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2006-04-26 - Why VoIP

Some more advanced and secure systems use a private data network instead of the Internet. This technology has been around since the 1970s but hasn't been practical until recently because for it to be effective you need a broadband/high-speed connection. Specifically you need a bit more than 100kbps per connection using modern VoIP transmission technologies. This has only recently become common among residential broadband subscribers. That kind of bandwidth has been available in businesses for longer and the technology is already well established in the business market but even there the necessary broadband has only been commonly available for three or four years.

In addition, improvements in standards, protocols and underlying hardware and software have also made the required broadband speeds more feasible and have reduced costs to where the decision to move to VoIP is more about the timing and the implementation for a business rather than if it should switch or not.

Typically any VoIP system residential on up offers slightly lower operating costs (contrary to advertising claims the cost savings are small) but offers a big step forward in available features and functions. For example, it is now perfectly feasible and cost effective for a 20 person small business to run a call center of its own and to have one system manage main and branch offices and even remote and telecommuting workers.

How it works

There are several protocols and methods for VoIP calls the commonest standards are termed SIP and H.323 but they all have some basic features in common. To the user phone calls are made and handled in the same way as they always have been except that VoIP phones often have more features available from menus and buttons than regular phones. When a call is dialed, the system takes the phone number, connects over the local network to whatever system is providing service. That system figures out if the call needs to go into the regular phone network and if so switches it to a gateway that connects the call over the regular phone network. If the call can be completed without going over the regular phone network (the number dialed is also a VoIP system) then the provider system will route the call directly, performing protocol translation (to a different kind of VoIP) if needed.

When traveling on the network, VoIP calls are treated like any other network data they are broken down into little pieces of digital information (packets) and sent by whatever route the network determines to be fastest. That means different pieces arrive and different times and out of order and then are reassembled back into the proper sequence at the destination. This is why the 100+ kbps transmission rate is needed so that the signal can be sent and reassembled quickly enough so that human users on both ends don't notice any delay.

It is also one of the weaknesses of VoIP if the network goes down or has performance issues, so will your VoIP calls.

Levels of VoIP Service

The phone services and methods for providing them differ for different groups. Residential or home phone services have always been pretty straightforward. But businesses need PBXs for switching, handing extensions and for managing multiple users and numbers over a smaller number of lines in order to be cost effective. VoIP is no different. Residential VoIP services are straightforward but they do offer a range of features not common on regular phone systems.

Small businesses typically want more lines, a level of robustness not found in residential phone services and a predictable pricing structure. Quality of service becomes an issue. Not surprisingly, a different set of vendors is typically able to satisfy these needs than the best choices in the residential arena.

Scaling up again, medium businesses in the 200 employee and up range have a different focus for their concerns. Quality of service is more key, new features come into play including call center features like automatic transfer and queuing. Pricing becomes more critical again and in-house options begin to look attractive now that capital costs can be amortized across so many employees.

Large enterprises are clearly at the point where it is economically more sensible to bring equipment and services in house. Precise features become more critical as the need to integrate processes becomes critical to business success.

At every level of these services there is considerable overlap, so a small business provider is likely to be able to satisfy the needs of many medium-sized businesses. But stretch too far and everything breaks...

The bottom line when looking for VoIP service and when finding a good fit for a service provider is to do a little due diligence. Define your absolute requirements as well as the requirements that would be very positive. Define the deal-breaker issues. Go out and find the best fits and look at the intangibles and make a decision.

But here are the basics.

Residential. You should get a flat rate with free long distance. It should include all necessary equipment. It should cost less than your current service. It should include voicemail with access from anywhere. It should include advanced features like caller ID, callback, etc. It should NOT interfere with your other broadband-based services (Internet access, etc.)

Small-business. You should either get a direct dial number or an extension for everyone. Cost of operation should be lower than your current system. Setup and maintenance should be simple via a web interface or from the phones themselves. Conference calls should be straightforward. You should have full caller ID and identification on missed calls.

Medium-business. You should get a full feature system that matched what you previously would expect from a multi-national large enterprise phone system (really). You should get full call menu and voicemail tree systems. You should get the ability to include remote workers and branch offices in the company phone system. It should be no more expensive than your current system.

Large enterprise. The world is your oyster you want a system that you can integrate into your corporate network, that can be built into your business and IT applications, that can smooth the way forward for your business in all kinds of directions.

Pricing

Price is where everything gets serious. Many first-time VoIP buyers are seduced by promises of big savings over their existing telephone system. But apart from basic residential service there are no longer huge savings as regular telephone companies have cut long distance rates to remain competitive. There are still savings, but they aren't as large as some providers may try to lead you to believe. Nevertheless, that's no reason not to be cost-conscious. Look at three basic cost areas even for residential service. What the startup cost will be in terms of equipment, other first-time fees and services to get up and running. Look at monthly (or whatever period you prefer) operating costs ongoing, and look at termination costs if any costs to end a contract, etc. All of these are factors.

For residential service you can pay as little as $17 per month or as much as about $40 depending on where you can call for free, included features, etc. Most services are in the $20 to $25 per month range for a single line with unlimited free long distance throughout the US.

Small businesses can pay as little as $50 per line per month from hosted plans to as high as $200 per month, again depending on services, features and other issues. If you choose to buy equipment and operate with a lower operating cost per month from a provider but a higher capital outlay you can expect to shell out from about $1000 to $5000 in equipment costs for from five to ten or so people plus a monthly operating charge of from $100 per month total to as much as $1000 per month. The price range is higher here but so are the range of options and features on offer.

Medium and large businesses move into total capital costs expressed typically as a cost per line of between $300 and $1000 and operating costs in the several thousands per month. But if the number of lines is large, that can still translate to a very low cost per line.

Conclusion

There are three clear messages to be learned and remembered as you start up any VoIP service at any level. First it isn't about saving money it's about added value, features and services. Second you CAN find a VoIP provider that will meet and exceed your needs and expectations. Third buyer beware you need to look at the details. Compare plans over three to five years with expected growth scenarios. Look at the costs to drop a poorly performing plan as well as the startup costs. And expect more from your telephony system than ever before.


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