TELECOMS - This is the voice squad

Voice and data travel down the same wires outside businesses but how and when will they converge inside companies' four walls? PC Dealer listens in on the Convergence 98 sessions at TMA.

Telecoms used to be a dull industry. During the 100 years sincet how and when will they converge inside companies' four walls? PC Dealer listens in on the Convergence 98 sessions at TMA. Alexander Graham Bell set the ball rolling, it was almost stagnant, with monopolies controlling the industry all around the world.

But all good things - at least from a shareholder's point of view - eventually come to an end. Deregulation and the explosion of internet-related technologies have changed the landscape of the telecoms industry beyond recognition.

A handful of new companies with huge wads of capital at their disposal are entering the market, including WorldCom, Qwest and Level 3. Older players such as the US' Regional Bell Operating Companies (RBOCs), Sprint, BT and AT&T are having to alter their capital programmes drastically and re-organise under new flags to handle the competition and the latest technology.

Sprint, Deutsche Telecom and France Telecom have banded together to make a play for a big chunk of the US and European telecoms market under the GlobalOne banner. Change is in the air, not only because of the shifting alliances, but because communications network requirements have changed dramatically. All and sundry have finally realised that they have to become leading players in the internet market or find another line of business.

Companies that shift packets are migrating as fast as they can to internet-related technologies. Every key internet provider will offer fax over internet protocol (IP) this year. WorldCom announced it last year and shortly everyone will have some sort of voice over IP product, say market analysts.

There's bound to be a smash-up, as established large-scale network providers such as Lucent, Northern Telecom, Alcatel Alsthom, Siemens Nixdorf and Ericsson rush into the burgeoning market to grab the lead from Ascend Communications and Cisco. These two fast-growing companies planted their IP stake in the ground much earlier and have reaped the rewards. Likewise, network technology companies such as Cisco, which have previously focused on the IP world, are having to move defensively into the heart of the network to meet the challenges of the converging telecoms global mega-companies.

To shed a little light on the state of play in the UK, Global-One recently commissioned a survey to assess the current and expected levels of voice and data convergence.

It revealed that GlobalOne isn't the only company wondering what is really happening in the world of corporate telecoms - the survey discovered that the users themselves are at odds with the pace of change.

GlobalOne surveyed 200 of the UK's largest companies, including a high number of multinationals - its natural market. The companies represented a handful of the usual niche markets, such as manufacturing, utilities, wholesale/retail and finance. Fifteen per cent of survey respondents had turnovers of more than #1 billion and 21 per cent were in the #100 million to #1 billion range. On average, they spent about 0.7 per cent of their annual turnover on telecoms - approximately #7.45 million per year.

Richard Bowker, product marketing manager at GlobalOne in the UK, admits that while GlobalOne has looked at national markets in Europe, it isn't prepared to branch out into other key European economies.

'You have to be careful generalising the results down to smaller scale businesses,' he says. 'We have found that small and medium enterprises are less clued-in than the top-end corporates, but they are much more open to new service products - especially where savings are significant.

'In many ways, it is like a flywheel. Once a company has spent considerable sums on telecoms infrastructure, it starts to move along predictable paths.

Only when there are significant savings, applications opportunities or the chance to start over on a greenfield site will larger companies make a dramatic change in their network technology direction.'

Magnus Lund, UK and Eire managing director of GlobalOne, delivered the survey results at the recent TMA (Telecommunications Managers' Association) conference in Brighton. The data-voice convergence market in the UK is in its infancy, he explains: 'Forty six per cent of large corporates have no convergence of voice and data at present and only six per cent have full convergence from the backbone to the desktop.'

The picture changes when the telecoms managers of these large companies are asked to state their intentions for the future - 28 per cent of respondents said they are going to embrace full convergence. Lund adds: 'The main changes are in advanced applications and in bandwidth sharing to the desktop.

This probably indicates that the market for wide-area voice-data convergence is already well served by existing systems. Change is difficult to justify on pure cost grounds where there is no current strategic driver for integration.'

The survey found a strong synergy between the use of sophisticated applications using voice-data convergence, as well as voice-data convergence in the campus backbone, so these are expected to march in step. Desktop video is increasingly seen as a valuable tool within organisations - the relatively poor video quality is not such an issue, and document sharing can greatly add value compared with a pure audio conference.

'The results clearly highlight that telecoms and IT professionals believe voice-data convergence will be an important business issue within their organisations in the near future,' Lund says.

The survey revealed there are still obstacles to overcome. Cost is a significant consideration but the key stumbling block is a lack of appreciation of the business benefit of data-voice convergence. GlobalOne certainly has its work cut out for it.

'The proponents of voice-data convergence have to look at the difficulties experienced in putting forward business cases,' says Lund.

'Many of the respondents felt the technology cost was not only high, but prohibitively high.'

In the main corporates targeted by the survey, a significant reduction in voice quality would not be acceptable just to take voice over the network.

Although the survey did not include small or medium-sized enterprises, Lund believes they will probably give greater consideration to lower cost convergence systems that imply a noticeable reduction in voice quality.

Bowker expands on the briefing: 'Loss of quality would be considered acceptable if the applications were great and allowed new things to be done, as well as improving efficiency. The quality issue appears to lie beneath the other reasons that were given for holding back the convergence of voice and data on backbone. Quality costs money.'

It's a case of weighing up the tactical cost against the risk, he continues: 'Economic cases are harder to make than arguments for the provision of technologies that enable customers to do something that simply couldn't be done before.

'The windows of opportunity are usually linked to something else on the business' radar screen - for instance, its present network has ground to a halt or it is moving premises.'

Bowker's big tip for resellers was selling the future. 'Nets need to be very flexible to be future-proof, but they can't cost lots more. With care, you can eliminate additional costs and sell on the preservation of options. That gives you a way to come back in with a fresh system when the company or the technology is ready,' he says. 'Oddly, people won't pay anything for future-proofing on its own.'

Bowker downplays ATM, which has been heralded as the path from desktop to data centre. Although it has technical merit, no one believes in it, he claims. IP is the king, and IP over ATM is like sex with a condom, he says - quality of service is only what you can achieve through the IP layer. Safe or not, it is not likely to be anyone's favourite in the future.

The GlobalOne survey found that applications developers are not using ATM's APIs and 100BaseT. IP can handle good multimedia, so even though ATM scales and integrates different traffic types on the same backbones, it is being ignored as the Next Great Thing. The big spenders are looking for IP from end-to-end.

A single protocol has some attraction, even if it is to be IP. It is easy to use and many developers are on the case but, Bowker explains, you wouldn't pick it from the pot if you had to make a 'best' choice.

The survey also highlighted the steps resellers and integrators have to take to get a slice of the pie. The old adage of knowing your customer's business as well as your own product comes through strongly. According to the telecoms managers who responded to the survey, Vars and integrators just don't know the technology or the business applications.

Bowker acknowledges the conflict. 'Customers really want something for nothing - they want expertise and knowledge in depth and then they go for price,' he says.

The solution for the channel that labours at the telecoms coalface is to partner up. GlobalOne and its competitors work resellers, agents and partners to focus on expertise and execution. But it isn't a free ride.

'We expect our resellers to get the business and do the marketing for themselves. We provide the service and any deep technical expertise required in a given application, but winning the business is their job,' Bowker sums up.

SPANNING THE GLOBE WITH VOICE OVER IP

Not everyone sees the forthcoming collision between data and voice with the same tint of rose in their spectacles. For a glimpse of an alternative reality, you need only peer at what WorldCom is doing. In a spate of acquisitions, WorldCom has absorbed 66 companies in just over 36 months. MCI could be the biggest prize if the US Department of Justice gives the all-clear - WorldCom will own a vast voice and data infrastructure in Europe and the US.

John Sidgmore, chief operating officer of WorldCom and former chief executive of UUNet, knows a fair bit about the IP world. He was confident about the role of voice over IP in a recent interview in Red Herring financial magazine. 'Internet usage is growing at 1,000 per cent a year; the voice market is growing at only eight to 10 per cent. Most people think that given the current path, 50 per cent of all the bandwidth in the world will be internet-related by the year 2000,' he says. 'If that arithmetic continues to hold true, by 2004 the internet will require 99 per cent of all the bandwidth there is, and voice and all other services will require one per cent. Everyone talks about voice over the internet, but voice will be a niche market - it will be almost irrelevant.'

Fred Briggs, chief engineering officer at MCI, is in charge of orchestrating the company's equipment plans. He thinks the voice over IP technology available today is a show-stopper and the current furore is a storm in a teacup. 'Voice over the Net is purely an arbitrage opportunity. Because the internet is not subject to access charges, costs are probably 20 to 30 per cent of those for a normal switched minute of access. From MCI's standpoint, our telco bill is in the neighbourhood of $9 billion per year - about 45 per cent of our revenues go to telcos. So if we could move our traffic to the internet and lower our costs to the RBOCs by 70 to 80 per cent, we would do that in a second,' he explains.

'The problem is that the technology won't scale today to do voice over the Net in any significant volume. We also don't have the devices that can handle voice, fax and data - most are unable to handle all three and none can on a wide scale.'

Regardless of marginal suitability and paucity of technology for users to buy, the IP bandwagon, coupled to the internet's shooting star, seems destined to pull a lot of communications traffic along behind it.

ATM remains a strong contender for public and private network interconnectivity.

A recent report from US telecoms analysts Insight Research claims ATM is the best approach for merging the many types of communications traffic onto a single network. Traditional carriers will incorporate ATM systems as an evolutionary progression as they upgrade their networks. However, newer carriers will be open IP.