By Ben Charny Staff Writer, CNET News.com January 27, 2003, 4:00 AM PT

Read more about VoIP

A group of telecommunications giants is quietly pushing a proposal that could create hang-ups for up-and-coming Internet-telephone rivals.

At stake are rules used to divvy up the 5.2 billion unassigned phone numbers set aside for use in North America, one of the biggest potential markets for Internet, or voice over IP (VoIP), telephone services.

VoIP technology allows people to make phones calls that travel over the Internet rather than solely across wires owned by long-distance phone companies. Such calls can be made from telephone systems that tap into the Internet, and from PCs.

The cost of making such calls is significantly less than that of basic long-distance service because the calls bypass the phone companies’ lines. As a result, many large corporations and tech-savvy consumers are using VoIP to make long-distance calls.

Net telephony providers such as Vonage and Net2Phone enjoy an unfettered stream of new numbers passed down from other carriers, which they can hand out to customers as they wish. Now, Verizon Communications, BellSouth and Qwest Communications International want federal regulators to tell the newcomers to heel.

Verizon and the others raised their concerns most recently at a meeting Wednesday of the North American Numbering Council (NANC). The industry group is chartered by the Federal Communications Commission and is charged with developing policies on how to distribute telephone numbers.

If successful, some observers warn, the lobbying push could dampen the market for Internet-telephone service in the United States.

“The results could choke off the industry before it really gets going,” according to a source familiar with the ongoing debate.

The looming fight over phone number allocations comes amid a supply crunch , just as VoIP services are shaping up as a significant new challenge to both local and long-distance carriers.

Once denigrated for spotty reception more similar to that of a CB radio than that of a phone, Internet calling has improved in quality to the point where analysts expect the industry to soar over the next few years. TeleGeography , a phone industry analysis firm, estimates that there were 18 billion minutes of VoIP phone calls in 2002, or about 10 percent of all the calls made.

As VoIP makes up a bigger proportion of the overall phone market, it is poised to join a growing field of competitors that are vying for an increasingly limited phone-number pool.

Your number’s up U.S. government reports estimate that the United States, Canada, Guam, Bermuda and Trinidad will run out of 10-digit numbers by the year 2025, driven by demand for cell phones, faxes and other devices. The coming crunch has led at least one industry organization to draw up a plan for a 12-digit future that could add some 640 billion new numbers to the pool.

In the meantime, the FCC composed two conservation measures, both opposed by the phone carriers. One, “number portability,” would let people keep their phone numbers even if they switch carriers. The second would force carriers to be assigned a smaller amount of telephone numbers at a time.

Against this backdrop, some carriers said they are concerned about what they see as unorthodox number allocation practices among VoIP providers.

At the Jan. 22 NANC meeting, proponents of VoIP phone number regulation said they want agencies including the FCC to examine the Internet-phone industry’s use of “designer numbers,” among other things. Because of the nature of the Web, computer phone providers can offer customers a choice of different area codes, regardless of where they live.

“The idea is not to choke this thing off, but to explore the issues and reach some agreements so we can go forward,” said Randy Sanders, BellSouth’s director of regulatory and external affairs.

NANC members were interested enough in the problems to order a subcommittee to come up with some of the possible technical problems involved with telephone numbers and VoIP.

Others, however, have dismissed the concerns as overblown for an industry that is barely getting its legs in North America.

In a white paper called “Much Ado About Nothing,” AT&T recently argued that Internet phone providers aren’t attracting enough customers now to even pose a possible problem to be addressed.

“The sky is not falling,” AT&T wrote to the NANC in a follow-up to the white paper.

Worldwide, there were around 2.93 million cable telephony subscribers in 2001, more than the 2.5 million most analysts were predicting, according to a study last year by Allied Business Intelligence, an Oyster Bay, N.Y.-based research firm. That number was expected to almost double by the end of 2002, reaching 5.2 million subscribers, the study predicted.

By contrast, only a handful of companies sell computer telephone service in the United States, with fewer than 100,000 people now using broadband connections to make phone calls. The leading computer phone provider is Vonage, which has about 10,000 customers.

NANC and the North America Numbering Plan Administrator (NANPA) distribute phone numbers in blocks to so-called incumbent local exchange carriers (ILECs), which then transfer some of those numbers to competitive local exchange carriers, or CLECs, that ride on their lines.

Vonage representative Brooke Shultz said the company gets its telephone numbers from CLECs, although she declined to name the suppliers or the terms of the transfer deals.

Shultz dismissed the lobbying effort as a competitive tactic.

“This is really the first sort of tactic to get us regulated,” said Shultz. “We’re not misusing numbers.”

Industrywide makeover Regardless of where the industry stands now, there is no doubt of the momentum behind a new way of delivering voice communications at a fraction of the cost of traditional phone networks.

VoIP providers generally require two things–a broadband connection and either an adapter for a landline phone or a microphone and speaker device for computers.

The calls travel mostly over the Web, avoiding the toll roads that are traditional phone lines. As a result, computer phone services can offer plans with unlimited dialing and no long-distance charges. The average monthly price is $40.

VoIP’s efficiencies come through its use of packet-switching technology, which breaks up communications into small bits that are dispersed to find the fastest path across the network and recombined at the end point. Traditional telephony, by contrast, is “circuit-switched,” creating a dedicated channel for the duration of the call.

Analysts have cautioned that traditional phone companies could get squeezed out of VoIP technology. Responding to the threat, big carriers, including Verizon and Qwest, have been inking billion-dollar deals with equipment makers such as Nortel Networks, to add packet-switching capabilities. Sprint began adding packet switching to its network in 2002, after a $1.1 billion deal with Nortel. Qwest has also announced that it will adopt packet-switching technology.

Norm Bogen, a communications infrastructure and services analyst with Cahners In-Stat, expects the sale of media gateways, the equipment needed to install VoIP systems, to increase from $883 million in 2003 to $2.74 billion in 2006.

Even as the big carriers race to get into this area, however, Bogen tipped the advantage to the upstart VoIP providers.

“They are replacing the local phone company,” Bogen said.

Consumers See Deals in Internet Calling Sat Sep 28, 3:44 PM ET By Eric Auchard

NEW YORK (Reuters) – Telephone calling via the Internet has come a long way from the days fives year ago of crackling walkie-talkie conversations, and U.S. consumers now have a range of choices that trade higher quality for cost.

A variety of battle-hardened start-ups have staked out lucrative niches in U.S. domestic and overseas calling markets, ranging from calling cards offered by Net2Phone to full-featured phone replacements from firms such as Vonage.

Such services run the gamut in terms of the technical sophistication required. They range from simple dialing-code calling cards to software programs that must be installed on computers to modem-computer hardware combinations that make up in cost and unique features for the pitfalls of installation.

Net2Phone , based in Newark, New Jersey, counts some 1 million U.S. consumers and another 1 million to 2 million overseas customers for its primary Internet-based calling card business, spokeswoman Sarah Hofstetter said.

The company, which was founded in 1995, offers its original computer-to-phone Internet calling software that allows ultra low-cost calling — at rates of two cents a minute — but at the mercy of dial-up Internet connections that can create a classic walkie-talkie-like sound quality.

DeltaThree , another PC-to-phone software maker, boasts calls as low as 1.2 cents a minute.

The bulk — some 60 percent — of its customers live overseas and rely on Net2Phone to make discount calls internationally, either to the United States or elsewhere. Calls within the United States and Canada are 3.9 cents per minute. U.S. callers pay 8 cents a minute to Australia, 10 cents to Poland and 13 cents to Colombia.

HIGH-SPEED INTERNET CALLING, THE NEXT BATTLEGROUND

Thousands of technically sophisticated users have signed up for a next-generation phone service offered by Vonage at http://www.vonage.com. Vonage, of Edison, N.J., introduced in April a service that allows consumers with high-speed Internet connections running over television cables or phone lines to make local and long-distance calls at flat-rate prices.

The company, which was founded by Wall Street entrepreneur Jeff Citron, offers monthly service plans ranging in price from $20 for 500 minutes of calling a month to $40 for unlimited local and long-distance calls within the United States. International calls can placed at substantial discounts also.

The Vonage DigitalVoice service has drawn rave reviews from some 3,000 customers who have signed for the service.

“Feature for feature, we have everything that WorldCom is offering — plus more,” Citron boasts.

Norm Bogen, an analyst at Cahners In-stat in Scottsdale, Arizona, agrees that the service offered by Vonage is highly competitive in both price and features with integrated local and long-distance packages offered by AT&T, WorldCom and Sprint.

“Vonage has a better offer than the other long-distance competitors,” Bogen said.

A novel feature Vonage offers is the means for consumers to choose from a range of phone numbers in alternate area codes.

Thus a small business operating in New Jersey can for as little as $5 extra receive calls to a fashionable 212 Manhattan phone number. A Delaware-based software company can set up a sales and marketing presence in Silicon Valley, for example.

A retiree in Florida can set up a 516 number in Long Island, New York to allow relatives in the region east of New York City to pay just the price of a local call to talk to Florida. Vonage claims users have signed up in all 50 states.

Later this week, a spokesman said Vonage plans to introduce a new twist on its service that allows customers to switch from traditional local phone service providers such as Verizon or SBC while keeping their existing phone number.

This eliminates another big hurdle that has prevented consumers from switching to competitive phone services such as Vonage and thereby loosing touch with friends and family.

But competitors say there is little keeping them from entering the market. Analysts say that major cable and telephone companies can offer these services themselves but are waiting for the market to mature before expending the sales and marketing costs to switch over new or existing customers.

Net2Phone, with backing from cable and programming giant Liberty Media, has begun testing with several hundred Liberty cable customers in Puerto Rico of a rival broadband phone calling service. DeltaThree’s Web site promises similar services.

It also offers an innovative version of Microsoft’s popular instant messaging ( news – web sites) software that allows online users to speak with each other.

“Our long-term goal is not to have the consumer be our customer, but to have the cable company be our customers,” Hofstetter said. Net2Phone is positioning itself as the ally of cable television operators in their battle to wrest phone customers from established local phone companies.

Meanwhile, AT&T and Comcast Corp. , two of the top three U.S. cable television operators, have pushed forward with stop-gap services that combine cable connections with traditional circuit-switched phone connections. Such services do not benefit from the lower costs of running purely Internet-based networks, but allow these operators to generate phone revenues from existing cable customers.

Perhaps the biggest challenge to Internet-based phone calling services is emergence of wireless phones as a potential replacement for both local and long-distance fixed-line plans.

“How many people that have a broadband connection also have a wireless phone?” industry analyst Bogen asks rhetorically. “Many people have switched to wireless for their all their communications needs. Vonage can’t get those customers.”

———–

Voice over Internet service talks to consumers

Steep phone fees spur move to online voice calls

TOKYO, Japan (AP) –For years, the high cost of phone calls was the biggest obstacle to Internet growth. These days, that curse is proving to be a bit of a blessing.

As always-on broadband Internet service becomes more available, towering tariffs for traditional voice calls are encouraging adoption of a technology that has yet to make much headway with consumers elsewhere: voice over Internet.

More than 300,000 people have signed up for the service from BB Technologies Corp., a subsidiary of Tokyo Internet company Softbank Corp. That’s easily more than three times the estimated U.S. consumer market.

The service, which began in April, doesn’t require a new telephone. With a book-sized modem, one gets voice quality comparable to that of regular voice lines — at a fraction the cost.

Subscribers to Softbank’s Yahoo broadband Internet service get voice over Internet for free. Non-subscribers pay about $10 per month including modem rental after a $30 installation fee.

Users keep their same phone number. The broadband service is an asymmetric digital subscriber line that runs over existing wires. Customers still must pay a line fee that starts at about $13 a month to Nippon Telegraph and Telephone, the former state monopoly that still controls nearly all fixed lines to homes.

Saving on the service

Even so, callers can save drastically.

Although traditional phone fees are gradually coming down as the sector opens up to newcomers, a three-minute long-distance phone call in Japan still costs as much as 68 cents while the same call to New York costs $1.40.

With BB Phone, three-minute calls within Japan and to the United States cost 6 cents. The rates for calls to other countries vary but are all generally cheaper than old-style phone calls. Calls to another BB Phone are free.

A long-distance romance has Ayumu Mizuno, a 24-year-old engineer, sold on BB Phone. He expects to save hundreds of dollars in calls to his out-of-town girlfriend, who lives with her parents.

The service is in such demand that customers have complained about long waits for service and support. Another catch is that free calls happen rarely because BB Phones remain rare.

“It’s too bad I have no other BB Phone person to call,” said Yoshio Inohara, a 43-year-old electrician who switched to BB Phone last month. “The only BB Phone I’ve ever called is the support center.”

An online oven?

Softbank, which has invested $ 740 million to set up its broadband network, believes homes of the future will be linked over the Internet through all kinds of devices, not just telephones and computers but also home entertainment centers, ovens and refrigerators.

“The BB Phone is a result of the natural changes in technological advancement,” Softbank spokeswoman Misao Konishi said. “The market is certain to get bigger.”

Last year marked a period of explosive growth for broadband in Japan.

Half of Japanese households are already connected in some way to the Internet, up from just a quarter of households two years ago, according to InfoCom Research, a Tokyo company that compiles Net data.

Those using high-speed connections — including ADSL, cable and optical fiber — total 4 million people, or nearly 8 percent of Japanese households.

A recent study by the Nihon Keizai newspaper found 30-fold growth in high-speed digital connections in Japan over the 12 months ending in March.

Coming to America

Although some 12 million American homes have broadband connections, voice over Internet has not penetrated the U.S. consumer market nearly as well.

That’s primarily because basic phone service in the United States is relatively cheap, about $20 a month, said analyst Norm Bogen at Cahners In-stat. Besides, voice over Internet requires new equipment and service that are not as reliable as traditional voice calls, he said.

In larger U.S. companies, it’s a completely different story.

More than 40 percent of U.S. companies with 500 or more employees have begun converting to Internet-based telephony, according to the research and consulting firm InfoTech.

In Japan, the road ahead for BB Phone remains precarious despite its early success.

Telecom giants such as NTT and KDDI Corp. as well as other start-ups are beginning to offer rival services.

This month, NTT’s long-distance unit began offering a videophone feature for its Net phone service, which has attracted 13,000 users.

“NTT has marketing power,” says Shinji Moriyuki, analyst with Daiwa Institute of Research in Tokyo, adding that only the best of the efforts from smaller companies is likely to survive. “NTT may lose some market share, but not all ventures are going to succeed.”

———–

Tuesday January 08 09:00 PM EST

Home-wireless boom could boost Wi-Fi By Sam Ames CNET News.com

Researchers are anticipating a boom in people setting up wireless networks in their homes, even as the standards for such local area networks shift to new technologies.

“The idea of being wireless-connected to the Internet is slowly becoming flashy and sexy, at the same time boosting mobility and productivity,” analyst Gemma Paulo of Cahners In-Stat/MDR wrote in a recent report. “Users want to be wirelessly connected throughout their home environment: on the couch, by the pool, (or) on the front porch.”

A wireless network allows consumers to connect PDAs, laptop computers and PCs to each other and to the Internet without the limitations of a wire connection through a LAN (local area network).

The Cahners report also said the networking protocol 802.11b, or Wi-Fi, will gain significant market share over the competing standard, HomeRF. HomeRF was used in 45 percent of the home wireless networking market in 2000 but dropped to 30 percent in 2001 and is losing ground.

One of the main reasons for Wi-Fi’s ascendance is the number of companies promoting the standard.

“802.11 technology is available from many different suppliers, so there’s greater availability, and competition will push prices lower,” said analyst Joseph Byrne of Gartner Dataquest. Byrne compared the competition to the video standards war between VHS and Betamax, which VHS eventually won because it was more widely available.

HomeRF claims big-name supporters like Motorola, Nokia and Siemens, but those companies also support Wi-Fi, as do many others, including Microsoft and Lucent Technologies. HomeRF’s cause looked bleak when Intel pulled out its support to concentrate exclusively on Wi-Fi.

But HomeRF’s supporters maintain that there is room for more than one standard in the home market, and that HomeRF offers more attractive features than Wi-Fi.

“HomeRF’s contention from the very beginning has been that home networking is much more than just two PCs connected to the Internet,” said Ken Haase, the general chairman of the HomeRF Working Group.

Haase mentioned that Siemens announced Monday the availability of its wireless network gear called the voice data gateway, which transmits high-speed Internet data to home computer devices and voice calls to cordless phones.

The HomeRF standard also won a small victory when AT&T announced Tuesday that it was joining a HomeRF working group that develops the technology.

AT&T says it wants to keep its options open: “AT&T is standards-agnostic when it comes to home networking,” said AT&T spokeswoman Ellen Zundl. AT&T “likes to keep an open mind and is exploring new technologies.”

Wi-Fi also has a lead in the business market, which gives the protocol an advantage in the home market. “If you were using (Wi-Fi) at work or while traveling, you’d be more inclined to use it at home also,” Byrne said.

Yet Byrne also believes it is premature to start writing HomeRF’s epitaph, saying it is possible that future versions of the technology will also run Wi-Fi, which could forge a peaceful coexistence.

Cahners research predicts that even though HomeRF’s market share is shrinking, companies that support it will still sell more equipment in the next few years. That could help, according to Byrne.

“HomeRF might become small enough to become a niche market so that the (Wi-Fi) guys will just focus on competing with each other,” he said.