The State of VoIPby Andy Oram
I often go out seeking fertile intersections of technological innovation, new businesses, and policy debates. This month, I found just such an intersection at the Fall 2004 Conference and Expo of the Voice on the Net (VON) Coalition. It bubbled over with a rich, interactive mix of implementers, vendors, service providers, customers, standards committee members, regulators, public interest representatives, and press. Organizer Jeff Pulver predicted over 5000 people--twice the number who came last year--to pass through the show. The presence of more than 200 vendors on the exhibit floor showed that a lot of people expect VoIP to generate a lot of money. More on that later.
You may think you know Voice Over IP. It's the technology that lets you phone Cairo from San Francisco as casually as you send an email. And it lets you bypass those nasty charges that the FCC levies on behalf of rapacious local phone companies.
But wait! The FCC and the local phone companies love VoIP! FCC chair Michael Powell came up to Boston for the Tuesday morning session of the VON conference, saying such things as, "You are bringing about a revolution, like the American revolution, bringing power to the people....We need to create a new constitution regulating VoIP that reflects that revolution. If we do, we will be rewarded as our forefathers were....VOIP has ignited a fire under a stalled industry."
And the day before, a spokesperson from Verizon gleefully called VoIP a disruptive technology (not a trait that one would expect to endear VoIP to an established incumbent) and touted it as a selling point for DSL.
So what's going on? To get some perspective on what VoIP means to different people, we have to look at some of the technical challenges, then at its business prospects, and finally at regulatory issues.
Over the years, I've encountered three very different ways to describe Voice over IP:
An exploitation of TCP/IP in a streaming application for which it was not designed, with predictable problems in Quality of Service and network utilization.
A wide open business opportunity with the ultimate economic effect of totally overturning the huge, entrenched telecom industry.
A modest example of the packet-switching's long-sought promise to enable integrated multimedia communications.
That all three views are correct is not worth extended discussion here. What I want to stress is the different implications of the three different views, which I'll label 1) the cynical, 2) the effusive, and 3) the far-thinking.
The cynical view was historically the province of Bellheads (although many TCP/IP experts admitted to it as well); the effusive view associated with businesses entering the field along with politicians such as Powell; and the far-thinking linked with internet pioneers who remember such things as CUSeeMe from the distant internet past.
The cynical objection has receded wherever people get DSL or cable modems. Still, during the early years of VoIP, I didn't hear any Bellheads tout VoIP as a selling point for DSL. (They didn't tout anything as a selling point for DSL.) The adoption of VoIP by incumbents such as Qwest and Verizon mark a historic conversion comparable to the Emperor Constantine's embrace of Christianity.
The effusive view is easy to get tired of, but it's a critical factor because it's what pushes the market forward. As Powell pointed out (backed up by Senator John Sununu of New Hampshire in a keynote Monday), the telephone industry can break out of its doldrums and provide a substrate for new applications only if large companies such as Siemens and Cisco believe they are going to stuff their pockets with cash from sales of VoIP, wireless, and other current advances in technology.
The far-thinking view is typified by experimental networks such as Internet2. They promise a future where you can collaboratively edit a presentation while videoconferencing with your partner or carry out a medical examination with a specialist thousands of miles away while sitting in your local health clinic.
The problem with the far-thinking view is how to get there from here. Cable modems and ADSL are insufficient. So no one can commercialize applications without a new transport infrastructure, and no one will build the transport infrastructure in the absence of commercial applications. The effusive stage of VoIP will build the missing bridge to the future.
What VoIP advocates want it to be
So the essential requirements for reserving enough bandwidth, eliminating jitter, and protecting the privacy of conversations are met in today's VoIP. It is fully ready to function as a stand-along drop-in for individual phone users. The industry is diligently pursuing the remaining problems of scaling up to the corporate level and of interconnecting with corporate PBXs and the PSTN (public switched telephone network--the worldwide grid of phone lines and switches that has been built up over 120 years).
But placing phone calls is not enough of a driving force for the adoption of VoIP; it doesn't justify a worldwide switch-over. Not even the effusive sector believes that. As Mitel chairman Terry Matthews said at the VON conference: "If you don't invest in new services, don't expect new revenues. You can't just replace what customers are already using; you have to offer something new." Perhaps even a dozen new services need to be offered every month!
VoIP proponents want a new world of connectivity, similar to the far-reaching vision mentioned earlier. When it truly becomes useful, VoIP will create scenarios such as:
"The statistics in this part of the spreadsheet were generated by Sari Phillips, who is now available at the phone number..."
"Thank you for calling our 800 help line; would you like to be connected to the person who talked to you last week?"
"Find the lawyer covering for me and patch him or her in to a teleconference whenever you need a legal consultation."
Why it's hard to make VoIP what they want it to be
To achieve these things, VoIP has to be enhanced with presence and security, both of which depend on the trait that has been the bane of the internet--establishing identity.
Familiar to every instant messaging user, presence is a complicated feature that depends on maintaining a robust server and instantly updating endpoints when status changes. A person has to be able to easily define and change info about where she is and who can contact her; would-be correspondents have to be known to the system too.
First, spoofing must be blocked. The risk of getting unwanted VoIP calls has risen to such prominence that there is a new acronym for it: SPIT (Spam over Internet Telephony). Lots of other new ways have been found to cause denial of service on VoIP.
To support presence and security, individuals need to obtain certificates from certificate authorities and present them to a server that can make or break connections. This calls for a sizeable new infrastructure and a new degree of centralization more familiar to the phone industry than to internet users.
A particular dilemma that ties these areas together is emergency (911) services. These depend on being able to find the geographic location of a device, which landline phones and cell phones allow but internet-connected computers do not. Perhaps regulators will end up separating communications from geographic locaters. Anyone who wants a GPS device broadcasting his or her location can carry one.
Another interesting change from the past is in directory services. Cathy Martine of AT&T suggested that, in the phone systems of the future, white pages may disappear. People don't want unsolicited calls, the cost of which is lowered so much by VoIP that SPIT becomes a serious risk. Perhaps everyone will just share their phone numbers with their colleagues and friends, as they now do their IM contact information.
It's no coincidence that VoIP presents the same requirements as many other new services on the internet: web services, P2P networks, auctions sites, and more. (See my articles From P2P to Web Services: Addressing and Coordination and From P2P to Web Services: Trust.)
In this regard, it's worth noting an announcement from Microsoft at the VON conference. They refer to the requirements discussed in this section as Infrastructure Services, which they plan to incorporate into a work environment called Microsoft Office System. They are announcing the beta of their Live Communication Server 2005 and an upcoming client with the code name Istanbul. The collaboration and presence features shown in the demo are reminiscent of those offered by Groove Networks, a company that has obtained funding from Microsoft and contributed some of its technology to Microsoft products.
I expect that identity, presence, and related security will appear first on the small scale, spanning a single corporate environment or a group of tightly knit colleagues. As a general way of life, it will be a long time coming.
The size of the VON conference shows that vendors expect a big market in VoIP. And I think they'll make a good living (if they can deliver the promises in the previous section) selling equipment and services to enterprises looking for savings in efficiency and administration of phone services. But there are also service providers at VON who expect to make big bucks offering it as a service, which I think will be much harder.
Most worrisome is governments that think they will make money off of VoIP. They're used to getting fees paid by phone users, and several speakers at the VON conference suggested they're grasping at VoIP to close budget gaps.
However, internet applications don't generate revenue. I don't know of anyone who made money simply offering email or web browsing. And VoIP will eventually be no different. Revenue comes from the transport, from offering connectivity. Jeff Pulver warned about this in his keynote: there is not necessarily a one-to-one relationship between a goal, a need, a case for technology on the one hand, and a way to generate revenue on the other.
And so, just as VoIP hits the big time--now that British Telecom and Qwest and AT&T and other big players pick it up--the new reality shifts the attention from VoIP to the underlying physical medium. Now, who owns the hardware is more important than ever.
For several reasons--the question of how governments can tax something that might not generate revenue and the question of how VoIP interacts with regulated monopolies--it's time to look at questions of policy and government.
There's a lot to learn here. Let's start small.
U.S. state regulation
Six representatives of state Public Utility Commissions offered a panel at the VOIP conference. All claimed to regard VoIP as fundamentally different from the PSTN, with different regulatory requirements. All claimed to favor a light touch. These are substantial conceptual advances over the first entry of regulators several years ago.
The PUC representatives also agreed that they wanted a comprehensive ruling at the federal level (although some of them claimed the right to impose requirements on top of federal regulation). And in his Tuesday morning keynote, Powell garnered applause by promising at least that much: "to extend exclusive federal jurisdiction over these services and to work with colleagues on the international level as well, to ensure a minimal regulatory environment." He stressed the international task by saying, "VoIP knows no borders."
And so it seems that states want to leave their hands off of VoIP. Just as long as VoIP services incorporate geographical tracking, so they can report a user's location to emergency services. And, of course, as long as they support the fight against crime and terrorism by engineering the capture of traffic and user data into their services, to meet the wiretapping obligations of CALEA. They also need to pay into the universal service fund, of course. And don't forget supporting local number portability...
U.S. federal regulation
Powell claims to understand that VoIP is a different animal from other phone services, but it's the same story as the state PUCs when one gets down to details. Responsibilities established by the government don't just go away. Thus, on CALEA, he promised, "We won't force VoIP into a square hole just to provide intercepts." But he lectured the audience that, "The government's first responsibility is to protect citizens from harm. This is an issue you have to deal with."
Here's my prediction, for what little it's worth. We've heard all this hand-wringing about secure communications before, when law enforcement in the 1980s decried strong encryption, tried to hold in place distribution restrictions from the 1940s, and proposed various third-party escrow systems such as the Clipper chip. These all went nowhere, and by now strong encryption has become universally available.
CALEA is a sad story. The law passed in 1994 after enormous debate and negotiations over the most piddling details. The FCC, FBI, and phone companies spent the next four to five years haggling over CALEA's implementation, which cost hundreds of millions of dollars. Now, the whole thing is showing its age, and not gracefully.
What government will do in the case of VoIP, I think, is meet formal CALEA requirements by decreeing that all phone calls pass through recognized ISP servers and that the ISPs incorporate wiretap capabilities on these servers. VoIP users will go along with using servers because of the identity, presence, and security issues mentioned earlier. They will add end-to-end encryption at the customer premise equipment, and law enforcement won't be able to do anything except wring their hands again.
The commissioner of the California PUC, Susan Kennedy, suggested that VoIP be left exempt from all the requirements placed on other phone providers unless the VoIP call involved a traditional telephone number. This proposal would essentially allow VoIP companies to implement all the overhead in gateways between the internet and the PSTN and free them from wholesale retrofitting of internet protocols to provide these historic services.
While Powell was asked a great deal, and widely quoted about government regulation, he made several intriguing and little-noted comments concerning a kind of regulation that law professor Lawrence Lessig calls regulation by code or by architecture. To me, the most thought-provoking section of Powell's keynote laid out four freedoms that should apply to communications:
Freedom to access content
Freedom to run applications
Freedom to attach devices
Freedom to obtain service plan information
Powell explained these principles, which add up to a restatement of the end-to-end principle, and underlined his support for it by saying, "IP doesn't work if the person who owns the infrastructure can control the user's freedom of access." Competition thus means much more to Powell than low price or even greater chances for innovation; it means precisely the kind of open commons in communications that Lessig has called for.
Pulling strings and pulling wires
Powell waxes enthusiastic about new technologies, such as Wi-Fi and VoIP, but he's probably given more help to the oldest and most deeply entrenched monopolies in communications. After all, if he opposes unjustified regulation for Wi-Fi and VoIP, he can claim to remain consistent while opposing regulation for local incumbent phone companies and cable TV companies. As I explained earlier, the potential of VoIP to drain revenue from phone service returns the locus of power and money-making activity to those who own the equipment.
The details of the current regulatory situation are too involved to go into here, but competitors of the Bells, such as AT&T, have just about thrown up their hands and given up trying to get access to the last mile. While Powell insists he doesn't want to reinforce a monopoly, he has essentially sealed the monopolies in local phone lines and cable TV that emerged in the late 1990s.
This issue raises pulses and brings imprecations to the lips of long-time internet activists. But complaining about the eviscerated competitive provisions of 1996 Telecom Act is about as pointless now as complaining about the expulsion of non-profit community stations from the radio waves in the 1930s. How will we move forward?
Three major forces control the conduits: local phone companies, cable companies, and cellular companies. Some organizations create their own networks, but this is still a minor phenomenon.
Local phone companies and cable companies move slowly and are careful not to compete with their own existing services. They tend to add services in response to competition. In particular, cable companies seem to have hit a limit on reliability, and they cannot improve the speed of their internet services unless they increase bandwidth by taking channels away from their lucrative TV service.
So the last players on this list--cellular companies--are most interesting to me because they offer an expensive service that, many VON participants believe, will gradually be cannibalized by VoIP.
The cellular companies have enormous sunk costs that they know they must move away from their current voice service. They are also alert to the possibilities for data services. They're the ones who are going to move first and fastest.
In this regard, I hold out hopes for the WiMAX protocols, built on the 802.16 specifications. Many in the internet community sneer at WiMAX, calling it an attempt by large corporations to co-opt the grassroots Wi-Fi movement. These critics expect WiMAX either to fail miserably or to succeed by expelling the public from the virtual commons of the spectrum.
I see WiMAX from a different angle. I see it as an attempt by intelligent people to improve on the promise of Wi-Fi, to build on its successes and avoid its failures in areas such as security protocols. WiMAX is supposed to move data much more efficiently than Wi-Fi in the same spectrum. But WiMAX can also give a second chance to licensed bands of spectrum that never lived up to their promise in the old pre-standardization days. As with VoIP, I see the entry of the big carriers as a good thing.
We have finally come to the broadest level of policy. Here, while hardly anything makes it through to the trade or mainstream press, we can find increasing activity, mostly from the United Nations and another institution called the International Telecommunication Union, which has regulated spectrum and telephony for decades and was placed under the auspices of the United Nations. There is little to show for all this yet.
The ITU has been considering for some time what role it should take on in relation to the internet, a medium that grew up completely independently of the ITU and where most activists see no positive role for the ITU. Another UN/ITU activity, the World Summit on the Information Society (WSIS), has established a Working Group on Internet Governance (WGIG).
Walda Roseman, CEO of CompassRose International, insists that the UN means business, and that internet providers who stay aloof could find its regulations distinctly unfriendly.
Regulation is a given. In his keynote, Jeff Pulver warned, "To the extent that you offer services that resemble traditional voice services, you will face regulatory issues in various countries." And while regulation may be slow to adapt, and solicitous toward the special interests who devote the most money and effort to it, it does in some attenuated way represent the influence of public opinion. We can express our freedom collectively as well as individually.
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