This article was published in CAUSE/EFFECT journal, Volume 22 Number 2 1999. The copyright is shared by EDUCAUSE and the author. See for additional copyright information.

IP Telephony: The End of the World as We Know It?
by Scott V. Street

We are hearing more and more that traditional voice technology, in- cluding the standard PBX, is going the way of the telegraph key and the Pony Express: valuable and functional communications systems being replaced by new, bigger, better, cheaper technologies. Voice and data networks, once separate and distinct, are merging into a single network. The PBX is dead or dying, to be replaced by networked telephony servers. Computers are doubling as telephones. Management of this new technology environment is easier and more efficient, and these efficiencies translate into savings.
It�s the end of the world as we know it.

Further evidence of the revolution abounds. Telecommunications departments are now reporting to the same boss as their networking counterparts: the chief information officer. Telecommunications vendors are gearing their sales pitches in order to win the "IT-influenced decision." Some PBXs run on NT servers; some PBX nodes are connected over ATM backbones. And our old friend, the Internet protocol (IP), is being combined with telecommunications technology to form a dynamic new hybrid: IP telephony aka Voice over IP (VoIP). And best of all, thanks to IP telephony, phone calls are free! Wow!
Has your boss heard about this?

IP Telephony

For purposes of this article, we will refer to the above technologies generically as IP telephony, meaning voice systems that are computer-based and use the Internet protocol to ride on data networks. Traditional voice communication has long been digitally based, including phones, switching, signaling, and so forth; what we are discussing here is the newest applications of computer and network-based technologies for voice communications.

So once again, IT professionals are confronted with a familiar problem: how to separate the reality from the hype, that is, the next Navigator from the next Newton, the next Ethernet from the next Arcnet. Is the revolution for real or simply a figment of an overactive media hype machine? Is the PBX really dead?

More specifically, given that this new technology will indeed play a part in the next generation of telecommunications equipment and services, which components and systems should IT leaders buy now, which should be implemented later, and which will never pan out? What will be the impact of IP telephony on IT budgets? What will happen to services being offered to students, faculty, and staff? How will operations management, IT staffing, and the IT department organizational structure be affected?
And don�t forget the end users...

This viewpoint offers a perspective on these questions. It also examines ways in which IT professionals can understand the IP telephony "revolution" and its potential impact on their campus and their careers, and it will suggest strategies for dealing with both the technology and the hype in the near and long term.

What�s the Buzz? Convergence

IP telephony is a basic component of what is typically referred to by the industry as convergence. Convergence is the melding of voice, data, video, and multimedia technologies--formerly disparate entities--into a single, unified, digitally based technology. This new technology encompasses:

The obvious advantage of convergence is that instead of many things to buy, to install, to manage, to learn to use, and to pay for--cabling, connections, devices, tools--there is just one of each of these. Fewer moving parts means (theoretically) smoother operations, happier customers, easier management, and lower costs. And since the voice call is utilizing unused bandwidth on the data network, voice essentially "rides for free" on the existing network infrastructure.
Did we mention that long distance calls over the Internet are free?

The Death of the PBX

Compelling though these advantages may be, few industry pundits are unequivocally predicting the death of the PBX. There are many reasons for this unwillingness to jump completely on the "PBX is dead" bandwagon: for one thing, there is currently a very large, relatively satisfied PBX customer base holding substantial investments in equipment, infrastructure, and management. Managers who are happy with a sound, reliable technology investment are unlikely to jump at the chance to adopt the latest and greatest.

From a technical point of view, PBX technology is not so much being replaced as it is evolving into a leaner, more flexible, open system that can live on the data network. It is a transformation much like that of the mainframe computer of the 80s.

Remember the Main[frame]!

Prior to the advent of the PC, mainframes were the way that computing was done on campus (and everywhere else). Mainframe computers were big and centralized, utilizing proprietary operating systems and networks. They were mission-specific, hardwired, and inflexible. They were stand-alone systems accessed only via dumb terminals. They were very complex, monolithic, and expensive.

If you are familiar with the architecture and role of the basic PBX, these characteristics should sound familiar. Like its "big iron" cousin, the traditional telephone system is proprietary, centralized, living on its own network, complex, monolithic, and expensive to own and operate. It is also single-purpose, unintegrated with other systems, and inflexible.

PCs arrived big time in the mid-80s and have changed the computing paradigm from mainframe/dumb terminal to networked client/server. Yet rather than suffering the death so often predicted, these large mainframe systems have evolved into good corporate citizens: they now live on the data network; they share data electronically with other systems; they are based on open, standards-based principles; and instead of a monolithic architecture, they are now scalable and designed so that smaller, distributed boxes can be coupled together.

Like the mainframe, the PBX is moving into the networked, open systems world. The PBX can now share the same cable infrastructure, databases, operating system, and client/server architecture, and even connections to the off-campus world, that are utilized by the data network. What was once complex to manage is now done with a mouse click (more or less). What was centralized is increasingly being distributed across campus. What was unwieldy is now flexible. In short, the PBX, like the mainframe, is not sunk.
Not death by revolution. Adaptation through evolution.

Time to Make the Move to Digital Telephony?

The question remains when (and whether) to implement IP telephony in some form or other. It is all well and good to argue that standard voice technology is and will remain viable for the foreseeable future. But your customers (and your boss!) are seeing articles and ads touting free Internet long distance calls, and they may soon demand to know what you are doing about it, if they haven�t already done so. We like to refer to this phenomenon as "the peril of the in-flight magazine."
One wag calls it reading-edge technology.

IT decision makers are often faced with this kind of problem, and the criteria used to decide on implementing IP telephony are the same as those used for any technology decision. In our opinion, there are four major factors that drive the move to a new technology. These factors are (1) economics, (2) changing functional and/or technical requirements, (3) improved manageability, and (4) hype.

To make a successful and, equally important, a justifiable technology change, you need economics and at least one other factor in support of the change (and hype doesn�t count). Our equation for a solid decision for technology is thus: Economics + (Requirements and/or Manageability) � Hype = Successful Technology Decision. Here is a look at the pros and cons for IP telephony for each of these factors.

Change Factors: Economics

A move to a new technology like IP telephony must be financially advantageous to the institution and/or your customers. An argument that a new system is full of whiz-bang technology and makes your job easier typically will not convince the powers-that-be that they should buy it unless there is also some financial benefit for the institution (or it is at least a break-even proposition). In the case of IP telephony, there are several economic factors to consider: (1) saving on long distance calling (free calls!), (2) utilizing one network instead of two, and (3) the technology life cycle.

Free Calls

First, about those free calls. Yes, sending calls over the Internet avoids the cost of long distance access fees, accounting rates, and settlement rates. Right now, the cost of a typical long distance telephone call is driven not so much by the actual cost to carry the call, but by charges levied by and on long distance providers and by what the market will bear. Internet-carried calls do not have to pay these charges--yet. However, according to Brett Azuma of Dataquest, "By 2002, access charges on traditional and Internet calls will even out at 2 cents per minute. These additional charges will remove Internet telephony�s most important source of cost and price advantage versus traditional services."1

In other words, the arbitrage advantages of IP versus traditional calls is going away. When you couple this prediction with the ever-falling long distance rates, this conclusion is not surprising. For residential customers, 10 cents per minute any time, any place, any way is becoming the standard, and a typical college or university pays considerably less. So although IP calls are cheap, their cost is likely to rise while the cost of traditional calls is falling.
No long-term economic advantage here.

One Network

Now take a look at the savings factor resulting from the use of one network instead of two. Lucent Technologies has put it this way: "IP Exchange Systems are the next step in the evolution of communications. By making it easier for businesses to manage sophisticated voice and data communications over one network, the IP Exchange Systems deliver on Lucent�s promise to help customers reduce the cost and complexity of their networks while giving them the flexibility and power of an open systems platform" [italics added].2 It is interesting to note that while all of the big telecom players are making similar claims, most are shying away from touting the arbitrage cost advantages discussed above as a reason to change.

There is no question that data networks frequently have considerable unused capacity. According to an article in USA Today, it took six fibers to broadcast a single football game in 1985; today, one fiber can transmit the equivalent of 700 football games simultaneously, a 4,200-fold increase.3 Voice calls require very little bandwidth, especially at 10:1 compression ratios (projected to reach 30:1). If these calls are sent out over the unused bandwidth, then voice rides for free. Coupled with the notion that managing one network is easier and more efficient than managing two (and thus cheaper), you have the crux of the value proposition that Lucent and others are setting forth.

This is a strong argument, but it is perhaps not as strong as it might appear. The fact is that institutions typically already own a voice infrastructure, so moving from it to the data side doesn�t really save anything. In addition, implementing IP telephony requires a significant investment in new equipment (telephony servers, end user devices/software, sometimes cabling, switches, routers, and so forth), not to mention the training, support, documentation, and shakedown costs associated with any new technology. There are also the less obvious costs associated with staff and department reorganization, frustrated new users, and the general upheaval of the institution�s culture to be factored in. Besides, we already have plans for that unused bandwidth--video conferencing, distance education, collaborative computing, and so forth. So nothing�s for nothing.

Technology Life Cycle: Bang for the Buck

The growth and development of any new technology follows a predictable life cycle, and understanding how far in the cycle a given technology like IP telephony has come is the best way to maximize technology investments (and minimize mistakes and headaches).

Technology begins in the research and development (R&D) phase, where the cost of the technology is high while the perceived value to the buyer is low. People who buy technology in the R&D phase tend to be die-hard technologists.

Assuming it survives the first stage, the technology moves into a phase referred to as the specialty system phase, where the cost of the technology is still relatively high, but the value to the buyer, frequently referred to as an early adopter, is now also seen as high.

Next comes the commodity phase, with the cost having fallen but the value remains high. This is the phase where most people decide to buy.

Eventually the technology enters the obsolete phase, where both the cost and the value for the buyer are low and getting lower. Only the technologically unsophisticated buy during this phase, which doubtless excludes all of our clients and anyone who has read this far.

Clearly, the best time to gain the most bang for the buck is at the end of the specialty phase and into the commodity phase.
High value, low cost is good.

Where IP telephony lies on the life cycle curve is debatable. Peter Alexander of Cisco Systems, a major player in the IP telephony market, believes the industry to have made significant progress, saying: "Customers view VoIP acceptance as inevitable, and the market has already begun moving from the early adopters to the first phase of wide-scale deployment.4

We think this is a bit optimistic. We see the industry in the early specialty system phase, moving out of the R&D phase; therefore it is too early to buy from a value standpoint (but maybe not by much). It probably goes without saying that it is generally not prudent to be an early adopter of anything that is replacing something as familiar and reliable as the telephone.

Economics: The Bottom Line

In its coverage of the PBX 2000 conference, Business Communications Review stated, "The economics of the new alternatives has yet to be proved." Further, Dr. Lee McKnight of MIT stated in no uncertain terms that "the business case for this hot technology is not ready for prime time."5 We believe that these conclusions, published more than a year ago, remain apt. The economic benefits may be realized over the next five years, but not yet.

Change Factors: Functional/Technical Requirements

The need and/or desire for new and improved functionality is another factor that drives the acquisition of any new technology. Several technical advantages of IP telephony are frequently cited by its proponents, including:

New features and functions. With so much data flowing electronically, particularly on the Internet, it makes sense to integrate telephone calls with other electronic media. For example, prospective students examining a college�s Web site can immediately be connected via telephone to an admissions counselor with the click of a mouse; ACD (automated call distribution) centers can route calls and service callers by integrating automatic number identification data with the company database; voice mail, e-mail, and fax messages can be all be available from any phone or computer.

Open systems architecture. Data professionals are very familiar with the concept and benefits of open systems architecture. According to Lucent Technologies, open systems designs provide improved "flexibility and power," thus freeing businesses "from dependency on single-vendor, proprietary equipment and software, enabling them to choose the data, telephony, and CTI applications and devices that best meet their needs."6

Growth capacity. Digital telephony systems are designed to be readily scalable, allowing for easy, cost-effective growth on an as-needed basis. Need more ports? Drop in a card. Need more bandwidth? Dedicate a 100-MB pipe. And so on.

Programming and management. Digital telephony takes advantage of the latest programming languages, including C and Java, along with application programming interface (API) techniques. This enables an institution to take advantage of its existing programming expertise to develop new custom applications rather than being dependent on a single vendor�s products. It also improves and simplifies manageability, as discussed below.

And Now, the Rest of the Story

While there are some legitimate functional and technical advantages provided by IP telephony, there remain some serious technical problems as well. Latency and reliability are the most often cited problems, and other major hurdles also must be overcome.


The latency problem will sound familiar to data network managers. Briefly stated, it takes time to digitize a telephone signal, compress it, packetize it for data network transmission, transmit it through any number of on- and off-campus switches and routers, and buffer it at the far end to make sure all the packets arrive before transmitting it to the end user. At the far end, it takes more time to un-packetize, decompress, and turn it back into a phone signal. This process (minus the digitization and compression/decompression) is typical of all network transmissions. For typical data transmissions, latency isn�t a major problem. But for phone calls, latency causes the annoying delay between when a word is spoken and when it is heard, much as it was in the early days of long distance calling. Callers end up talking over the top of each other in a manner that is disruptive and not tolerated in a typical business environment.

Table 1 illustrates the latency problem. The threshold of delay that is not noticeable to the human ear is considered to be 100 milliseconds, and a traditional toll call meets this standard. Even assuming that all of the above latency factors are and will be dramatically reduced, VoIP quality is not likely to reach toll quality any time soon, especially if the notoriously fickle Internet is part of the equation.

Table 1


Perhaps more significant than latency is the reliability problem. Everyone�s experience of the telephone is that, when you pick up the receiver, you get dial tone almost 100 percent of the time. In fact, the actual percentage of telephone service availability is 99.999 percent, the famous "five nines" of reliability. That averages out to five minutes of downtime per year; any more than that is considered unacceptable.

Data networks, on the other hand, are nowhere near as reliable. Due to complexity caused by multiple protocols, vendors, service providers, operating systems, network management systems, and so forth, it is virtually impossible for data networks to reach the reliability bar set by the telecommunications industry. Table 2 indicates the average availability of various networks.

Table 2

The best private data networks are available about 94 percent of the time, on average, meaning a user can be without the digital equivalent of dial tone about 22 days per year. Compared to 5 minutes, 1 day per year sounds like a lot; 22 days down sounds well beyond reason. And we haven�t even mentioned the public Internet. It simply isn�t good enough today, and it will be a long time before the Internet can handle business-grade VoIP traffic, if ever.

There are some who feel that toll call reliability is at least possible on the data side. Jason M. Beckett, director of sales and marketing for Samsung Telecommunications of America, states, "One-hundred per cent uptime can be achieved in the computer side of the industry, but [you knew there was a "but" coming, didn�t you?] not at a price most end users are willing to pay. The argument that the PBX is dead and all voice will be LAN-based will never be accepted by the customer."7

While Mr. Beckett may be speaking from a telecommunications marketer�s perspective, we believe he has struck the right note: sure, a fully reliable data network can be built in theory, but it probably won�t be because the cost is beyond what buyers are willing to pay.

Other Technical Difficulties

Though latency and reliability are the most significant challenges, there are many other technical difficulties confronting IP telephony adopters. These include:

Multiple routes, unpredictable contention. You never know exactly how a data transmission will travel to its destination; in fact, it will likely take multiple routes, making it difficult to manage and maintain a consistent, high level of quality. Unlike the circuit-switched telephone network, data networks are highly vulnerable to slow-downs during peak usage times, as any Web surfer or AOL customer can attest.

Full redundancy. Data networks are seldom designed with the degree of fail-safe redundancy familiar to telecommunications managers. We recently saw a plan for a so-called fully redundant ATM network that was designed to support remote PBX nodes. The PBX utilized fully redundant fiber routes, PBX backplanes, cards, trunking, and so forth. However, it also utilized the campus ATM switch which had but one power supply. So much for full redundancy. It can be achieved, but at a high price.

Standards. Because it is still in its infancy, there are few standards governing how all the new technology works together. Even systems based on open architecture need to be able to communicate across vendor platforms; calls placed from IP devices need to be able to reach plain old telephones and vice versa; data security standards (for example, encryption) need to be adopted as do Quality of Service standards; and so forth. These standards are being established but are not there yet.

Signaling. IP telephony mirrors the old-fashioned sequential call setup that was used before the development of Signaling System 7 (SS7). Call setup can take more than three seconds to connect a call (SS7 takes less than one second), and it does not provide look-ahead routing and other standard SS7 features.

Desktop devices. What goes on your desktop? Does your computer become a telephone, or does your telephone become an IP/Ethernet device? Where do you buy it? What software are you running? Is it a Mac or a PC? You get the idea.

Perhaps the most telling question about the reliability of IP telephony can be stated with chilling simplicity:
When was the last time you had to reboot your telephone?

Functional/Technical Requirements: The Bottom Line

There are indeed some possible technical and functional advantages offered by IP telephony, but the technical problems are currently unsolved and are likely to remain so. Traditional telecommunications work so well and so reliably that it begs the question: Why change now?

Change Factors: Improved Manageability

The management advantages of IP telephony should now be apparent. In particular, there is now a single network to manage instead of two. From an organizational perspective, this can lead to a single, unified, streamlined IT department that handles all service and support for all things electronic.

Management Realities

Obviously, organizational changes, especially those involving "streamlining" operations and personnel, can be very difficult to implement and manage successfully, even when such changes are a really good idea. All kinds of political, budgetary, personnel, and personality issues can get mixed in, leaving aside the technical training and support issues.

There are other management issues to consider as well. For example, IP telephony is not currently regulated by the FCC, hence the lack of access charges and other federal fees. However, IP telephony is under FCC scrutiny as was mentioned earlier. It is quite likely that the regulatory landscape will change dramatically over the next several years and could well change what today is a good idea into a bad (or at least nonprofitable) idea tomorrow. In a related issue, some institutions have contracts with long distance providers that preclude providing any support for competing telecommunications alternatives; such schools are obligated to send all their long distance minutes over the provider�s network. IP telephony could be in legal conflict with such provisions.

Then there is the question of how to provide and pay for student services. Student long distance calling has long been a cash cow that produces "revenues" which fund various telecommunications and other projects. If calls are sent over the data network, how does the institution recoup this revenue? Remember, we are talking about several hundred dollars per residential student per year in revenue! If schools do attempt to recapture this income, how do they bill for it? The typical cost-per-minute model doesn�t lend itself well to data communications.

Improved Manageability: The Bottom Line

Theoretically, managing one network is easier than managing two, and integrated systems and databases are easier to manage than dis-integrated systems and databases. Theoretically. However, convergence will also create a new set of management problems to deal with. In the end, convergence will ease some management issues, exacerbate others, and eliminate none.

Change Factors: Hype

As we stated earlier, the essential dilemma for the IT professional concerned with IP telephony is separating the hype from the reality. The hype is deep and getting deeper. A classic example of VoIP hype was stated last year in Business Communication Review.8 This august publication proclaimed, "1998 is beginning to look like the year that �packet voice� could finally make it big." So far, so good. However, BCR goes on to ask the question, "Is the quality acceptable for business use?" "Yes," we are assured, "most of the time, under normal network conditions." And then, sounding a bit Clinton-esque, the following is added, "Of course, this depends to a considerable degree on your definition of �acceptable.�"

Without belaboring the point, let�s just say that the phrases "most of the time" and "under normal network conditions" should be red flags to network managers and telephone users everywhere. And when it comes to placing a phone call, "acceptable" means only one thing: you pick up the receiver, get dial tone, and complete the call successfully, every time.

Hype: The Bottom Line

Industry trade journals and vendors� glossy brochures are rife with sentiments similar to the one above although most leave the negative parts out. When it comes to IP telephony, it is clear that the marketeers are overhanging the market, which, after all, is what they are paid to do. Despite what is being said and written, it will be several more years before IP telephony "finally makes it big," if it ever does.


Table 3 summarizes our perspective on whether it is time for IT professionals to make the move to IP telephony, based on the factors discussed in this article. Bearing in mind that according to our equation a successful technology decision depends on a combination of favorable economics plus improved functionality and/or manageability, things don�t add up.

Table 3

In the meantime, IT planners and managers can invoke familiar strategies to deal with the usual uncertainties they face while waiting for technology revolutions to arrive. These strategies include:

In summary, we believe that traditional PBX technology is proven, reliable, evolving, and here to stay. IP telephony is still unproven and unlikely to overtake traditional telecommunications technology for the foreseeable future.
The end of the world as we know it? Not quite yet.


1 Lenore V. Tracey, "Voice over IP: Analyzing the Analysts," Telecommunications Online, September 1998. []

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2 Lucent Technologies press release, "Lucent Technologies unveils next-generation IP business systems that converge voice and data over local and wide area networks," dated October 21, 1998.

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3 Kevin Maney, "The Next Big Bang," USA Today, October 8, 1998, 1B.

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4 Paul Korzeniowski, "VoIP Gateways Slowly Taking Hold," Business Communications Review Voice 2000 Supplement, April 1999, 7.

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5 Fred Knight, "Mood and Attitude Changes at PBX 2000," Business Communications Review, February 1998, 3.

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6 Lucent Technologies press release.

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7 "Interview on the Run," ZD Net Advertising Supplement, October 1998. []

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8 Edwin E. Mier, Robert J. Smithers Jr., and Thomas R. Scavo, "Voice over IP Gateways: Sounding Good," Business Communications Review, February 1998, 23-34.

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Scott V. Street ([email protected]) is a senior consultant with Compass Consulting International, Inc. the table of contents