Cell phones connected to Wifi will be the final destination for VoIP in the home.
This is the second part of our discussion of The Future of VoIP.

This holiday shopping season as I was looking for a cell phone to gift, I noticed that hardware vendors like Samsung, LG, HTC, and Nokia are making touch-screen PDA phones and some are beginning to standardize around OS’s like the Android Mobile Stack. Even Motorola has started making phones like the ROKR on its new Linux-based operating system and, of course, the Apple App Store has surpassed any analyst’s wildest expectations for usage and adoption.

While selling home-based VoIP service through an ATA (Analog Terminal Adaptor – the box that connects the traditional phone port to your computer) was the first obvious stage for VoIP, we are seeing a common trend amongst those who get unlimited or all-you-can-eat wireless plans through their cellular carrier – they stop using any land-line based phone. With the exception of making international calls, increasingly people use their cell phones at home.

Along with this trend is the rising amount of phones sharing a common open-source operating system where anyone can write an application that uses the Wifi capability in their mobile (or even an iPod Touch) and use an app from VoIP application vendor – bypassing spending time with their wireless provider.

While wireless companies attempt to stop such applications from working on their networks or the phones their networks support, numerous “jail-breaks” exist for many of the more popular PDA-style cell phones. Their increased usage, like it or not, is as inevitable as file sharing music.

In South Korea, broadband and cell phone adoption is incredibly high. If their cellular phone market is any indication, possible indicators show that while the wireless carriers struggle to make money off of selling raw minutes and data (a phenomenon not seen by US Carriers yet), they do profit by creating “value-added network services” such as games for teens, cell phone coupons and wireless payments for busy professionals. There are numerous apps any South Korean teen can now download onto their phones that allow them to connect to their home Wifi and conduct VoIP calls over their cell phone.

Which means the U.S. can’t be very far behind. Expect to see people “making cheap calls on their cell phones” at home as the U.S. carriers begin to gradually increase pricing on overall ‘Family Plan’ packages in a tight economy.

A fascinating survey conducted by RingCentral shows an emerging trend in the way America’s small businesses are operating. Here’s the scoop.

When I first started writing for RingCentral, one of the ideas thrown around in our early brainstorming sessions was to open up the data that customers were supplying the company in order to help small- and medium-sized business owners make better-informed decisions about their communications and work-flow strategies. To their credit, the folks at RingCentral wanted to not only supply their customers with a communications platform, but they wanted them to also be more successful at running their day to day operations.

I’m proud to announce that they’ve recently conducted a study that shows an emerging trend in how America’s businesses in the SMB (small- to medium-sized business) sector are operating in today’s challenging economic climate. In a nutshell – business owners plan to expand their business operations next year, but will heavily leverage VoIP technology to grow their offices “virtually”. While this may sound self-serving, in my experience this is a bold move for any company to “open up their veil” like this in an effort to help entrepreneurs.

They have some nice pie charts and breakdowns in the RingCentral survey (located in the first link above), but the summary upshot is that more businesses are hiring employees that do not necessarily work from the office or even in the company’s location. And while most businesses want to give their customers the impression that all are working from one geographic location, more than half of the expected new hires in 2010 will be working from a “virtual office”.

While the cost savings in infrastructure overhead are obvious (as can be evidenced by another independent study conducted by officebroker.com), what some don’t state are the benefits of being able to hire equally skilled employees that work in less expensive areas of the country – and the willingness of employees to take less salary for the ability to avoid rush-hour or daily parking expenses. In essence, people will take less if it means that their workplace lifestyle is better.

Having worked in both San Francisco as well as Austin, I can say for certain that rent is almost triple here in “the city” as opposed to anywhere in Texas. The ability for a business to be able to grow in a metropolitan area in San Francisco or New York, while being able to attract talent in a highly educated talent pool that surrounds such “University-towns” is a significant competitive advantage. This is a generalization of sorts (San Francisco versus Austin), but an SMB can hire 1.5 virtual employees for every 1 physical employee. That’s not a comment about which place is better to live, it’s just an economic fact of the cost-of-living index respective to each city.

OK, so I know some are saying “John, people have been effectively working remotely for years by telephone.” And yes, that’s true, but what’s really the driving force behind being able to do this in a large scale is the ability to be able to quickly ramp up a remote virtual office with the entire suite of features that, formerly, only an enterprise-level IT department would be able to setup.

Example: In the 1990’s (has it been that long already?), innovative companies such as Cisco Systems offered the ability for large-businesses to deploy virtual offices for remote workers that encompassed fax, virtual DIDs (local numbers) and unified messaging on one platform. But the costs were high and the interfaces still in their “1.0″ stage. Now that’s not an insult to Cisco because since then they have invested in major new enterprise-level collaboration tools for big businesses. However, what “Business Phones as a Service“companies have done is created the ability to allow such formerly pricey features to be had so that:

1. Any business could afford it and be tiered to a pricing structure that allowed even a micro-business (read: 1 person) to pay per usage as their business grew to multiple employees over time.
2. SMBs could adopt such technologies on a singular platform. That meant that a new employee leveraging a virtual VoIP business service could get signed up for, and trained on, a suite of features such as: intelligent call-routing, a local DID so that their area codes appeared to their customers as coming from the same as headquarters, visual voicemail, internet faxing, auto-attendants, office-to-mobile call handling and conference calling ability – all in one afternoon.
3. It was easy to use. I remember starting a VoIP company with engineers from Webline, one of the pioneers of web collaboration that came out of MIT’s annual entrepreneurial competition. It was inventive and useful, but the training it required was an order of magnitude greater than the services offered today. Now when we hire a new employee, it takes very little training to get them on the “office communications platform” because the user interface is self-explanatory. It’s akin to the iPhone versus the old punch-key PBX phones – they can both do amazing things as far as communications go, but one doesn’t come with a training manual. Know what I mean?

More exciting – and useful – stats to come. Stay tuned!

Photos by deborah jaffe & Silent700

1) Spies

OK, that’s a bit exotic, but the earliest adopters of sending voice packets as data were intelligence agencies that were both testing it as a communication modality and also to send messages that could not be easily tapped. And now the NSA is openly adopting VoIP as part of their organizational efficiencies.

2) Carriers

Telecom companies were amongst the first to use VoIP. Anyone remember MCI? The early carriers had large portions of their voice networks traverse over the internet since it was one of the most cost effective ways to compete on local and national long distance rates. CLECs were also huge adopters of VoIP – since they competed mostly on price, they had to be.

3) Geeks

I still remember the programmable Pingtel SIP phones which cost $500 and looked oh-so-pretty. Now you can get feature-rich SIP phones from the likes of RingCentral for a fraction of that cost. My, how times have changed – but at least we got into the early part of Gordon Moore’s “chasm wave”.

4) Call Centers

Due to the sheer volume of calls they were making, call centers were amongst the first business verticals to really look into VoIP. Combined with this impetus was the tidal shift in that call centers were being moved to offshore making the need for efficient long distance termination a business necessity.

5) Gamers

XBOX Live users learned a long time ago the joy of trash-talking a complete stranger in a foreign country while playing Halo online. Oh come on, it’s only words. Besides, my excuse is that the 12 year old who consistently beats me plays Halo as a full-time job. I, meanwhile, have a blog to write.

Photo by emma*k

by John Sung Kim, founder of Five9

Many have speculated on the future of VoIP in so many ways. The reality is, there are actually 5 distinct and separate markets for voice over the net:

- Consumer Free VoIP
- Consumer Home VoIP
- Small Business VoIP
- Large Business VoIP
- Telco VoIP

This month we’ll cover the first category of consumer free. In 2004 I started a VC funded VoIP company, and back then we had to license a SIP stack ($70k) and SIP soft-phone clients ($10 each) to our endpoint customers. That was when asterisk and other open SIP stack software was still in its relative infancy and virtual phones as a free application was unthinkable.

Though it’s only been 5 years, there are dozens of VoIP companies (not just Skype) that offer free applications that allow voice over net communication without license fees – unless of course you call to a termination endpoint. What this means is that there are desktop applications for both Mac and PC (and now on smart-phones such as iPhones, BlackBerrys and Andriod phones) that leverage the web to call another client on the web. However, this is where “free” for the consumer ends.

If you call, even using a free VoIP service, another landline via the good old POTS (Plain Old Telephone System) going to the destination is likely owned by the regional (maybe gone national) telephone company. And they charge a “termination fee” to those other entities that call which can range from a tenth of a penny per minute to over 6 cents per minute in more rural areas where there is less competition.

That means when Skype charges 2 cents per minute to call any land-line in the country, they need to charge this to not only turn a profit, but they have to do so at a calculated risk assuming that most people and most calls will terminate in a major metropolitan area. Personal experience dealing with large telco bills tells me that if anyone calls a land-line in Alaska and all they have to pay is 2 cents per minute – someone is losing money.

Photo by inacentaurdump

How Pam saves her job on the hit show ‘The Office’ by not buying a VOIP phone system.

Punch-key PBXs (the traditional office phone system with those old RJ-11 phone jacks) have officially crossed over into comedic territory. I mean to say, most business people know now a VoIP-based phone system allows offices to be much more efficient, but a recent episode of The Office shows just how prevalent this notion has become. Seriously, what business wants to be technologically behind the made-up paper company Dunder-Mifflin?

The episode begins with a VoIP phone system salesperson soliciting Dunder-Mifflin. Pam soon realizes that the new phone system does 90% of her job and, given the uncertain economy, Pam starts lying to the salesperson in order to prevent him from getting a meeting with Michael (the politically incorrect boss).

When Pam has run out of every excuse she can think of, Jim (the practical joker) steps between Michael and the phone system salesperson and belts out a Fonzie-type “Aaaay!” For ridiculous reasons only understood by those that watch the eccentric (and oft ridiculous) antics of the office staff, others start repeating “Aaaay!” and the perplexed phone system salesperson leaves.

If it’s this obvious to a group of writers at NBC who probably rely less on their office phone systems than the rest of us – has VoIP “jumped the shark”?

A phrase coined on Happy Days, “jumping the shark,” has become a popular phrase to describe anything that has passed its peak. Obviously the majority of office phone systems are still old PSTN-based PBXs which require the telecom engineer to visit the premises or a user to read through a manual in order to make any MACs (moves, adds, changes).

So while the numbers suggest that most offices are still based on the copper wires of their telecom company, popular culture indicates that VoIP is not just here to stay, but a thing of comedy – that is, if you don’t have it.

>> Watch the video clip

Who invented the telephone is one of those questions that’s not easy to answer. There were actually lots of people working on the problem. Alexander Graham Bell may have been the first to actually get one to work, or he might not have been. What is clear is that he was the first guy to be awarded a patent, and that made all the difference.

The first telephones were simple things, and would only work between two points, just like those cans on a string you played with as a kid. You needed a telephone at both ends of your private line, and you let someone on the other end know you wanted to talk to them by whistling loudly. Later on, bells were added. However, if you didn’t have ready electricity to run your bells, you had to charge up the bells on the other side with a hand crank on your end. The idea of a network, linking many points through a central hub, wasn’t new with the telephone.The Western Union Telegraph Company had been using networks before the telephone came along.

However, it took time before the telephone moved from being a novelty to an expected and useful tool in every home. It was the simplicity of the device that led to its wide-spread adoption. To operate a telegraph, you had to know Morse code. While the code was sent across the wire, someone at the other end had to write out the dots and dashes before laboriously translating the signals into letters. By comparison, anyone who could hear and speak could use a telephone with the most minimal training.

As the telephone network was expanded, more and more folks could be added to the system. Early phones had batteries in them to power their signals, and these needed periodic replacement.Soon, however, the electric power grid was expanded and the phone network itself began to carry the current necessary to power the telephones. A compact telephone with dial, bells, circuits, and a single hand-held combination of receiver and speaker was released in the 1930s. This device would remain pretty much unchanged until the development of touch-tone phones thirty years later.

It wouldn’t be until 1983 that true hand-held mobile phones would reach the market. The first phones were big, clunky things, requiring the energy of a vehicle to power them, or a
large battery pack to be carried along with the phone. As both electronics and batteries got smaller, so did both the phones and their cost. Today’s phones are easily in the range of most consumers, fit in your pocket, and look more like a calculator from 1983 than an actual telephone of that era.

But phones are still changing as technology marches on. The latest revolution comes in the form of voice over IP, or VOIP as it’s commonly abbreviated. Transmitting voice over packet-switched networks allows you to make phone calls from anywhere you can get a ‘net connection and makes it easy to combine the traditional conversation of the telephone with other information technologies, like databases and video. Using VoIP with modern cellular mobile service allows people to take their digital lives with them, wherever they choose to go.

Photo Credits: Jan Joris Vereijken, smith, Paul Keleher, Alexander O Neill