Talk is cheap, the old saying goes. Certainly as consumers, all of us welcome cheaper phone calls. Over the past decade, phone services have been getting cheaper and better, but now, thanks to advances in technology associated with the Internet, we may soon be able to make normal long distance calls - international or interstate - essentially free of charge. Not only that, the same technology will give us unprecedented communications options for person to person contact - including videophones and simultaneous data transmissions - and enable far more entertainment to be delivered to our TVs and PCs.

Foremost among these technical advances is VoIP or Voice over Internet Protocol. The principle is simple: VoIP enables a computer to take analog audio signals from the phone and convert them into digital data that can be transmitted over the Internet. Putting data into a digital format is extremely useful because you can compress (shrink) it, re-route it and convert it to a better format, all using computer algorithms. Also, unlike analog signals - which require precise voltage levels - digital data is more resistant to noise and other disturbances over the network.

But perhaps the biggest advantage is that VoIP enables voice transmissions to be sent via the Internet, and as with e-mails and web-site access, the cost is miniscule.

We’re all very familiar with the charges made for long distance calls on regular land line or satellite telephones: you pay for your time on the line, and there are times and places where this can be formidable. But with VoIP you can talk as long as you like with anybody you want anywhere in the world at virtually zero cost. At the same time, you can also exchange data with the people you’re talking to, send videos and use your e-mail. Using some of the free VoIP software that is available over the Internet, you can even bypass the phone company charges completely.

Smart talk

VoIP enables you to make phone calls in three different ways. You can use a device called an ATA (analog telephone adaptor) which enables you to connect a standard phone to your PC and link it to the VoIP system. Then there are the dedicated IP Phones, which connect directly to your Ethernet LAN card (a router). As you would expect, IP phones have all the necessary hardware and software to handle VoIP calls. But the most straightforward way to make VoIP calls is via a PC-to-PC connection.

All you need is the right software, a microphone, speakers, a sound card and a broadband connection - and there are now many free or low-cost software packages on the Internet that allow you to make long-distance calls using VoIP.

In fact, VoIP has been around for over five years. (Unknown to you, you may already be making VoIP calls, when you place an IDD call - telephone service providers have already started using VoIP to route thousands of phone calls through a circuit switch and into an IP gateway.) However, problems with software and transmission times made the initial personal-use packages unappealing to all but a dedicated few. The speed of broadband has changed that, and now VoIP calls are matching regular phone connections in terms of quality.

US consumers have embraced VoIP with a passion, forcing the whole communications industry to react very quickly. The US Federal Communications Commission (FCC), which regulates interstate and international communications by radio, television, wire, satellite and cable, has published a White Paper on the pros and cons of the VoIP services.

It’s on our doorstep

Several local companies in Hong Kong have already started testing VoIP services, and preparing for its widespread public use. One of these companies has already invested in an IP network that can service 1.2 million households. Another local company has even started offering VoIP phone services, including four value-added services such as caller display, call waiting, conference call and call forward.

We are virtually certain to see major telecoms companies in Hong Kong fully embracing VoIP very soon - based on the experience of the USA, VoIP has the potential to completely transform the world’s telecommunications industries, and no one in Hong Kong has any intention of being left behind. There’s been quite a bit of controversy about the introduction of VoIP, but this technology has marched on, and the benefits of the whole system seem to assure that it’s here to stay. Overall cost is, of course, a major factor. It’s not just consumers who are ardent advocates - many within the telecoms industry see huge advantages in the whole way VoIP works. Proponents claim that the cost of installation of VoIP is far below that of “legacy” telephone services - the industry term used for the standard fixed-wire phone lines you have in your home and office - and the end result is more flexibility and value added services. A leading VoIP service provider in Hong Kong estimates that the real cost of installation of a legacy telephone line ranges from HK$4,000 to HK$5,000, compared with a HK$500 cost to hook up a VoIP subscriber who already has broadband. And with uninterrupted growth in the VoIP subscriber base, the phone companies will find it even cheaper to provide VoIP services. Companies who have launched VoIP phone services in Hong Kong have received good support from the industry.

The corporate backlash

Legacy phone companies in Hong Kong claim that when in use VoIP phones will interfere with other broadband devices - including broadband TV as well as the Internet - and possibly debase the quality of other signals coming in on the broadband line. But the VoIP services providers point out that when you use a VoIP phone it only takes up 64 to 110 kilo bits per second of bandwidth, which is just too small to degrade the capability of other devices and applications that access and operate on broadband and the Internet. By comparison, a broadband TV transmission uses 4.5 mega bits per second of bandwidth, about 50 times more than a VoIP phone call. The service providers also point out that when a VoIP phone is not in use, it uses no bandwidth at all.

Loss of IDD revenue due to VoIP usage is a certainty for Hong Kong-based legacy phone service providers, but based on overseas experiences they need not despair. Enterprising operators in other parts of the world have already developed innovative ways of getting more revenue from their existing networks. One concept that’s attracting considerable interest is secure VoIP services for corporate users. Companies like AT&T are looking at providing corporate services with a secure telephone network, capitalizing on one of the major weak points of VoIP. Service providers are also bundling several applications with the broadband service itself. Maybe in the near future one can reasonably expect some VoIP application along with this package. There also other potential applications, such as game consoles with VoIP capability. If done correctly over a peer-to-peer network this type of gaming can be very exciting: players can experience the real-time thrills and excitement of competition over the Internet.

Recently, regulation has been the key issue affecting VoIP growth in Hong Kong - just as it has been elsewhere in the world. But the general consensus is that VoIP services must be allowed unfettered growth. Even Mr MH Au, Director-General of Telecommunications of the Office of the Telecommunications Authority (OFTA) was quoted as saying “...it is perfectly feasible for a customer in Hong Kong to have access to a service provided by a service provider located outside Hong Kong.” Global carriers can come to Hong Kong to provide VOIP services and to meet this global challenge, the Hong Kong telecoms industry must embrace the VoIP services or run the risk of losing out to competition.

Expecting rapid growth

If Hong Kong follows other international markets where VoIP has been introduced, we can expect a very rapid uptake and explosive growth in usage. In the USA VoIP is continuing to develop rapidly as a mass consumer service. AT&T is offering the CallVantage VoIP service; and Verizon’s service, called the VoiceWing, offers features similar to CallVantage. Vonage, a newcomer, started consumer VoIP services way back in April 2002, and now has a subscriber base of more than 200,000 users. Vonage just received a boost from a recent ruling that declared its VoIP phone service as “interstate” in nature, meaning that individual states cannot impose regulations on VoIP companies and VoIP usage as they can with a legacy company. One of the most popular VoIP services has come from US-based Skype, whose homepage has recorded more than 22,000,000 downloads of its freeware service program. Its “SkypeOut” service allows you to use a PC to call any fixed or mobile telephone line in the world for a small fee.

Teething troubles

Although there are considerable cost savings to the consumer, VoIP does have its problems. For example, VoIP-enabled phones are still expensive, and VoIP-related equipment is much more expensive than traditional telephone equipment. This is because digitizing voice data and recovering voice signals requires enormous amounts of processing power and hence requires expensive semiconductor chips. Also, many VoIP service providers are using proprietary solutions, so to date competition and price cutting are limited. “VoIP telephones are currently expensive,” says Dr John Ure, Director of Telecommunications Research Project at Hong Kong, “but greater VoIP adoption will force a fall in prices very soon. It just depends on the rate of adoption. It’s bound to change with the greater availability and standardization of VoIP services.”

Another point of concern is that VoIP phones have turned in less-than-impressive quality-of-service (QoS) results, which is largely because of some inherent problems of transmitting this type of digital data over switched networks. When you send data (usually sent in chunks of bytes referred to as packets) over a network there is bound to be some loss in transmission. Factors like delays in receiving and reassembling the data in the proper format are highly influential in determining the QoS. Since customers have come to expect crystal clear voice conversation over a telephone, VoIP services have to match or exceed that QoS. There have been vast improvements since the early rough transmissions, but there is still room for improvement.

The final major problem with VoIP telephony is security. Since the voice information is sent as data packets, it is subject to attacks by hackers. This is a major concern for business users, so the VoIP providers are acting quickly to find solutions. Since VoIP is digital in nature, encryption techniques will help ensure data security.

But one thing is certain: even with the problems, the strengths and general appeal of VoIP are almost irresistible. Expect it to be part of our daily life ?like e-mail and mobile phones - very, very soon.