Voice on IP (VoIP)

History of VoIP

Voice communication, as we know it in the modern age, was invented by Alexander Graham Bell in 1876- the Telephone.

The architecture of today's Public Switched Telephone Network (PSTN) is a direct descendant of the original manned switchboards of Bell's days. Voice is transmitted in one way: sampled in 8-bit bytes, 8000 times a second, for an aggregate rate of 64 Kbps. The entire telephone network is designed around this rate and for this one type of traffic - voice.

PSTN is a circuit-switched architecture: a direct connection is closed between two users. The users have exclusive and full use of the circuit until the connection is released. The connection is bi-directional with very low delay between the two end points.

PSTN was designed for circuit switching of voice calls. This fact makes it very difficult to add new services to the network, or change traffic handling methods. Another major disadvantage of circuit switching is that once a circuit is established, it consumes the full-predefined bandwidth, no matter if the call contains many silent periods.

The increasing difficulties in maintaining the existing networks and upgrading them to many new demands together with the inefficient bandwidth usage, has driven the market to seek after a new architecture. The demand was for a technology that will enable easy and rapid growth and updating, together with efficient use of bandwidth that will enable more simultaneous connections with larger volumes on the same bandwidth.

During the early 90's the Internet was beginning its commerical spread. The Internet Protocol (IP), part of the TCP/IP suite (developed by the U.S. Department of Defense to link dissimilar computers across many kinds of data networks) seemed to have the necessary qualities to become the successor of the PSTN. IP works in a packet-switching method: the data is sliced and bundled into packets (pieces of information). These packets are transmitted from the source end-point to the destination end-point by moving from router to router until they reach their destination. No circuit is closed between the two end points as in the circuit-switched PSTN. IP as a connectionless mode is very efficient because no bandwidth is spent when there is nothing to transmit. When transmission is needed, IP enables using all the free bandwidth.

Another big advantage of IP - it enables easy and rapid network growth and updating, because of the IP design. It is possible to add features to a part of the network without changing other parts.

The great efficiency in the use of bandwidth causes problems when dealing with voice - real-time transmission needs constant rates with small (known) delays, otherwise the conversation sounds abnormal. Other problems that might occur in IP: packet loss due to routers overflow, packets arrive out of order due to different routes, causing unacceptable delays. These problems do not appear in PSTN because real-time transmission is inherent in circuit-switched networks.

Voice over IP began as the result of work done by some hobbyists in Israel in 1995 when only PC-to-PC communication was available. Later in 1995, Vocaltec, Inc. released Internet Phone Software. This software was designed to run on a home PC (486/33 MHz) with sound cards, speakers, microphone, and modem. The software compressed the voice signal, translated it into voice packets, and shipped it out over the Internet. The technology worked as long as both the caller and the receiver had the same equipment and software. Although the sound quality was nowhere near that of conventional equipment at the time, this effort represented the first IP phone.

By 1998 VoIP had reached some potential. A number of entrepreneurs started setting up gateways to allow first PC-to-Phone and later Phone-to-Phone connections. Some of these entrepreneurs started by providing customers a facility to make free phone calls using the regular phone. Every phone call which the user made had an advertisement at the beginning and at the end of the call. This service was only available to users in North America. This service allowed the users to make free long distance calls. This ˇ°free to the customerˇ± marketing model, was sponsored by various advertising companies or agencies. These services often required the services of a PC to originate the call, although the actual communication was from ˇ®phone to ˇ®phone. At this stage, VoIP traffic represented rather less than 1% of voice traffic.

In 1998 three IP switch manufacturers introduced equipment capable of switching. At present, most IP switching and routing equipment suppliers offer VoIP as either a standard or as an option on their mid-range and up equipment. VoIP traffic exceeded 3% of voice traffic by 2000, and is forecast to grow rapidly to between 25% and 40% of all international voice traffic by 2005. Today there are two standards for VoIP switching and gateways: SIP and H.323. The former primarily relates to end-user IP Telephony applications, whereas the latter is a new ITU standard for routing between the circuit-switched and packet-switched worlds used for termination of an IP originated call on the PSTN, but the converse is increasingly becoming common.

Voice is the latest core function making its way into the IP world. In the years since VoIP has been introduced, a growing list of technology providers have begun to offer PC telephony software. There is a spate of gateway manufacturers entering the market. Until recently, VoIP provided PC-to-PC telephony primarily over intranets typically found in a business environment. With the introduction of gateway infrastructure outfitted with VoIP technology, users can now look forward to the widespread increase in the usage of Internet telephony.

VoIP technology offers an alternative to POTS.  In order to understand the changes that VoIP technology makes to POTS, one should have a good grasp of POTS.  POTS have traditionally been highly regulated by both state public utility commissions and the FCC.  With the passage of the Telecommunications Act of 1996, the FCC relaxed many of its POTS regulations which were based on specifically defined geographic calling areas.  By using a mobile technology such as VoIP, users do not have a defined calling area, nor are they required to identify the source of the call.  These differences have sparked the current regulatory debate.  While POTS and VoIP exist as separate technologies, in the future VoIP may dominate the telephone industry. 

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User Base

• AOL Triton: 53 million active users (Nielsen//NetRatings, August 2005), 195 million total (January, 2003).
• Skype: 45 million total (September, 2005).
• MSN Messenger: 29 million active (Nielsen//NetRatings, August 2005), 155 million total (April, 2005).
• Yahoo Messenger: 21 million active (September 2005).
• Google Talk: Unknown
• QQ: 10 million active, 400 million total users (Tencent Q1 results 2005).

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VoIP & IM Integration

According to Radicati Group, there are currently 867 million instant messaging accounts in use worldwide. Of those, 51 million are Enterprise IM accounts and the remainder is on the public networks. The research firm forecasts that there will be at total 1.2 billion accounts in use globally by 2009. IM use is only deepening as part of the daily online experience and business. As a new IM evolution, VoIP and its applicatios presence integrations are part of the business story of IM helping to drive its evolution from simple text to richer forms of communication. IM presence and VoIP and are really all being consolidated into a unified communications experience. The next frontier is the bundling of the services that deliver services in a unified experience that allows users to collaborate in real time whether its using IM, file transfer, VoIP or sharing desktop there is a whole set of logical extensions to what the IM client is doing today. Such new evolutions are quickly proved by eBay-Skype deal.

Recently, many investment analysts and technology industry observers are scratching their heads about eBay's announcement on September 12, 2005 it would acquire Skype for $2.6 billion (and possibly as much as $4.1 billion if performance targets are met). skype, for those who don't know, is a software-based peer-to-peer VOIP company. Skype offers free phone calls between Skype users, and is particularly popular in Europe and Asia. This shows the tip of iceberg of IM and its expansion to VoIP

Almost at the same time, Microsoft acquired San Francisco based Teleo, a developer of VoIP, PSTN termination and click to call functionality. Teleo's VoIP products allow for PC to PC calls as well as PC to PSTN , or landline calls. It also has a click-to-call feature that can be integrated with Microsoft's Outlook and Internet Explorer, enabling users to place a call from inside e-mail or even a Web page. The deal accelerates Microsoft's VoIP capabilities and sets the stage for a fall showdown in the VoIP over IM space as AOL and Yahoo ramp to launch their respective services as well.

AOL is widely expected to release it newest IM client, code named Triton this fall as well, which will also have dramatically improved VoIP capabilities.

Yahoo in June acquired VoIP to PSTN play Dialpad Communications and is also expected to be rolling those features into its IM client which has recently been renamed Yahoo! Messenger with Voice.

Google Talk enables users to call or send instant messages to their friends for free–anytime, anywhere in the world. The Google Talk service is built to support industry standards. User can connect to the Google Talk service using Google's own client, as well as many other IM clients developed by third parties.

Recently, we are fortunately to be the exclusive agency for a Beijing, China based company Com.TV, to raise venture capitals in the US market. Their main IM product MiPhone builds their customer base by offering telephone calls to anywhere in the world by using an unique Next Generation Network (NGN) peer-to-peer (P2P) technology, and add-on features such as dialing-out of the network to mobile or landline telephones. 

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Recommendation to Invest in Com.TV

Based on the current market trend, competition and huge opportunity, we recommend to invest in Com.TV to share the VoIP & IM pie. In this presentation, we will discuss more of Com.TV's VoIP technology and its major competitors around the world.