Qwest Communications International is leading the change among regional Bell operators to introduce IP telephony as a de facto standard in communications, a move that paves the way for futuristic voice applications and which materially changes the economics of telecommunications.
The Denver-based carrier announced on Oct. 10 that its customers in Boise, Idaho, customers phone calls are already being routed via a data network using Voice-over-IP (VoIP) technology in a commercial technical trial. End users probably have not noticed the difference, since Qwest is changing its voice switching equipment to carry phone calls over an IP network as opposed to a circuit-switched network without introducing any IP-based services at this time. The move is the first step on the road to junking the circuit-switched network in favor of VoIP.
"On a going-forward basis, we would like to see the growth in our switched capacity to be packet-based, and eventually migrate to where 100 percent of the capacity we use Qwest-to-Qwest would be packet based," said Clay Van Doren, Qwests vice president of network planning for local networks. "But we would continue to leave the option open for our wholesale customers, so that if they need a TDM [Time Division Multiplexing] environment ,we would be able to support that."
The next six cities to get VoIP circuits are Albuquerque, N.M.; Denver; Minneapolis; Phoenix; Salt Lake City; and Seattle. The time table for these launches would be "aggressive," Van Doren said, but no dates are set. Qwest plans to replace its circuit switches with VoIP switches in its entire territory of 14 states over the next three to five years, with the contract awarded to Nortel Networks.
Van Doren wasnt able to confirm the size of the contract - which is rumored to be worth more than $100 million - but he said that some deployments may not happen if the economics of upgrading to VoIP are not there. He stressed that Qwests first priority is to make sure that the new technology is not introducing quality degradation, and he projected that, going forward, most of the revenue associated with VoIP would come from enhanced services.
Observers said Qwest has a long VoIP history.
"Qwest has long been a leader in packet telephony. They deployed the Vienna systems back in 1997, and were the first major telephone company in the U.S. to roll out domestic VoIP as a calling card offer," said Hilary Mine, executive vice president of Probe Research. "It was a flop, because the Vienna equipment was just too early."
But now the Nortel technology is a proven entity and, whats more, Nortel is offering a seamless upgrade onto a new platform for enhanced services customers, Mine said.
"In other words, if I am a current Centrex customer in Denver, Qwest can cut over to the next-gen platform without impacting my service or feature capability." Mine said. She also noted that enhanced services brought in $11 billion in revenue for U.S. regional Bells last year, of which $7 billion was pure profit, Probe estimated.
Other regional Bells are likely to follow in Qwests footsteps. Tom Evslin, CEO of ITXC, a Qwest termination partner, indicated that along with Qwest, ITXC also terminates traffic for Verizon Communications and Ameritech. Verizon is also expected to receive clearances to carry long-distance traffic in 2002 that would allow the company to proceed with a planned takeover of Genuity, which runs a large VoIP wholesale business.
"We are seeing in developing countries carriers build just a single network for voice and data, because they have new networks to build," Evslin said. "I think as capacity is added and networks are upgraded, the new capacity added would be IP capacity, and eventually all networks would become IP."
Executives such as Evslin believe Qwest is creating a material change in the VoIP market, specifically enabling many next-generation enhanced services. The other major player making a difference is Microsoft, which has added Session Initiation Protocol to its new Windows XP operating system. Technically, this enables customers to start using their computers as telephones, given that the machines are always on and online.
However big the possibilities, Qwest executives appear to want to take this journey one step at a time.
"This is the first step in this space, and we have to make sure everything works seamlessly," Qwests Van Doren said.