Legacy networks that support only analog services like telephone and television are giving way to ones that support the digital convergence of data, voice, audio, and video. And because service providers realize that the future is a single broadband pipe for all of these services, competition is fierce for control of that pipe, and political lobbying is intense.

Incumbent phone companies have been partnering with satellite providers to complete a “triple play” service bundle of voice, high-speed data, and video services. And Cable MSOs are responding with phone services over coaxial cables, often in conjunction with their own alliances for adding long distance calling, directory assistance, and enhanced 911 support.

Cable companies already serve 69 million U.S. homes with television programming and have a clear edge, with over 11 million cable modem subscribers and control of two thirds of the country’s residential broadband service. That’s why analysts at Allied Business Intelligence forecast some 14.7 million Cable Telephone subscribers by 2008.

Among the various Cable MSOs planning phone services, Comcast claims the most subscribers today, but Time Warner Cable announced in December that it is partnering with Sprint and MCI to offer Internet phone service throughout the country in 2004. It is digital technologies that make this possible.

Internet Phone Basics

A new modem with both RJ-11 and RJ-45 ports and support for Voice over Internet Protocols (VoIP) will connect to existing home phones and Ethernet networks. It will convert phone calls into digital packets of information, just as with data, so voice travels on cable lines the same way that information travels along the Internet.

Because of new FCC rules requiring Number Portability, you’ll be able to keep your same phone number, and the cable providers will also be able to support your advanced calling features such as Caller ID.

Premise Equipment (yours)

Since the modem has just one RJ-11 port and might not be placed next to a wall jack, you can attach the base station of a multi-handset cordless phone system and distribute handsets anywhere around the house, even putting them where there are no phone jacks. If you’d rather just keep your old phones, however, you’ll need to plug the modem into both a cable outlet and a phone jack and allow the modem to take over control of your phone wiring. While I’ve not yet seen the equipment that allows that connection to existing phones, products available to do that sort of thing for cellular phones today.

Switching Equipment (theirs)

Internet telephone calls are transferred to traditional phone formats at a switching station, and in the case of Time Warner Cable, its partnership with MCI and Sprint means that the company doesn’t have to do that work itself.

Technology Improvements

Internet telephony has come a long way since the early days of PC-based systems, where you could only call another PC or IP phone, where the primary motivation was to save money on long distance charges when calling overseas, and where voice quality was spotty since there was no way to guarantee the timing of delivered packets.

Today those problems have been solved, and you won’t need a PC or cable modem service. You’ll be able to use your existing phones that are plugged into phone outlets. Voice quality can be better than with traditional lines since high sampling rates capture more audio information, and because modern IP networks have better control of packet delivery.

One VoIP tradeoff remains, however, that is reliability during a power outage since the modems need power. It’s a problem solved with battery backups, but there must be backups all along the network. A simpler fallback is to just rely on cellular phones if there’s a power outage.

Internet Phone Implications

Because VoIP service is digital and enables convergence, it enables new applications and benefits, and it also introduces new regulatory issues.

VoANYTHING from Anywhere

Cable companies are not alone in supporting VoIP since voice applications can run on just about any network that supports Internet protocols. For the access provider, this means cable networks, DSL, fiber, and wireless; and for device connections, it means Ethernet, 1394, powerline, Wi-Fi, ultra-wideband, and (of course) coaxial cable.

Businesses already use VoIP to support remote workers and part-time telecommuters. Calls can be transferred to Call Center workers in their homes just as if they were in office cubicles. With VoIP in your home office, you can press the same four buttons to call your manager (either at the office or on his IP phone) as you would have done from an office phone. Or add an unlimited number of people to a teleconference or videoconference with no difference in quality.

When traveling, you can receive and place IP calls from anywhere in the world where there’s an Internet connection; and when you do, it will be like you’re connected to your home or office phone system, with full access to your contact lists, phone logs, photos, files, and applications. To call home, press one button to intercom into the kitchen phone or connect all home phones.

Regulatory Issues

VoIP service is also significant because it is not covered by the same rules as traditional phone networks and doesn't have to fund emergency 911 services and universal access. This has strong implications for the future of phone service and service bundles.

The federal and state regulations that cover traditional phone service are complex and only address telephone service but consume thousands of pages of legal text that has evolved over a hundred years – from a time when there was just one phone company. Back then, funding was needed to encourage deployment into rural areas and poor inner city districts, but today, wireless technologies make deployment much easier and competition more likely.

At the recent International Consumer Electronics Show, FCC Chairman Michael Powell said he wants to encourage open competition and that he firmly believes the Internet and VoIP should evolve in a regulation-free environment – free of taxes and rules from the old phone system. Also at CES, a group of U.S. Senators and Congressmen on a discussion panel seemed to agree with this view, but they said these were difficult issues due to heavy lobbying from special interests. Both Congress and the FCC continue to study the VoIP issues.

Recent FCC rulings that affect VoIP include Number Portability and Plug-n-Play. Number Portability was put in place to encourage competition by making it easier for consumers to switch between cellular service providers and still keep their phone number. It also lets you keep your number when moving between cellular, local phone service, and cable telephony.

Plug-n-Play is promoting standards that will allow “cable-ready” TVs, DVD recorders, DVRs, game consoles, and media centers to receive digital and high-definition content, including premium services, without the need for a set-top box. It means that the VoIP modem will not likely move into the STB but into other devices instead.

Broadband Bundles feature Voice Services

Bundling is a win-win for customers and service providers alike – and a big looser for the service providers that are left behind.

Service providers must all create attractive service bundles or risk being driven out of business entirely. That’s because stand-alone services are becoming low-cost commodities, a trend that started with long-distance telephone service, is now extending to local phone service, and will eventually hit every stand-alone service.

By integrating many services into a broadband bundle, carriers can add value and increase customer loyalty with lower costs, a single monthly bill, and one support number to call if there are problems, all while locking out competitors and lowering their own operational costs. The cable industry’s use of VoIP is significant because it integrates voice onto the same network that also carries data, music, and television programming.

TV Phone as Screen Phone or Video Phone

The convergence of voice, data, music, and video on the same network makes it easier to enhance the data applications with voice, or the voice apps with data. It also makes it easier to blend voice and video and lessens the cost of developing screen phones and videophones since there’s just one network to connect to.

Service providers especially like screen phones and other Internet terminals as a way to reach consumers who won’t PCs at any price. They are simpler and less expensive than PCs, easier to support, and simpler to replace if problems occur.

The most expensive component of a screen phone remains the screen, and VoIP will let TV sets act as screens and be part of the VoIP system for video conferencing.

More Justification for new TVs and More TV Choices

Since TVs already have good screens and speakers, all that’s needed to turn them into videophones is a microphone and camera, so I’m convinced this will happen. And as the TV’s screen resolution gets better and can display readable text and data, the application possibilities (and justification) expand.

When buying TVs in the past, there were just three primary criteria: brand, price, and screen size. Today, we have more choices, with different display technologies (direct view, LCD, plasma, projection), different resolutions (SDTV, EDTV, HDTV), and different aspect ratios (4:3, 16:9). Our choices also determine the brightness, viewing angle, need for external tuners, and (of course) cost.

The Challenge of Selling Convergence

How do you sell convergence products? Where do you put them in the store so consumers know where to look and can experience their benefits? That’s the challenge that faced early Home Theater vendors until they convinced storeowners to provide demo areas with TVs, ProLogic receivers, and speakers.

A similar dilemma will be faced when selling converged voice & data or voice & video apps, so I expect VoIP to first be sold as a simple and low-cost replacement of local phone service. The true convergence applications will take time to develop, not so much because of technological, regulatory, or business model barriers, but because of the difficulty in demonstrating their value to consumers.

The Personal Phone Number

VoIP supports the trends that I wrote about two years ago in “Telephony Unplugged,” including the move away from one phone number per location. With one number per person, your personal phone number reaches you at home, in the office, in the car, in the mall, or at Grandma’s house in San Antonio, assuming you haven’t turned off the handset. The new FCC rules regarding Number Portability ensure that you’ll be able to keep that number as you move between one service provider and another.

My early article also presented a vision of “Next Generation Home Phone Systems” that VoIP now makes possible. Just plug your mobile phone into a charging unit to tell the service provider you are at home (or at work), so they can send your calls over more efficient broadband networks using VoIP. By doing this, your large screen HDTV can receive the video conference call for much better picture quality than you could ever get on a handheld device. And you can also use the wireless keyboard to enter data much faster than on your smart phone’s handset.

When you travel and stay at a hotel with a similar VoIP connection, you can also tie your phone into the room’s TV set like you would do at home. And when relatives visit your house, they can have their phone number tied into your phones and TVs. If needed, a service provider can remotely provision additional lines, or you can do it yourself through their Web site. Turn on and turn off additional lines or network capacity at will.

TV Broadcast and On-demand Business Models

VoIP would not have been possible with the old analog, terrestrial broadcast business model, where programming is free and sent through the air, and where broadcast revenues come from advertising. Cable television added a subscription model and the ability to carry more programs, with each one taking up a 6 MHz frequency channel, and with a single cable able to carry over 80 channels.

While it’s conceivable that phone services could be offered over one of the 6 MHz analog channels, digital technology makes this easier. Digital compression gives cable companies the ability to send more programs in the same bandwidth, or send the same content in high-definition formats. And compression keeps getting better.

The future of digital television and voice extends well beyond just converging video, voice and data. It supports both broadcast and VoD business models, and with true VoD, there’s no limit to the amount of content you can get, since it can come across the Internet from servers anywhere in the world, and it can be created by anyone. But that’s a subject for a future article.

CAZITech founder and chief visionary, Wayne Caswell, is a home networking pioneer with over 30 years of IT experience in development, systems engineering, marketing, and strategy that can be applied to your organization. His vision includes consumers with easy access to services and service providers with equal access to consumers – all without worry about wiring or incumbent competitors that control the infrastructure. FULL BIOGRAPHY