The Best days of Voice-over-IP Telephone Service May Already Have Passed

These are heady days for Voice-over-IP (VoIP) phone services. From Vonage to Packet8 to Skype and a hundred more besides, several million people around the world are enjoying really cheap phone calls that are carried primarily over the Internet. But that fun may be diminishing soon because the big Internet service providers, which is to say the big telephone and cable TV companies, are about to start taking back that third-party VoIP traffic, leaving Vonage and the others at a distinct disadvantage.

It has always rankled the telephone companies, especially, to be carrying over their Internet backbones the seeds of their own telephonic destruction. Protected from both regulation and most regulatory fees, VoIP phone service providers have been able to easily undercut the long-distance prices of the Regional Bell Operating Companies and still make good profits. The phone companies — always slow to react — did not pay much attention at first to these outfits they collectively refer to as “parasites,” but now, with several million lost customers, they are paying VERY close attention indeed.

The other big broadband Internet provider is typically your local cable TV company. Not sharing the values of phone companies, they ignored VoIP, too, until they realized that it could become a new source of revenue. With so many things available for free on the net, finding a service people are willing to actually pay for is thrilling to companies like Comcast. Now they just want to make sure that the VoIP service you use is THEIR VoIP service.

The trick for phone companies and cable companies alike is to hurt the VoIP upstarts without incurring the wrath of Congress, the FCC, or any other regulator. They have to be sneaky.

Here’s how they plan to cripple the Vonages and Skype’s, according to friends of mine who have spent 20+ years in engineering positions at telephone companies, cable companies and internet service providers. As the phone and cable companies begin offering their own VoIP services in real volume, they plan to “tag” their own VoIP packets so that at least within their own networks, their VoIP service will have COS (Class of Service) assignments with their routers, switches, etc. They also plan on implementing distinct Virtual Local Area Networks (VLANs) for the tagged packets.

Tagged packets get both less restrictive rules for passage and a private highway lane to drive on.

The net effect is that any packet that isn’t tagged will only get “best effort” service, which means whatever is left.

“Best effort,” as defined by IETF RFC 791, makes almost no guarantees. The packet may arrive damaged, it may be out of order (compared to other packets sent between the same hosts), it may be duplicated, or it may be dropped entirely. And that was in the good old days.

Now imagine “best effort” transport on a backbone that is already clogged with tagged traffic that gets preferential treatment. Where previously all packets got “best effort,” in this new system some packets get better than best effort, which means the remaining packets will effectively get worse than best effort.

The telco and cable guys know enough about their networks that they can throttle their network capacities up and down so that “best effort” service is going to be pretty awful. But have the magic tags on your packets and you’ll have decent service.

The beauty of this approach is that they’re NOT explicitly doing anything to the 3rd party service applications. They’re just identifying and tagging their own services, which is within their rights.

VoIP providers have been claiming that some ISPs (specifically rural telcos) have been keeping out their competing phone service. That is probably against any number of laws and rules, but this new technique is not. Doing something to make your own VoIP service better isn’t illegal, even if it effectively makes every other VoIP service worse over the same network.

This is the beginning of a web services war where the advantage lies almost entirely with the broadband service provider. It starts with VoIP but I am sure will move on to movies and music, too. The incumbent suddenly has a real, unassailable advantage. If Vonage (or CinemaNow or even Bit Torrent) wants to play along, that’s fine, but they’ll see most of their profits going to Comcast.

What’s sad about this for me is that I fear it will lead to an end (or certainly a slowing-down) of innovation in VoIP and similar services. The telcos and cable companies will offer generic VoIP service and only change it if some startup comes along offering better features.

I’m not sure there is much that can be done about this impending counter-reformation, either. Of course, telephone and cable companies in the U.S. tend to be regulated monopolies, so it probably will be possible to lobby politically against these big boys, but I doubt that will do much good.

It would be better, I think, for the pure VoIP companies to be lighter on their technical feet, and so bring new services to market faster than the telcos and cable companies can even react.

One example of such an innovative service that’s probably beyond your local phone company’s capability of even imagining is theswitchboard.ca, which you’ll find among this week’s links. Started by a pair of programmers in the UK and Canada, the Switchboard is an incredibly clever idea — a VoIP applet.

Here’s how it works. There is no application to install. Just go to the website and sign up for a free account, or even sign up for free accounts for your friends, then send them the sign-on URL. You sign-on, they sign-on, applets are downloaded and suddenly — if your PC supports Java and you own a headset — you are talking to your buddy.

Think about it. Theswitchboard.ca gets around most corporate software installation restrictions and establishes a virtual voice circuit to your girlfriend in Bulgaria so you can listen to each other’s heavy breathing. And through some UDP sleight-of-hand, it gets through most firewalls as well. The service not only offers free VoIP phone service, it has free voicemail as well.

I can see a ton of uses for this service, from voice-enabling product- or customer-support to voice-enabling games that aren’t already so enabled, to potentially even offering a link into the REAL phone system through a participating VoIP vendor.

Imagine what a Vonage could do with this, for example. Vonage presently offers fixed VoIP services through the use of analog terminal adapters and semi-mobile service through the use of softphone applications, but theswitchboard.ca offers the additional metaphor of a pay or public phone. Go up to any computer anywhere and make or receive a call or check your voicemail without having to install ANYTHING. For a Vonage, it could replace the softphone entirely or offer a way for prospective users to test the service without having to install hardware or software.

Yeah, but how do they make money? Well, they don’t have to make a lot, given that the actual connections are peer-to-peer and make little direct use of theswitchboard.ca’s bandwidth. But there are some obvious profit possibilities like adding audio ads to voicemail messages. Before you can retrieve your free voicemail message, please listen to this Volkswagen commercial. And we’d do it, too.

Broadband Internet service has popularized the idea of continuous operation, as in continuous communication. When I was young and UseNet communication was the norm, you’d pop on the network for a moment or two, do your work then get off. But today, machines listen continuously for the silliest of things, the bad guys are striving 24/7 to steal your machine, and VoIP has gone from being the replacement for a three-minute long-distance call to a virtual audio presence where people effectively hang out together even if they aren’t on the same continent.

Your grandmother wouldn’t understand. Or she might if she’s Bulgarian.

PBS.org