoIP phone with a simple adapter and a broadband connection. Like Skype, Vonage offers features such as voicemail and has a soft-phone for turning your laptop into a cell phone as well. And depending on where you live, you may be able to keep your existing telephone number if you decide to make a complete break from your current telco.

But neither Skype and Vonage are not free from challenges and limitation. With Skype, calls can only be received if placed by another Skype user. In San Francisco, I asked contacts by e-mail to download the software if they wanted to call me on my laptop — or to “Skype me.” I can, however, make calls out to whomever I’d like around the world by using a feature called “SkypeOut.” This works like a prepaid cell plan or calling card where you buy, in advance, a certain amount of time. That, however, comes with its own challenges, as you need to make sure that there is enough money is in the SkypeOut account to make the calls that you need to.

The downside of Vonage, primarily, is a sign-up fee plus a monthly charge to use the service. Oh, and that phone adapter is going to cost you as well. But even with these charges, Vonage is cheaper for me than my existing telephone service, and Vonage does have 911 service access.

With the power of regulation, a large customer install base and a deep war chest of resources, the traditional telco isn’t going away anytime soon. Moreover, they have their own plans to conquer a VoIP-enabled telephone industry. But the telephone industry is rounding a corner, as VoIP, P2P, wireless broadband and the increasing power of little devices coalesce to challenge a century-old business model.

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–Senf is the manager of IDC Canada’s IT business enablement advisory service. He can be reached at [email protected]

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