IT companies are digging further into voice communications, forcing change to traditional telephony that could leave a century-old communications industry unrecognizable in short order.
As the telephone carriers struggle to adapt to packet-based networking, data companies are quickly adopting voice strategies of their own. Moreover, VOIP (voice over IP) is forcing the convergence not only of voice and data traffic, but also of voice and data companies.
Microsoft Corp.s foray into the voice world started with its decision to build SIP (Session Initiation Protocol) into its Windows operating system and other clients, including MSN Messenger, enabling PCs to carry voice calls.
"SIP as a control protocol has more or less won. Its embedded in everything we do," said Michael OHara, Microsofts general manager of the solutions provider business of the communications sector.
To integrate voice with its more traditional data applications, the Redmond, Wash., developer is testing a new client for its Live Communications Server, which would link instant messaging with telephony and video applications. Called "Istanbul," it is slated to replace Messenger as the key client for LCS and will be released early next year.
According to some experts, Microsofts move into voice and video has the potential to shift telephone competition from its focus on mass-marketed bundles of service to highly customized services. In this environment, owners of applications and services, rather than owners of the network facilities, will hold the most value, which "could further the deterioration of traditional telco toll revenues based on time and distance, particularly long-distance charges," according to a report authored by analysts at Legg Mason Wood Walker Inc., in Washington.
With SIP embedded in its nearly ubiquitous operating system, Microsoft could even deliver an IP platform for computer-to-computer communications with advantages over traditional voice delivery, including greater integration, easier customization and lower prices. Unlike other similar telephony offerings—such as Pulver.coms Free World Dial-up, or FWD, and Vonage Holdings Corp.s basic VOIP service—a voice network via a Microsoft operating system would connect a vast number of users instantaneously. "If Microsoft rolls something out, they can immediately reach millions of people," said David Kaut, a Legg Mason analyst.
The potential for Microsoft to dominate voice communications has not been lost on the legacy telephone companies, which were monopolies themselves not long ago. By expanding its market power in the operating system to other platforms, the software maker could become a gatekeeper for all services moving over the desktop, potentially directing users to its own services, SBC Communications Inc. warned in a plea for tougher sanctions against Microsoft in the antitrust lawsuit brought by the government.
According to Microsoft officials, however, the company is more interested in partnering with telephone companies than competing head-to-head with them, as illustrated by its agreement with SBC last month to deliver a hosted IP-based television service, known as Project Lightspeed.
"I think the focus we have here is to help our service provider customers to succeed in the marketplace," OHara said. "Youll have a free choice in terms of where you buy your applications. We would like to enable those applications for service providers."
Expanding into voice and video is a way for Microsoft to add more value to its data applications, and, at the same time, partnering with Microsoft is a way for telephone carriers to add more value to delivering traffic. Rather than serving solely as a delivery mechanism—an increasingly commoditized service—carriers are moving to become service managers.
In addition to its partnership with SBC for hosted video, Microsoft has forged an agreement with British Telecommunications plc. to provide hosted data services, including Exchange and Messenger. Forming similar partnerships that enable hosted voice applications is something that Microsoft is "looking very closely at," OHara said.
"Our view is that its a triple play over IP," he said, adding that the initiative is optimal "when you start to combine Exchange and voice and maybe one or two channels of video."