Consider This . . .Voice over Internet Protocol (VoIP)

By Jimmy R. Hammond, CPA

If you haven't heard about "Voice over Internet Protocol" telephony services, or "VoIP," then this is a good place to get the basics. Generally speaking, VoIP includes sophisticated calling features using your computer with headset, handset or a gateway interface in a business environment to make unlimited calls or data transmissions to any digital device anywhere in the world. Services could include standard telephone usage, video transmissions, faxing, conferencing, call forwarding, messaging, call waiting and remote data access through any Internet portal.

According to a white-paper group headed by Balz Wyss, Ph.D., and published by the Microsoft Corporation in June 2003, VoIP has been greatly enhanced by the introduction of the broadband service explosion. Microsoft expects broadband subscriptions to rise from 52.7 million in 2003 to nearly 84 million by 2005, an increase of 59 percent.

Intel took a slightly different tack indicating that there are 4.9 billion persons worldwide with access to a telephone and more than 800 million worldwide with access to a computer through 2004. These numbers are also expected to dramatically rise in 2005 and beyond. Microsoft noted that the broadband phenomenon will occur primarily in the cable and DSL subscription area, enhanced further by the smart gateway devices and Internet services now available as a result of broadband introduction to the masses.

The Microsoft report went on to say that broadband subscriptions in the U.S. have caused extraordinary growth in small business and home-based Local Area Networks, or LANs. Industry leaders believe LANs will increase to 23.5 million, or 83 percent of the multiple-computer households, by 2005.

A solid piece of real evidence comes from Comcast, our local Internet and cable provider. As of this writing, Comcast is now offering to set up a home-based LAN for up to five home-based machines using the standard cable connection that already delivers digital television service---for only the cost of the installation. This is truly a sign of the times.

Internet technology has caused the tables to turn. The communications and data lines are blurred, according to the following quote from Intel: "The Internet was developed as an information medium but is rapidly becoming a communications medium. The telephone was designed as a communications medium but is being transformed into an information medium with the emergence of portals. In a digital world, communications and information are converging into a stream of digits that can be readily accessed by a multitude of devices, when and where people want."

This brings me back to VoIP. Why now? Intel reports that deregulation of the telecommunications industry and a new class of competitive service providers are creating the VoIP market. These providers can support advanced telephone applications with minimal investment. The capacity for this business niche market is further enhanced by the efficiency of the Internet Protocol over standard circuit networks. Unlike voice circuits, which transmit data at 64 Kbs, the VoIP telephone transmits in data packets at 6 to 8 Kbs and sometimes as little as 2Kbs. With an eight-times-the-bandwidth advantage over conventional circuit-based systems, we are truly wired for speed.

Not many years ago, VoIP had just a few companies around, like www.dialpad.com and www.net2phone.com, that provided call-making service from your PC to conventional-based circuits for free. Quality was also an issue in the early going.

Now, service providers are eager to be in the market. As a result, hundreds can be found, and most charge something per minute although substantially less than conventional communications companies.

A great resource to find the right VoIP provider for you is www.business.com/directory/telecommunications/ip_telephone. At this location you will be instantly linked to more sites than you will ever have time to visit. I would recommend you visit several companies' sites before making your selection. At www.packet8.net and www.pc-telephone.com you can truly see a representative sample of services offered by VoIP providers to the residential as well as business client. Using your broadband connection and with minimal additional equipment, if any, for a residential connection to more sophisticated gateways in an office, you could soon be calling anywhere in the United States, Canada or internationally for as little as 2 cents a minute.

In larger commercial applications it is possible to create a gateway for your data and communications needs that will provide rates of return that can be fast and profitable. Recently, Anne Arundel Community College offered an adult education class to learn more about the business side of VoIP and data integration.

The good news and bad news is that current legislation allows communication in this manner to be considered data transmission rather than voice communications. The result is that you could save hundreds or thousands of dollars a year in a business system, and the federal and state excise taxes don't apply. If you have followed the history of legislation in this area, you know that politicians are eager to bring this to an end. It's another reason to look at VoIP now. Call me on the net!

If you have comments or suggestions or have an idea for a future computer or business topic, e-mail me at Jimmy@InsideAnnapolis.com.