CWU R E S E AR CH
Voice Over Internet Protocol (VoIP)
Voice over Internet Protocol (VoIP) enables voice to be carried on the same line as
internet and e-mail using certain versions of DSL technology. This means that
broadband users pay a flat rate charge for unlimited voice applications, a factor
which is likely to encourage the take up of broadband. The VoIP market is growing
fast and is well placed to take over from traditional voice telephony in a matter of
What is VoIP?
Whereas traditional voice communication uses circuit switching and is transmitted
over the Public Switched Telephone Network (PSTN), VoIP is voice transmitted as
packets over a data network. This differs from internet telephony which refers to
voice transmitted as packets over the public internet. VoIP involves the transmission
of voice traffic over an Internet Protocol (IP) network. Voice calls are digitalised,
encoded, compressed and placed into packets. Gateways provide connections for
these packets to travel in a seamless manner.
VoIP enabled devices such as mobile IP phones, and gateways, decrease the cost
of voice and data communication and can enhance existing features and services.
Operators can run their voice traffic over the internet for a flat monthly access fee,
bypassing expensive long distance call carriers. Sandy Fitzpatrick of high tech
research company Canalys, says that companies have adopted IP private virtual
networks to save money not only on internal calls, but calls around the world. “Some
hotels in the US now charge a flat rate for 24 hours internet connection, sometimes
as little as $5. You can connect and then you can do what you like, including
unlimited VoIP calls.”
VoIP in the International Market
The VoIP market in America is growing rapidly. In North America wholesale VoIP
sales were estimated to approach well over $400 million in 2002. Total equipment
purchases of VoIP gateways (such as application servers) are expected to reach
$12bn by 2006, a six fold increase on 2001.
In Japan, traditionally a technologically advanced nation, Yahoo has signed 3 million
broadband users and 90 per cent of them take voice as part of the service. Sweden
has been one of the leading European nations in terms of developing VoIP services.
Swedish telecoms firm Bredbandsbolaget has 250,000 users of its VoIP service.
Dave Burstein, a broadband analyst, predicts that by 2004 there will be 10 million
voice users around the world.
VoIP services are coming over the horizon fast and appear well placed to take over
from traditional voice telephony within a matter of years. A recent survey by Market
researchers The Yankee Group found that voice revenue is expected to decline from
88 per cent of the consumer telecoms market in 2002 to 69 per cent in 2007. The
potential impact on traditional telephone companies is devastating, and the world’s
largest telecoms companies have taken note. In August 2003 NTT launched its own
VoIP service for business users in competition with Yahoo broadband. In October
2003 France Telecom also announced a mainstream VoIP service for business
users. The Yankee Group believes 83 per cent of European operators will be offering
VoIP services within two years.
VoIP networks have been driven by the needs of business users believes Sandy
Fitzpatrick of Canalys, who says “people with a broadband internet connection will
be able to access their company’s VPN to make calls anywhere in the world at no
extra cost. That really is the killer application and it’s only a matter of time before
facilities managers who handle the ever growing mobile phone bills of organisations
can make them plummet by forcing people to use a dedicated line to access the
VPNs to do this.”
VoIP in the UK
With VoIP more cost effective to run than a switched telephony network, offering
greater choice of services to consumers, telecoms companies in the UK marketplace
should be looking to invest in providing VoIP services. With good VoIP services
requiring broadband access this may also push UK companies into providing and
promoting the take up of broadband in the UK. A possible area of concern with VoIP
could be the effect such services may have on the UK call centre industry which is
already facing stern challenges with the outsourcing phenomenon.
VoIP Services and the UK Call Centre Industry
VoIP services offer the potential for cheaper calls to be directed anywhere in the
world, at any time. Margaret Hopkins of the Analysys telecoms consultancy says
that VoIP will have a massive effect as it would make it easier for call centre
operators to do ‘follow the sun’ call centre operations where after hours service is
provided by staff in a different country. Firms may be able to dispense with
centralised call centres and use staff working from home, as there would be no extra
cost or call charges regardless of where the staff are located. This may have a
profound effect on the nature of call centre work in the UK and the potential for
unprecedented changes in the way call centre operators work and their terms and
Technical Issues with VoIP
There have been some recognised teething problems with VoIP services. The
International Engineering Consortium argues at present that levels of ‘reliability and
sound quality’ are not available with all VoIP services. Anecdotal evidence suggests
that loss of data from the packets has shown up in the forms of gaps or periods of
silence, having the potential to cause particular problems in business
communications. The International Engineering Consortium has also noted that
many of the internet protocols have a lack of standardisation and do not interoperate
with each other or the PSTN.
The VoIP industry has taken these concerns on board and intends to address these
issues by upgrading the internet backbone to ATM, the cable fabric designed to
handle voice, data and video traffic. This should eliminate bandwidth limitations and
prevent data loss from packets, improving reliability and sound quality. As with all
new technologies teething problems are not uncommon. Those promoting VoIP use
also appear to be carrying out the necessary changes to ensure the technology
VoIP and Oftel
If the provision of VoIP is considered public telephony the provider of the service will
have to apply to the DTI for a licence. Oftel considers that VoIP should be regulated
as a public service if any of the following apply:
• The service is a marked substitute for traditional PSTN voice services
• The service appears to the customer to be a substitute for public voice
• The service provides the customer’s sole means of access to the traditional
circuit switched PSTN.
Where a VoIP service is offered as an adjunct to a PSTN service is it not likely to be
considered as public voice telephony. All telecommunications networks in the UK
need to run under a licence. If an operator is selling services to the public but not
constructing its own infrastructure it is likely to operate under the
Telecommunications Service Class Licence for which no individual application is
required. If the operator intends to build an extensive network of its own it needs to
apply to the DTI for an individual licence.
Further information on licensing can be found at
VoIP is a growing market which commentators believe will take over from traditional
voice telephony. It is more cost effective to run than a switched telephony network,
and offers unlimited voice communication and internet access for a flat monthly fee.
Many traditional telecoms operators have begun to offer VoIP services in the
knowledge that it may be essential to retain customers and market share.
CWU Research Department