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Voice over IP is changing telephony.

By Robert W. Scott

There are any number of people saying that Voice over IP, the technology  that lets voice conversations traverse the Internet, isn’t ready for prime time. Don’t tell that to Wayne Schulz, a Glastonbury, Conn.-based CPA who operates Schulz Consulting.

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Schulz started using the Vonage Internet-based telephone service recently. The system has turned out to be a big help in providing telephone support calls.

The VoIP Story

If you are confused about Voice over IP, don’t feel alone. A recent poll conducted by Ipsos-Insight says that 54 percent of Internet users in the United States are unaware of the technology, and among those who have heard of it, a majority are confused about how it works.

The random survey, conducted in May by Ipsos-Insight, also showed that a majority of consumers who know about VoIP believe that it will save money.

The major difference between regular telephones and a VoIP system is that traditional systems are analog, while VoIP uses the same Internet Protocol that lets data move along the Internet. All calls are, in essence, local calls.

A VoIP phone has an IP address, just as any computer does when it’s hooked up to the Internet. When a user makes a telephone call, the call is directed to the IP address, just as a user who types in a URL (which is an easy-to-read substitute for the numbers of an IP address) finds that Web site, no matter where it is physically hosted. That’s one of the reasons that phone owners with VoIP service can often take their telephone numbers with them when they move. However, a person who begins subscribing to a VoIP carrier cannot necessarily take the existing phone number used for traditional service.

VoIP traffic must also be routed through broadband connections such as cable or DSL. If the recipient of the call does not have VoIP service, the signal is converted from digital to analog and delivered via the public telephone system.

Additional equipment is needed for a VoIP system, usually a router or adapter that connects the telephone to the Internet system to transform the analog voice traffic into digital form.
One big problem at the moment is emergency calls. Users cannot often dial 911 for emergencies because calls may not be automatically routed to the dispatcher nearest the user.

“We do a lot of telephone support,” says Schulz. “I’ve got clients in California who often keep me on for two hours. With Voice over IP, we don’t have to worry about how long we are on the phone.” Schulz also uses the system for his telemarketing calls. “You don’t have to worry about how many phone calls they make or where it’s to,” he continues.

Peyton Burch, who owns Houston-based Burch Consulting, went to a VoIP system three years ago to replace his office’s PBX system. Burch has yet to use the system outside the office, although he said it would be simple to equip a staffer with a digital phone.

“I don’t have a telephone system,” says Burch, a CPA and MAS 90 reseller. “I have a file server and our MCSE [Microsoft Certified Systems Engineer] can take care of it.”

Since the desktop IP phone doubles as a computer connection, Burch can plug a computer into the phone when he needs to have two computers on his desk at the same time. Burch says support has also become simpler. Instead of calling an outside technician for telephone problems, he turns to his own network support staff, although occasionally outside advice is needed. Because the telephones have IP addresses, they can be plugged in anywhere there is a computer connection and inbound calls will find the phone.

In Encino, Calif., the Information Technology Group is using a VoIP system to connect with an employee who lives in Phoenix.

“He does a lot of our product support,” says David Cieslak. “We just patch his calls to the VoIP phone. To the clients, it’s like he’s one of our employees who is sitting in the office here.”

The Future
Welcome to the world of Internet-based telephony—and if you think that it’s  too futuristic for accounting firms, you’d be mistaken. The early adopters have signed up and many firms are looking at VoIP for 2005, although there is a long way to go before mass adoption.

Randy Johnston, a partner with consulting firm K2, says that his firm is involved in three CPA firm consulting engagements that incorporate some form of VoIP. That’s just the beginning, according to Johnston.

“I think the majority of U.S. businesses will be using VoIP in five years,” says Johnston, who describes the state of VoIP as similar to networking about 1985 and 1986, just before local area networks became universal. Another way to gauge interest: Century Business Systems just purchased Cleveland Systems Group, a VoIP implementer.

Actually, many people have communications that have been sent via an IP system without knowing it. VoIP is used by telephone carriers for a great deal of international voice traffic. Nextel uses VoIP internally to route messages for its Direct Connect platform, although the calls are routed through the public telephone network.

What VoIP is not, says Dave McClure, executive director of the United States Internet Industry Association, a trade group representing many suppliers of Internet services, is “free phone calls over the Internet.”

In fact, VoIP requires a broadband connection, either cable or DSL, which carries a monthly subscription fee, plus the carrier charge. And if you read the direction that vendors see VoIP going in—including a lot of value-added services—free is not the appropriate word. ITG’s service, for example, costs $300 a month. Don’t forget the SIP telephones and the software switches needed to make the systems work. Others picture the cost as similar to traditional service.

But McClure agrees that the accounting community can find real savings in the new technology. “What accountants need to do is switch PBX and Centrix systems to VoIP internally because of the cost savings involved,” he says.

Both McClure and Gary Boomer, owner of Boomer Consulting of Manhattan, Kan., noted that the decline in long-distance costs offsets potential savings from installing VoIP.

“I don’t see this as a top priority for a lot of firms,” says Boomer. Nevertheless, he adds, “If they are putting in a new telephone system, they ought to be considering it.”

Until recently, VoIP was not a mainstream technology for anything other than enterprise businesses. The active players for the rest of the market included smaller vendors such as Vonage, Packet8, and VoicePulse, which serve both consumers and small businesses. But that will rapidly change as both the long-distance and local telephony companies get into the business.

Reaching Out with IP
Of the major carriers, AT&T has made the biggest push. In fact, AT&T’s home page has a link labeled, “All About Voice over IP.” Pursue the link and you find promotions for AT&T CallVantage, its residential VoIP service, and for AT&T Business VoIP Services.

Meanwhile, regional operating company Verizon announced in January that it had contracted with Nortel Networks as its VoIP provider to move its traditional local and long-distance lines to packet-switching technology.

AT&T has had VoIP services since 1997, although that was for enterprise businesses only. It began rolling out its residential services recently—for example in New Jersey about four months ago at $19.99 per month for the first six months. Services for small businesses are on tap, says Gary Morgenstern, an AT&T spokesman.

“The residential offering could suit a one-man shop, but it’s not a solution for a multi-line business,” he says. However, AT&T predicts that the technology will replace the current analog telephone network. “We believe that in 10 to 15 years, everything will be VoIP,” says Morgenstern.

One reason VoIP calls are cheaper is that callers do not pay the local telephone company for access, nor are such calls subject to a variety of federal charges, including access charges and taxes. The federal charges alone add $10 to $15 per month to residential rates, notes Morgenstern.

However, McClure argues that with long-distance costs averaging about 3 cents per minute, the savings aren’t as great as users might think, although he does note that in packet-switched networks, eliminating hardware-based switches and the need for one set of lines for data and another for voice will produce savings.

Among the big savings for VoIP is that companies do not need one set of wires for voice and another for data. Also, a VoIP system ideally can receive voice, data, and fax messages via a single mailbox.

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