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VoIP the wave of the future is now

By Michael E. Krell, Director, Corporate Communications, Legerity, Inc.

Running over twisted pairs of copper wire, traditional telephone systems – commonly referred to as the public switched telephone network (PSTN) – have been around since Thomas Edison spoke that famous line, “Mr. Watson, come here, I need you.” Legerity is not that old, but has been in the forefront of telephony communications for over 20 years. As the primary integrated circuit (IC) supplier for analog phone systems, most (at least 1/3) of telephone calls placed around the world go through Legerity subscriber line Interface circuits (SLICs) or subscriber line analog circuits (SLACs). In fact, Legerity ICs deliver phone calls in over 130 countries.

In today’s Internet and cellular world, traditional wire-line telephony is evolving. Significant changes in the deployment of alternative voice delivery technologies are being deployed. The conventional constant bit rate backbone is being replaced by packet voice delivery and distributed softswitch systems. These replacements require significant equipment redesigns and the rollout of new products – activities that are invisible to the average consumer. However, such infrastructure upgrades provide tangible new benefits to consumers, giving them more communications options and services over a wide variety of new devices.

The technology at the forefront of the communications evolution is called voice over Internet protocol (VoIP). In the late 1990’s VoIP was considered the technology that would change the way the world communicated. Networks that were usually used for data began to be considered as alternative networks to traditional voice networks. Why? A simple matter of cost. Moving data was inexpensive, trivial even, compared to the costs of delivering voice. Much of the price differential was related to high capital costs of the infrastructures that deliver voice. Another factor was government restrictions on telephone companies, such as 911 and lifeline services, and taxes that overburdened the existing monopolies, requiring them to re-think their traditional business models.

Today, VoIP is a proven technology. Calls placed over VoIP-based networks (called IP telephony) are already more commonplace. IP phones are replacing traditional phones, and standards-based call servers and voice gateways that interface to the PSTN are replacing private branch exchanges (PBXs). Moreover, within public networks, VoIP softswitches and voice gateways are beginning to replace transit Class 4 central office switches, leaving only the Class 5 layer to be inevitably replaced. But, the replacement of the Class 5 layer may take several years due to the massive cost of Class 5 switches. The good news for consumers is that regional Bell operating companies (RBOCs) and incumbent local exchange carriers (ILECs) typically replace their Class 5 switches every 20-25 years, and time is up.

The burning question now is: where, when, how and how fast will VoIP be adopted? Because VoIP can be deployed from a number of transport mechanisms including cable (using the primarily entertainment based cable television network) and DSL (using the traditional telephone network), the “how” has received the majority of attention in the world’s press. The competition to deliver VoIP to consumers is the subject of endless analysis and debate. Whether VoIP is delivered over cable, DSL or various other mechanisms, at Legerity, we refer to all of these “voice over” technologies as voice over broadband (VoB). [Figure 1]

Undeniably, the Internet drives the use of VoB products in the home. As more and more individuals move to high-speed Internet service in lieu of dial-up, VoB service becomes a simple addition to their data service. A great portion of the VoB drive, and the answer to the “how” debate, is buried in the question: who will own the communications/entertainment delivery to the home? In the United States, cable multiple services operators (MSOs) are deploying cable modem and cable high-speed services at a much faster rate than traditional RBOCs can deploy DSL service. This is, in general, a different scenario than in the rest of the world. One reason for increased speed is that cable MSOs have no U.S. government regulations to hinder their progress. Whereas the Telecom Act of 1996 states that RBOCs must share their network with competitors who do not own a network of their own, meaning that every dollar the RBOCs spend to update their network helps their competition. Until regulations are changed to favor large carriers, the RBOCs will continue to keep capital expenditure spending low. Cable MSOs are exploiting this advantage and aggressively pushing VoB developments. Their motivation is clear – if they can deliver data and cable services, they can also deploy voice (via VoCable) and easily establish new revenue-generating services. With the “triple play” – voice, video and data – cable MSOs can centralize consumer billing and maximize purchasing power for home services. At this time, a triple play is not completely viable due to the inability of cable companies to provide 911 and lifeline services – two items mandated by government regulations and typically taken for granted with local phone service.

From the RBOC’s point of view, the issue is far more complex. Hurt by cable MSOs, and by Internet and cell phone services, RBOCs have seen a steady decline in second line service to the home (lines primarily used for FAX machines, business lines, and children). While RBOCs are also looking for ways to expand the home services they offer, they are saddled with the high cost of maintaining network infrastructure, as well as with government regulations on services. For the RBOCs, the only option is DSL deployment. Data delivery via DSL is a natural fit with their existing portfolio of products, and the addition of VoDSL technology allows them to add products and services without greatly increasing costs. However, in order to obtain the coveted triple play, the RBOCs must add video over DSL to their existing services.

No matter who wins the battle for high-speed data services, the consumer reaps the benefits. New phone options and service providers will drive costs lower, and new product features will give consumers a multitude of choices when it comes to voice services. Legerity will also win. With the advent of VoB services, Legerity is well positioned to provide ICs to a whole new generation of communication devices. Our VoiceChip™ family of communication chipsets already provides over 60% of the world’s VoB connections, and our market share continues to grow. With customers from Europe to Asia, and in the United States using these chips for VoCable, VoDSL and VoIP installations, the deployment of VoB services appears to have a strong future. Legerity promises to be at the forefront of the VoB movement, making it easier and more cost-effective for companies to bring the products to market that will change our world.

For more information, please contact: Michael E. Krell: mike.krell@legerity.com



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