SIP Is Hip, Say VOIP Promoters

Traditional service providers beware. After years of predictions that voice over IP (VOIP) would soon render conventional phone networks obsolete, a new(ish) protocol may finally be making the technology simple and user-friendly enough to catch on.

Session Initiation Protocol, or SIP, is a signaling protocol for establishing real-time calls and conferences over the Internet. Although the protocol isn’t exactly new -- it’s been around since the late 1990s -- many industry observers say that it is quickly evolving to take the place of the more established H.323 protocol.

“The signaling technology has taken rather dramatic moves recently, and most are coalescing over the SIP standard,” says the chief scientist at AT&T Corp. (NYSE: T), Dave Belanger. “We are now working on the signaling technology for VOIP, so that not only can you get the services that you typically associate with voice, but you can get services that you associated with voice and data.”

“SIP is to communications what http is to the Web,” says Jeff Pulver, president and CEO of Pulver.com, and the co-founder of Free World Dialup (FWD), which offers free IP telephony to anyone who has an IP phone. “With SIP, it’s a lot less complicated to make a phone call, it takes less CPU processing power… and there are no royalties.”

(Check out Light Readers' views on SIP and FWD at: Free World Dialup - Try out Broadband SIP Telephony.)Of course, not everyone agrees that SIP is all that it’s been made out to be. “So many people are looking at [SIP] to use it for so many things that it’s slowing down the standardization process,” says Paul Jones, part of the duo that runs the Packetizer Website that offers information about packet-switched conversational protocols. “Even though they intended to start with something simple, they’ve built something fairly complex.”

While SIP may be more flexible and more extensive than H.323, Jones says the protocol lacks some basic capabilities like a standard way of sending DTMF digits, which is what you do when you choose number options on your touch-tone phone. “Unless they resolve the issues,” he says, “SIP’s not going to make a lot of progress… I would expect that we’re going to see a migration towards SIP, but SIP and H.323 may coexist for a long time.”

No matter what protocol people use, more and more consumers and businesses are opting to abandon their plain old telephone service, or POTS, and jump on the VOIP bandwagon. While only about 10 percent of global telephony today goes over IP, according to TeleGeography Inc., that number is likely to grow steadily over coming years.

That could have a tremendous impact on the traditional voice providers, which have invested billions of dollars in their PSTN networks.

Although all of the large carriers are at least examining the possibility of offering VOIP services themselves, they are likely to hold back for fear of eroding their traditional revenue stream. “I think it’s something that incumbent operators should be scared of,” says James Enck, an analyst with Daiwa Securities Trust Co., Europe, noting that, although it might be easy to ignore now, the number of users could grow quickly. “Five years down the road, this thing could jump up and bite them in the behind.”

Up until recently, traditional service providers didn’t have much to worry about. The only people willing to make the leap of faith into IP telephony were technophiles and consumers looking for cheap international rates. While VOIP can save consumers a lot of money, the complexity of the technology as well as the questionable quality and reliability of the service have dissuaded many from leaving POTS in the past.

Today, however, providers of VOIP claim that the audio quality on their lines is as good as, if not better than, that of a traditional phone line. “The voice quality is nothing short of amazing,” Pulver says. “The sex industry hasn’t found us yet, but trust me, phone sex never sounded better.”

Some disadvantages remain, however. Pulver’s FWD service may be free (after you buy the IP-enabled end-devices), but calls can only go between people who use the service. Today, there are about 5,000 people on the FWD network, but Pulver says he hopes to have as many as 50,000 by the end of September. “It’s like the first email addresses,” he says, pointing out that at first very few people used email and now nearly everyone does.

But no matter how low the price, or how good the sound quality is, many people still balk at the thought of having to make all of their calls over special, IP-enabled equipment. Several VOIP service providers have therefore started offering voice services that can be accessed from a regular phone, since they jump to a PSTN line for the last leg of the trip.

One of those providers is Vonage Holdings Corp., which, since it launched its services last April, has bagged more than 7,000 customers and completed more than 5 million calls. “People can simply use their home phone,” Vonage spokeswoman Brooke Schultz says. “They plug in and don’t even know that they’re talking over the Internet... It’s cheap phone service with a lot of cool features that you can’t get from your traditional phone company.”

Vonage’s service isn’t free like FWD, however. The company charges a $25 setup fee and then a flat $40 fee for all local and national long-distance calls.

“Voice over IP is happening, but it’s happening in a variety of different ways,” says Frost & Sullivan analyst Elka Popova. “It’s an underlying technology. It has various manifestations… SIP does give some additional leverage… Once you have a SIP end device you can offer a larger variety of services.”

— Eugénie Larson, Reporter, Light Reading