ZOOMING DOWN THE I-WAY
Alternative carriers and nimble startups have united PCs, E-mail, fax, and video
Remember all that talk a few years ago about the Information Superhighway? Offices and homes across the country were supposed to be transformed by powerful new communications technologies that would deliver two-way video, online games, home shopping, even the choice of working from the beaches or the ski slopes--all conducted via snazzy new digital devices. Instead, after a few limited experiments by Time Warner Cable, U S West, and Bell Atlantic, the telephone and entertainment companies decided that these high-tech roadways were just too expensive to build--and a hard sell to their cost-conscious consumers.
Even the Telecommunications Reform Act of 1996, meant to remove many of the regulatory barriers that made it tough for telecom companies to invest in the I-way, has made little difference. Fourteen months after President Clinton signed the law, the nation's phone and cable-TV companies are still fighting yesterday's battles, bent on invading each other's turf by leasing and reselling existing local and long-distance service.
But outside the boardrooms of telecom's giants, innovation is sweeping the wired and wireless world--bubbling up from the bottom. Hundreds of alternative carriers and nimble startups are leaping head-first into the newly deregulated environment. Pioneers such as Wildfire Communications, Lucent Technologies, Dialogic, and VDOnet are the new names to watch.
JUGGLING. Their holy grail: to unite PCs, phone, E-mail, fax, and video into a seamless fabric. They are designing software that sends phone calls around the world on the Internet so cheaply it's like dialing your cousin across town. And they're offering high-quality videoconferencing systems that make it as easy to do a meeting on top of a mountain as in the company cafeteria. "Last year was Year 1 of a 15-year revolution," says Joseph S. Kraemer, a vice-president at consulting group A.T. Kearney in Rosslyn, Va. "We're about to jam the equivalent of the 100-year Industrial Revolution into the next 15 years."
Unlike the original I-way visions, this revolution is starting at the office, not the home. The standard-bearers are such innovative outfits as Precision Response Corp., a Miami company that's something of a showcase for the merger of computers and phones. Precision Response handles customer service for 62 clients, including Taco Bell, Ryder System, and British Airways. To manage the 150,000 to 200,000 calls it gets each day, Precision has toll-free lines dedicated to each client and linked to PCs that pull up data about a given company in just milliseconds. Intelligent phone switches steer calls to customer-service reps best equipped to handle each problem.
With such a setup, juggling becomes a snap. While a customer-service rep is still on the line soothing an upset Taco Bell customer, for instance, an E-mail message is immediately sent to the manager of the problem restaurant, with copies to the zone and corporate managers. The system also generates a computerized letter to the customer and later alerts the rep to make a courtesy callback. "We have so much horsepower that with the right software we can deliver better customer care and achieve some things we didn't think we could do," says Precision President David Epstein.
The white line dividing computers and telephones, voice and data, is blurring at last. Why now? Because of a confluence of technology and demand--driven, to a huge degree, by the Internet phenomenon. Building on the union of data networks and computers, the Internet has become the new global communications infrastructure for businesses. With its standard interfaces and low rates, "the Internet has been the great leveler for communications--the way the PC was for computing," says analyst Virginia Brooks of Aberdeen Group Inc., a Boston consulting firm.
Companies that spent millions of dollars constructing their own private data networks and complex electronic data interchange systems in the 1980s are shifting over to the Web. General Electric Co., for example, had invested heavily over the past decade in proprietary networks to do business with suppliers and contractors. But a switch to a Web-based electronic commerce system called the Trading Process Network is saving GE millions of dollars a year. Now, GE is opening the network, which brings together buyers and suppliers of everything from machinery to stationery, to outside companies for trading with each other. A bonus for GE: It will collect a transaction fee on every purchase made.
The Internet is also giving rise to new products that could undermine traditional phone services. The one that sends shivers down the spines of telecom execs: software that lets you place phone calls over the Net. Cybersurfers figured out early on that, for the price of a local call to their Internet service provider, they could dial around the world to anyone else hooked up to the Net. All it takes is a PC equipped with a microphone, sound card, and special software.
Today, most Net phone callers are PC hobbyists. For everyone else, the quality of these calls is usually too inferior to the public phone network. But that could soon change. VocalTec Ltd. in Northvale, N.J., the leading maker of Internet telephony products, recently broadened the appeal by introducing gateways that connect the Internet to standard phone systems--allowing PC users to call non-PC users on their phones and vice versa. The company walks its talk: Chairman Elon Ganor says VocalTec saves $10,000 a month on phone bills between its Israeli and New Jersey offices by routing them over the Web.
THREATS LOOM. Such savings can more than offset the poor quality of Net calls--an issue that disappears anyway in the case of data transmission. Just ask TeleChoice Inc., a Verona (N.J.) telecom consulting firm that used to swap E-mail messages and database updates between its five U.S. offices by dialing directly. Now it's done across the Net.
"A $500-a-month remote access bill from Maine to New Jersey just went away, literally overnight," says Daniel D. Briere, president of the company.
The Internet is not the only threat to the telephone companies. A slew of startups are finding ways to eat into traditional telephone usage. Take FaxNet, a Boston outfit that launched a long-distance phone service in early 1996, tailored to fax traffic. Its Never Busy Fax capability ensures you won't miss an incoming fax even if your own machine is tied up. FaxNet diverts the transmission to its own computers and then relays it when your machine becomes free.
Sounds elementary, but such a service can be a business saver. At Vimac, a Boston venture-capital firm and FaxNet investor, a construction accident wiped out phone service for two days last November--right in the midst of closing a $1.5 million deal. When the phones were restored, FaxNet started spitting out all the faxes stored during the outage. "The service is worth far more than the $30 to $40 per month we pay for it," says Vimac Managing Director Robert C. Roeper.
Low prices, such as the fees that are charged by FaxNet, are a hallmark of the new telecom age. By marrying telephony with low-cost PCs, a slew of new products are now affordable for small fry as well as corporate titans. Small-office phone systems from companies such as Inter-Tel, Voysys, and Dash cost less than $10,000 and offer voice-mail and call-queuing capabilities that cost three times that a few years ago.
OVERLOAD. The same can be said for a new buzzword of the digerati: CTI, for computer-telephony integration. CTI started out as a high-end technology used in call centers run by direct marketers or service companies, such as Precision Response. Systems typically included automated call-routing, interactive voice response systems, and "screen pops" that display information about the caller.
Several years ago, Microsoft Corp. and Novell Inc. tried bringing this technology to any old desktop by creating competing standards for connecting phone systems to PC networks. The promise: Desktop CTI would let users place, receive, and manage phone calls through their PCs. And they could receive faxes, E-mail, and voice mail in a single box on their screen. But the products, TAPI and TSAPI, went nowhere. The two companies couldn't find resellers that understood both the telecom and computing needs of corporate customers, and there wasn't much telecom equipment that supported the software.
Now, a wave of products built on TAPI and TSAPI that works with standard telecom equipment is hitting the market. Coresoft Technologies Inc. in Orem, Utah, has just released a $4,000 software package called CenterPoint that offers all the CTI bells and whistles but runs on Windows 95, NT, and Novell's Netware systems. One neat trick: Users can select a handful of names from a database and command the phone switch to set up a conference call with all of them. "The convergence between computers and telephony is really happening at last," says Coresoft President Dan L. Garrison.
For proof, take a look at a technology aimed at people suffering from message overload: unified messaging systems that route voice mail, E-mail, and faxes to a single electronic in-box. This concept is a no-brainer for people who have spent half the morning checking messages on their phone, their PC, and the fax down the hall. Lucent Technologies and Octel Communications, among others, sell unified messaging systems that route all messages to staffers' PCs via the corporate data network. Cliff Roper, voice and video services manager at Tektronix Inc., figures his company will save $400,000 over five years using Lucent's Intuity system instead of an outside service. An added bonus: By scattering nine Intuity servers around the country, Roper is cutting out $10,000 a month in long-distance charges from employees calling in to get their messages.
Digital Sound Corp., in Carpinteria, Calif., has developed a similar system for use on the public phone network. Now being tested in Seattle by GTE Corp., this unified message service for the home would cost about $20 a month. "There's huge pent-up demand for this in the small-office and home-office market," says Dennis L. Bordelon, a Digital Sound product manager.
Wireless callers need not feel left out of the computer-telephone nexus. Pacific Bell is testing a sophisticated messaging service on 300 wireless-phone customers in San Diego. Developed by Boston's Wildfire Communications Inc., its "electronic assistant" answers incoming phone calls, screens them, and automatically routes them to wherever you are--a conference room, your home office, or your car. Most of the features are controlled through spoken commands, so you don't have to take your hands off the wheel.
Such a system is a godsend for short-staffed operations. Don Blanton, owner of multimedia production company The Wow Factor in West Hollywood, Calif., has no secretary and relies on Wildfire to track him down when clients call. "I have to be reachable," he says. "If I'm not, I'm out of a job the next day." The Wildfire service costs Blanton about the same as his monthly cellular bill, but if it spares him losing a single deal, it pays for itself, he says.
For a richer media experience, many companies are latching on to desktop videoconferencing products from Intel, C-Phone, and VDOnet, among others. Using PCs rigged up with tiny cameras and video boards, workers from Tokyo to Tacoma, can hold live conferences routed over a phone line or the Internet. These products cost just one-tenth as much as room-size videoconferencing systems, says Jeremy Goldstein, president of PicturePhone Direct Inc. in Rochester, N.Y., an integrator of videoconferencing equipment. Credit cheaper computer power and the wide availability of digital phone service. "In five years, videoconferencing will be as common as faxing is today," Goldstein says.
But to get to that point, companies will have to beef up the bandwidth of their networks. One solution is a digital service called frame relay, that speeds data packets by zooming past checkpoints required in old analog phone lines--"like a diplomat in a limo going through red lights," says TeleChoice's Briere. Datapro analyst Michael H. Smith estimates the market for frame relay services will grow from $2.5 billion this year to $5.3 billion in 1999.
BETTER MOUSETRAPS. Many companies are experimenting with an emerging networking technology called asynchronous transfer mode, or ATM (page 78). Originally developed by Bell Laboratories for high-speed voice networks, ATM has now been adapted for data applications. The appeal: Compared with modems, which top out at 56 kilobits per second, or today's fastest digital trunk lines, which hit 45 megabits per second, ATM carries data at blinding speeds starting at 155 mbps.
The ability to move that much data is already creating better mousetraps. The Defense Dept. used a fiber-optic ATM network between the U.S. and Germany to relay high-resolution images of Bosnian terrain, allowing pilots to practice reconnaissance missions in simulators before taking to their planes. The Mayo Clinic in Rochester, Minn., uses an ATM backbone for "tele-medicine"--doctors can videoconference with patients in a children's clinic in Scottsdale, Ariz. And the American Petroleum Institute is using ATM over satellites to transport drilling-site data collected by ships at sea instead of waiting until the ships return to port. Analysts estimate that slicing a month off the time it takes to analyze a drilling site could save $200,000.
Best of all, ATM switches are moving quickly into the public phone network, which will pump up the speed of the global communication network. Join those fast links with improved local connection speeds--via emerging technologies like ADSL and cable modems--and all these whiz-bang new office technologies will trickle down to the home, just as PCs did. That's when you may finally see an Infobahn for the rest of us.By Andy Reinhardt in San Francisco, with Peter Elstrom in Chicago, Paul Judge in Boston, and bureau reportsReturn to top