Clarent gives voice to the network

Clarent, one of the most successful voice-over-IP (VoIP) companies, brought together several VoIP service providers to speak...

Clarent, one of the most successful voice-over-IP (VoIP) companies, brought together several VoIP service providers to speak about their experiences at its third annual customer conference in Hawaii earlier this month

Danny Bradbury.

The VoIP market targets three user sectors: telephony carriers, which use it to route their customers' calls; the corporate market, which can use it to run traffic over internal networks or the Internet; and retail customers, who access it via services such as Net2Phone and Go2Call.

BT's reluctance to open up the local loop and allow broadband networking to the home has constrained the growth of the retail sector in the UK. Another problem for companies such as Clarent is that VoIP has traditionally faced concerns over call quality, which have steered many potential customers away from the idea.

IP's traditional characteristic as a better-late-than-never service (packets might take a while to get there but they get there in the end) does not sit well with the low-latency requirements of voice calls.

Nevertheless, IP is attracting considerable interest, both from the young upstarts in the telephony carrier community and from the incumbent telephone operators which are starting to add routing voice traffic over packet-switched IP networks as an alternative to circuit switching.

Cable & Wireless has announced plans to move increasingly towards IP-based telephony networks and will have 84 global nodes by the end of the year.

One of the drivers towards VoIP is the cost argument. Theoretically, distance is irrelevant to customers of VoIP, and a packet can be sent across the globe as easily as across town. In a circuit switched system, a specific route has to be set up for each call.

Certainly, the incumbent telephone companies are chasing dwindling revenues as call costs fall, so any decrease in operating costs would be welcomed.

Craig Kesby, manager of international IP development for Cable & Wireless Optus, an Australian C&W subsidiary, says there is a limit to the cost savings telephone companies can expect to make. This is due to the existing circuit-switched infrastructure, much of which has not been paid for yet. They have to run something over those lines.

In private networks, cost savings are potentially huge for corporate users that implement VoIP systems internally. Hooking up branch offices' voice phones to a data network could save thousands of pounds.

A more attractive prospect for both telephone carriers and enterprises is the concept of enhanced services. Services, such as pop-up screens for call centre personnel and unified messaging, have been well documented - if not widely implemented - but there are others. Self-provisioning of services is a good example.

Imagine providing automatic redirection of calls to a temporary number while travelling, for example, or being instantly able to set up another number in your office for a new employee online without having to wait a week.

But the question of quality remains. Mike Varga, Clarent's chief technical officer, advises the use of bigger pipes which Kesby, who has set a rule prohibiting his VoIP routers from going above 50% capacity, also favours, but not everyone can afford to be so liberal.

As an enterprise running a relatively new technology over its internal local or wide are a network, any corporate early adopter of VoIP must be sure that its network management is up to scratch, and for many this will be prohibitively complex. Network management skills become a major issue.

Such questions are bound to be at the root of Clarent's share price. The company made approximately $45m (£30m) in revenues in the first three quarters of this year, indicating that the market is growing steadily , but its share price has dropped dramatically since the start of last year. Not all of that price drop can be readily attributed to conditions in the tech stock market.

Clarent is the lead player worldwide in its area by volume, according to UK analyst firm i.Locus, but its market is heavily focused on service providers in the Asian market. For European enterprises to buy into the technology, the company needs to do a lot more evangelising.

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