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| Blindsided by Telus |
September 13, 2003 |
By Jim Harris
Telus is speeding past other telcos. It’s the first major provider in North America to move to an IP Internet Protocol) infrastructure, and the significance of that is profound.
Here’s a simple example of why that is: I was recently staying at the historic Chateau Frontenac in Quebec City. Every time you make a call the hotel charges $1.61. Make a local call and it’s $1.61. A 1-800 call is $1.62.
And for long distance calls the hotel doubles or triples the non-discounted phone rates.
I called the front desk and asked, “How much will it cost to call my wife in Germany for 10 minutes?”
The answer: a hundred dollars!
“Plus the $1.61?” I asked incredulously.
Yep. So I logged onto the in-room high speed Internet service ($14.95 per day), opened an application called Net2phone on my notebook, plugged a headset with a microphone and an earpiece into the computer, and called Germany for US$0.05 per minute. (Check out http://www.net2phone.com.)
So instead of $101.61 my 10 minute call cost me less than $16 Canadian—and that includes the high-speed Internet for 24 hours.
I was making a long distance phone call over the ’net using a protocol called Vo IP—Voice Over Internet Protocol. Instead of using the telco’s proprietary voice network I used the public Web infrastructure.
Will this change the profitability of hotels? Telcos? In 1990, 70 per cent of major North American telcos’ revenue came from long distance, but long distance rates have been plunging for the last century.
You can now get pre-paid phone cards from companies such as Phonetime in Mississauga, Ont., that offer long distance rates of just one cent a minute. (See http://www.phonetime.com.) All its calls are routed over the Web and there’s no perceptible difference in quality.
Vo IP is about to go big time. “The allure of cheaper long distance is pretty hard to resist,” said Jon Arnold, an analyst with Frost & Sullivan. “But what will really drive the adoption of Vo IP is applications
and competition.”
FROM ANALOG TO DIGITAL
When I am out of town, why do I have to call long distance to pick up my voicemail?
Because traditional telcos are still living in the analog world. Why can’t voicemails be forwarded to me as MP3 sound files so I can pick them up just like e-mail, from anywhere?
There’d be no limit on how many I could keep. This is just one example of a new service Telus will be able to offer.
Or think about bank ATMs, where three separate networks are actually operating.
When you put your bank card into the slot, data from your card travels over a data network. The security camera relays information over a broadcast network and the help-line phone beside the ATM operates on a voice network.
But it’s very costly to maintain, update and repair three networks. And when the bank discovers a particular transaction three days earlier was fraudulent, staff have to work to correlate the data from three disparate networks.
But if the bank was working on a single IP infrastructure? The data would travel as data, the video would travel as data and the voice would travel as data—over the IP network. The bank could reduce complexity and costs but most importantly the bank could quickly roll out new products and services.
THE FUTURE
Girish Pathak, the chief technology officer (CTO) of Telus, said implementing an IP infrastructure will change the traditional telco business model, economic drivers and competitive landscape.
If voice can go over data networks I could get phone service from a cable provider. Arnold notes that about two per cent of U.S. local phone subscribers are currently using cable companies for phone services. In the U.S. non-traditional telco companies like Vonage offer unlimited North America long distance bundled with phone service over high-speed Internet.
In a study released last year, analyst Elka Popova of Frost & Sullivan, estimated that in 2002 more than 47 billion minutes of voice traffic moved over the Internet as Vo IP and predicted this would rise to more than three trillion minutes in 2007, a compounded annual growth rate of better than 133 per cent.
The Chinese have an expression: it is easier to step on a dragon’s egg than it is to step on a dragon. The move from voice to data networks is inevitable because of the economics. And Telus is staying ahead of the change curve.
Eugene Roman, chief information and technology officer at Bell, said in a recent presentation to analysts that Vo IP over the public telephone network is still five to 10 years away.
Telus’ switch to an all IP network is driven by three things, Pathak said: “One, we’ll be able to offer new and integrated services; two, we need to take this step to drive cost efficiencies—reducing both capital and operating expenses; and three, enhancing the effectiveness in our support delivery and support operations.”
Telus’ customers will be excited for exactly the same reasons. That’s why Telus is set to blindside the competition.
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