An article I wrote for Australian Netguide Magazine in 1999 that I found on some old back ups. Interesting to see how (little) has changed….

Everyone with friends and family interstate or overseas dreads the phone bill, and even with the plethora of alternative phone companies that have sprung up in the last few years, the cost of calls can still mount up.

When the first Voice over IP (VoIP) products emerged a few years ago it came as no surprise that users flocked to them in an attempt to cut down or completely avoid traditional telephony costs.

Unfortunately, for many of those early adopters, the reality didn’t measure up to the promise. Early systems were plagued with quality problems, and were often difficult to use and set up.

Some of those early systems have fallen by the wayside, while others have matured, so the Net Guide is taking another look at how Internet telephony stacks up.

VoIP is a system which takes a normal voice telephone call, and transmits it across a digital packet network, like the Internet, rather than using traditional switched networks.

The idea behind VoIP isn’t new. For many years different suppliers have been taking advantage of digital technologies to cram more information onto standard telephone links.

With a standard switched digital telephone system, as used in the bulk of Australia’s telephone network, each call is allocated a 64kbps circuit between the caller and the receiver. This means that for the duration of the call, all sound collected by both parties handsets is transmitted to the other, using the same bandwidth whether the parties are talking or remaining silent.

Engineers realised this was an inefficient use of resources, and that if the information making up the call was compressed, more information could be packed into the gaps inherent in ordinary conversations, and less bandwidth would be required. Further compression techniques could allow even more information to be packed in if users were prepared to accept a small decrease in call clarity.

Different systems use different levels of compression, but a typical compression system can reduce the amount of data transmitted to less than a fifth of that required for a standard call. All this means that cost of supplying a call drops dramatically, and those savings can be passed on to the end user.

The trade off for this ability to fit more calls into existing bandwidth is a decrease in call quality. This can vary depending on a range of factors, including the degree of compression in the system and the amount of other traffic on the network. With traditional switched system, the quality of calls seldom varies, with a high degree of clarity maintained for the duration of each call. With VoIP, however, if the network has insufficient bandwidth at any point, users will hear delays and may find that their call “breaks up” intermittently during a call.

The other draw back, although for telecommunications companies rather than users, is that VoIP technology makes existing switched call systems redundant. With the high investment required to set up telephone network equipment, many existing phone companies are reluctant to move to the new technologies.

The two major players in the Australian VoIP marketplace, at least as far as international calls are concerned, are OzEmail and Telstra. OzEmail runs an international network of affiliated Internet Service Providers that provide VoIP services between their markets using software developed in Australia.

Telstra has recently finished a trial of VoIP between Sydney and London, using software developed in the United States and Australia.

In each case, users place calls through standard telephone handsets, which then use the Internet to carry traffic to its destination.

With both of these systems integration with current phone systems is considerable, and a user has no exposure to Internet technologies, just the familiar telephone keypad.

Other systems, such as Vocaltec’s Internet Phone software run on a user’s computer, which is then connected to the Internet using a standard modem connection.

The chief advantage of a PC based VoIP system is that there are few additional costs to your standard ISP fee. In the case of Internet Phone, or competing products such as Microsoft’s Netmeeting, if the person you are calling is online, then there are no call costs besides the standard ISP charges. Even using an ISP charging $5 per hour, this works out at less than 9c per minute, a fraction of the cost of traditional international calls. If you use an ISP offering cheaper, or unlimited rates it works out cheaper still, although beware that if your ISP charges for data downloads, using VoIP can download more than 5 Mb of data an hour when making a call.

The disadvantage of these software based systems is the requirement for the person you are calling to be online. Many regular users make use of instant messaging applications such as ICQ to determine when their friends are online to setup a call.

If you are online a lot, and the people you are calling are too, these PC based products are a great way to cut down on call costs, particularly if you like to chat for a long time, but they still fall a long way short of the convenience and ease of use of a traditional telephone service.

Vocaltec and Net2phone are making some advances in this area with the introduction of gateways to the traditional telephone network. These work by allowing you to initiate a call from your PC or Mac online, but instead of the person you are call using a computer to receive it, the gateway nearest to them places a call on the local phone network. This means that the person you are calling never need know that you are using the Internet instead of a normal telephone, and is ideal when you want to call somebody who is not online or does not have access to a computer.

The drawback of this system is that to avoid toll charges at the terminating end of the call, the person you are calling must live locally to a gateway, and at this stage that means only in selected areas. The other drawback is the requirement to setup an account with the company who runs the gateway to pay for the outbound terminating calls.

Even with these caveats, it offers the potential to offer good savings.

There are two drawbacks to the PC based Internet telephony packages that are common to all of these systems. Firstly, it is important that you have a “full-duplex” sound card. This allows the use of the microphone and speakers at the same time, allowing both you and the person you are calling to speak (and be heard) at the same time. The alternative, with a half duplex card, is a conversation reminiscent of a CB radio, with each party having to wait until the other stops speaking to get a word in. Most of the better quality sound cards available today are full-duplex, but if you own one of the older type, bear in mind the cost of a replacement if you think you might be using your PC to place calls a lot.

The second drawback is one that you face every day on the Internet, a lack of bandwidth. If your ISP doesn’t have enough bandwidth available for customers to maintain a reasonably high regular throughput (over 1.5 kilobytes/second) you will find that your calls break up and suffer in sound quality.

OzEmail and Telstra’s products take a different approach to capitalising on the savings of using VoIP. In each case, all that is required is a normal telephone, and you dial a special number to place your call over the Internet.

With OzEmail, for example, you first place a call to a local number, key in a personal identification number, then dial your destination number.

OzEmail’s Sean Crosbie, from the VoIP division Interline, says that customers accept the inconvenience of typing a few more numbers. “It is more convenient if you are making calls from several different locations, as it allows all your Internet calls to be billed to the one account.”

OzEmail offers two options for customers, an account which is debited to the credit card monthly in a similar way to their ISP charges, or prepaid phone cards which expire when you have used the credit they carry.

In both cases the per minute costs to use the service are cheaper than competitive phone companies, but are considerably higher than ISP rates, making the system a more expensive alternative than setting up your PC for Internet calls. The OzEmail system offers good call quality, approximately the same as with a mobile phone, although the delay when talking to European or North American locations is noticeable. Compared to PC based software, the quality is much more consistent. During testing people receiving the call were consistently surprised at the quality of the service when they were told it was carried across the Internet.

Telstra recently concluded a pilot of their own VoIP solution for 350 Sydney customers placing calls to London. The Telstra system is intended to integrate tightly with their existing telephone network, becoming part of Telstra’s complete service package.

Mr Geoff Benson, Manager of Internet Enablers said the service is set to launch in the second half of 1999, following further product and marketing enhancements.

“It is important Telstra get the quality of service and scalability right.”

Mr Benson also identified international call termination as a subject yet to be finalised. “We are investigating terminating calls ourselves internationally or forming joint ventures with other companies.”

Depending on the results of final market research, the service may be billed to customers existing accounts, using prepaid phone cards, or to a credit card.

It is expected that pricing will be cheaper than Telstra’s standard call rates, but again, not as cheap as using a PC based solution.

While in the increasingly competitive VoIP market, services such as these offer cheaper rates than traditional telephone services, it is at the cost of convenience or call quality. In the future, Mr Crosbie says, quality will be less of an issue and Internet telephony will be integrated more closely into your current telephone system. “The biggest hurdle we face at the moment is provisioning enough bandwidth to cope with growth, particularly with some of our affiliate networks without the network infrastructure we have in Australia, or that is common in the USA. As more bandwidth comes online, call quality will improve. Traditional telephone network quality has improved considerably in the last twenty years, but for Internet telephony the improvement will be much more rapid.”

The other hurdle Internet telephony faces, Mr Crosbie says, is from incumbent telecommunications companies and existing regulations.

“In a lot of places around the world, the telecom companies, and the regulatory bodies have very limited knowledge about how voice over IP works. Often regulators will be unsure how, or if VoIP fits into their regulatory framework.”

Regardless of the outcome of such issues, Internet telephony is a service available today that can allow users to take advantage of considerable savings in the cost of making voice calls, particularly to overseas destinations. If you have a good ISP and the appropriate soundcard, it is definitely worthwhile to try out one of the client software packages for making Internet calls, and if you want to save money on calls you make from a normal phone too, OzEmail’s service, and the forthcoming Telstra product will let you do that too.