If you use services such as Skype, you’ll already know about Voice over Internet Protocol (VoIP). This is what makes your video calls with loved ones possible, and – not least with the advent of the NBN – is the future of communication.
Why? Okay, let’s see.
VoIP facilitates telephone conversations carried by internet-style networks, otherwise known as packet-switched networks. These networks move data in small blocks, known as packets, based on the internet address (or IP address) of the destination. On the other hand, traditional telephones use a circuit-switched network which requires a dedicated point-to-point connection between callers.
We’re not gonna sit in silence
Simply put, VoIP is more efficient than a traditional telephone system. It all boils down to how the telephony industry allocates resources to its users, and how it bills for them.
We only use communications services for a small fraction of our time, and this allows the industry to work on the concept of Grade of Service (GoS). This hinges on the statistical likelihood that the resources we need to make a call, search for a webpage etcetera will be available at the time we need them.
The better the GoS, the lower that likelihood that the resources will not be available. And also, the better the GoS, the more equipment a network operator has to install and maintain, and so the more expensive the service.
VoIP is far cheaper because it uses computing power to dramatically reduce the resources required to carry telephone calls, and hence reduces the pressure on GoS. For example, having signed up with some VoIP service providers, calls to major overseas destinations, such as the US, are free.
We’re all someone’s daughter; we’re all someone’s son
Imagine you are on the phone. You speak for roughly half the time; your friend speaks for the other half. Roughly half your portion of speech comprises silent gaps between words. If you’re using a telephone line, at best your utilisation is only 25%.
Now, imagine you’re able to split your speech into tiny chunks, pass these chunks through the network and reassemble them at the other end. These chunks can be aggregated into large streams of data, with close to 100% utilisation, making far better use of the resources.
This is how VoIP works: it samples your speech extremely quickly, assembles those samples into chunks, transports these chunks in IP packets through an internet style network, un-chunks them at the receiver, and re-assembles them into your speech. It uses the computing power of your smartphone or computer to do this.
In addition to this (considerable) saving, two other factors come into play:
1) The cost and management of internet-type networks is dramatically simpler and cheaper than telephone networks. Enormous speed and capacity increases of the fibre infrastructure, which underpins all modern networks, means that “transport” costs are now a fraction of what they were 30 years ago. This has led to what the industry calls “death of distance”.
2) You do not have to be a telco such as Telstra to offer voice services. This effectively revolutionises the industry by paving the way for greatly reduced billing and administrative costs.
This explains why VoIP services are so cheap that they seem to be almost free.
In Australia, the NBN will essentially spell the end of traditional copper based telephone services. All telephony will be carried by packet-based systems. This is in fact already true for the millions of us who use 3G mobile systems.
Companies such as Skype (which was recently acquired by Microsoft) and Google have started to flood the market with VoIP-based services. Most integrate seamlessly with current telephone systems. Other companies such as Pennytel are offering VoIP services that emulate traditional telephone services.
The challenge for companies such as Telstra and Optus is how to compete on equal terms with Skype and Google, while not compromising their revenue streams.
We’ve all seen recent (and dramatic) examples of market gouging, such as international roaming charges, as the telcos seek to shore up their businesses.
Structural separation of the major telcos into retail and wholesale entities is the route being taken in Australia, driven by the NBN.
The future will see more and more of us owning VoIP-enabled smartphones, with a single contact number that will seamlessly roam from mobile networks to Wi-Fi or other networks.
We gotta make ends meet, before we get much older
There will come a time when we will no longer even think of somebody having something as archaic as a phone number. We will be billed a flat rate that will be more of an access fee than a usage fee. It will not matter who we are calling, anywhere in the world. The price will be the same.
I am reminded of the story of the Elders of the city of Port Elizabeth, who were approached in the 1880s for financial support to install a telephone system.
They refused, saying that they could not imagine anybody wanting this newfangled intrusive device in their homes. And, what possible use could it have anyway?
Sounds a bit like what some of us have been saying about the NBN.
What are your views on the VoIP revolution? And the NBN? And John Farnham? Leave your comments below.