Your New Computer: The Telephone

Where were you when the Information Age dawned? If you're like millions of American office workers, sometime during the 1980s you found a personal computer on your desk. When you finished figuring out how to use a spreadsheet and zip off a report without a secretary's help, you were expected to take the next big plunge: using your new computer to get in touch with the head office, or to tap into a data base, or to send pitch letters to prospects via electronic mail.

Maybe you never really got that far. But it's likely that you became part of this revolution all the same--through that most familiar instrument, the telephone. Increasingly, the nation's 240 million phones are doubling as computer terminals. Rather than teach consumers--or office workers, for that matter--the arcane process of data communications, businesses are finding that it's far easier to get people to punch a few buttons on a touch-tone phone or to send and receive digitized audio messages.

TELEPHOBES. "Human beings are creatures of habit. We fundamentally want the machines to come to us rather than the other way around," says William O. Sparks, vice-president for sales and marketing at Syntellect Inc., a Phoenix-based maker of voice-response equipment. Syntellect's machines allow depositors to tap into a bank's mainframe computer from their touch-tone phones to find out when a check cleared or how many payments are left on a loan. The information is "read" to the caller by Syntellect hardware, which, instead of displaying the information on a screen, renders it as digitized speech.

Newcomers such as Syntellect, as well as such industry giants as IBM, DEC, AT&T, and the Baby Bells, have made phone-based computer communications into a multibillion-dollar business. Sales of voice-mail setups and voice-response systems such as Syntellect's should hit $1.3 billion this year and surpass $2 billion by 1995, according to the brokerage firm Hambrecht & Quist Inc. (table, page 128). Then there are computerized voice services. One type alone, audiotex, should generate close to $1 billion this year by giving callers everything from stock prices to horoscopes, says market researcher Link Resources Inc.

The industry might be a great deal larger, save for one small problem: Lots of people hate doing business with a machine, even if it is attached to the good old telephone. Who hasn't encountered a computerized receptionist that leads you through a twisted maze of options before you realize you're not going to reach the party you're trying to call? Or heard from a computerized direct-marketing machine that automatically dials your number and delivers a recorded pitch? One such system in Colorado dialed every room at a hospital to deliver an audio ad for a liquor store.

Despite the problems, voice processing is spreading. By uniting the simplicity and omnipresence of the telephone with the power of the computer, it enhances both. Communicating with machines by phone, you can find out when your CD will mature, order tulips, reserve an airline seat, broadcast a voice message to your sales force, or have your e-mail read to you in a robotic monotone. It's faster, cheaper and more private than dealing with a person, and it can be done at 4 a.m. because machines never sleep.

INVISIBLE. While computers are involved in all these operations, they're so hidden in a well-designed system that even technophobes can cope. The ultimate in user-friendly computers--systems that recognize human speech so that people can talk directly to them--are beginning to move out of the lab.

While phone-based information and transaction systems lack the technological pizzazz of on-line computer networks, voice processing is becoming an important tool for businesses that are struggling to find a cost-effective way of providing services. "As far as I'm concerned, it's totally indispensable," says Julie Bezotte, customer service manager for Emerson Electric Co.'s In-Sink-Erator Div. in Racine, Wis., which has a toll-free line with recorded tips on fixing garbage disposals. Says Bezotte: "It's amazing how many people will call it at one, two, three o'clock in the morning." In the past, those calls would have gone unanswered because the company couldn't afford to have specialists by the phone at all hours.

But voice processing isn't only--or even mainly--a way to save money. Primarily, it's a way to improve communications with employees, suppliers, and customers by eliminating wasteful routines such as telephone tag, where people spend hours trying to make contact. Travelers Corp., the Hartford-based insurance company, found that 75% of its internal telephone calls didn't reach the intended party and 60% didn't require conversation.

Now, Travelers uses voice systems for internal and external communications. Customers can get answers to routine queries on claims and coverage directly from its mainframes by calling an 800 number. That frees customer service representatives to tackle the complex questions.

To speed up decision-making, Travelers encourages employees to leave messages in each other's voice mailboxes at all hours. One department head broadcast a voice memo into several mailboxes simultaneously on a Saturday morning and had 14 responses by 4:30 that afternoon. "We're finding that voice mail is a 24-hour, seven-day-a-week tool," says E. W. "Gus" Bender, Travelers' second vice-president for data processing. He says that employees with voice mailboxes have upped their productivity 20% to 30%. Says Bender: "It has become part of our culture."

The latest twist on phone-based information systems is fax-back. Callers simply indicate what information they want--a sales brochure or map, say--by punching keys on their phones. Then they key in their fax numbers and, voila! the information appears. Cruising World magazine in Newport, R. I., uses fax-back on a 900 toll number to help yacht buyers shop. Key in a code for the boat you like, and Cruising World will fax you the phone numbers of readers who own the model. The $3.95 charge per call produces a modest profit, but more important, the service frees the staff from answering up to 300 inquiries a week, says editor Bernadette Brennan.

It has taken nearly three decades for voice processing to get this far. AT&T laid the groundwork in the mid-1960s, when it began touch-tone phone service. Few customers knew it, but the beeps emitting from their new phones were really a kind of computer code--a different tone for each number from 0 through 9. Those same tones are now what make a telephone a computer terminal.

OILY ANCESTOR. In 1966, before remote on-line computer terminals were common, IBM sold a complex mechanical device that let branch-bank tellers call up to get account information from a bank's main computer. Immersed in oil, the mechanism had up to 128 magnetic recording playback heads. On each track was one word or number, which would be triggered to read off statements such as: "Balance. Is. Three. Hundred. Dollars. And. Zero. Cents."

The industry didn't take off until the 1980s, when microprocessors, inexpensive memory chips, digital signal processing chips, and large-capacity disk drives became readily available. These devices made it possible to build a voice processing system for a fraction of the cost of earlier models. Voice systems need powerful computers because just storing digitized recordings takes over 200 times as much computer memory as storing the same words in text form, figures Stephen R. Kowarsky, vice-president for business development at Comverse Technology Inc. in Woodbury, N. Y. One Syntellect system uses 30 Motorola 68000-series chips any one of which could run a complete Macintosh.

While the technology has advanced, the need for it has expanded because the pool of skilled workers is getting tighter. The systems let operators, receptionists, clerks, and salespeople focus on human interactions instead of the drudge work. At the same time, rising postal rates and falling long-distance rates have made dealing by phone more attractive. Indeed, according to the Direct Marketing Assn., $196 billion worth of goods were sold by phone last year. Nearly all big telemarketers tie their phones to computers for efficiency.

The next big move into voice processing is likely to come from the giant Baby Bells. They were freed to enter the voice-mail business in 1988 and are just beginning to roll out offerings, mainly in competition with home answering machines. They'd like to offer information services as well--so that a phone company computer could call you at 6:30 a.m., give you a weather report, and remind you (in your own pre-recorded voice) to take your jacket to the dry cleaner. Federal District Judge Harold H. Greene is deciding whether letting the Bells offer such services poses antitrust problems.

BAD REP. With all their expertise and financial clout, however, the Baby Bells may not get very far until the public warms up to voice processing. Thoughtless use of the new technologies has alienated a broad swath of the public. And some businesses have found that instead of improving productivity, their voice systems reduced it. At one GTE Corp. unit, employees often forwarded all their calls to the voice-mail computer, stranding callers in "voice-mail jail."

But business is becoming more savvy about how to use the new technologies. As GTE's unit was about to pull the plug on its system, it called in a consultant. Vanguard Communications Corp. in Morris Plains, N. J., advised GTE to have a person answer calls and to transfer callers into voice mail only if that's what they want. And it taught employees to create distribution lists, to broadcast messages to select circles of colleagues at the touch of a button. Now outsiders are happier with GTE, and insiders are more productive.

A bright future for voice processing may not come fast enough for some companies in the business. Hurt by the recession, the combined market valuation of nine of the biggest publicly traded voice processing companies plunged 60% last year, according to Steven D. Levy of Hambrecht & Quist. Some, such as voice-mail supplier Octel Communications, have bounced back, but Syntellect now trades at around 7, off a high of about 24 a year ago. Shares of Brite Voice Systems, which makes audiotex systems, is trading at around 5 after going public at 14 two years ago. Dialogue Inc. in Braintree, Mass., a privately held distributor of voice processing products, folded last November, a victim of too-rapid expansion and the recession.

ADD-ONS. A further shakeout could occur as prices continue to drop. One challenge to specialized hardware makers is technology that turns ordinary PCs into voice systems. In the early 1980s, $100,000 was cheap for a voice mail system. Now, Brooktrout Technology Inc. in Needham, Mass., makes PC-based systems with special circuit boards and software that sell for $10,000 or less. The first ones were of limited use because they couldn't interact with the office phone system, or PBX--say, to turn on a message-waiting blinker on a phone. Now they can. That's forcing makers of specialized hardware such as Octel to focus on more powerful systems that offer networking or other extras.

Office phone switches are famous for their software idiosyncrasies, making it hard to turn voice processing into a generic attachment. Nevertheless, standardization is beginning and could make basic voice processing systems closer to a commodity, akin to the PC, says Ed Brinskele, president of Marin Telemanagement Corp., a Novato (Calif.) consultant. Companies that don't want to be commodity suppliers will have to push specialized products into new niches.

Luckily for them, the public is destined to become more receptive. The younger generation thinks nothing of picking up a phone to tap into a data base--for updates on preteen heartthrobs New Kids on the Block, for example. Just ask third-grader Carisa Burrows or fourth-grader Courtney Hampton at Lew Wallace Elementary School No. 107 in Indianapolis. Courtney calls three voice-mail numbers every day after school: one to find out what's coming up in Spanish class, one to see when his other homework is due, and one to find out the next day's hot-lunch menu. (He doesn't like the mixed vegetables.)

At School No. 107, even kindergarteners use the voice-mail system, donated for the semester by Ameritech Corp. Chad Hinnan, a second-grader, sums up life before voice mail in one word: "Rough." With customers like Courtney, Carisa, and Chad in hand, all the voice processing industry has to do is make the technology so easy that even adults are comfortable with it.

      Total U.S. market
      Allows users to record, store, forward, and broadcast voice messages with 
      touch-tone phones.
      Octel, AT&T, Northern Telecom, Rolm, VMX
      Instead of buying special equipment to handle voice mail, some companies prefer 
      to use outside services.
      Local phone companies, service bureaus, Baby Bell holding companies, 
      long-distance carriers
      Responding to prerecorded cues, callers can instruct a computer to complete a 
      transaction or recite information by pushing the correct key on a touch-tone 
      phone. AT&T, Syntellect, InterVoice, Dytel
      Supplies recorded entertainment and information over the phone, sometimes with 
      voice-response capabilities. Call Interactive, an AT&T-American Express joint 
      venture; Universal Studios, MTV
      Parcel out incoming calls to operators. Rockwell, AT&T, Rolm, Northern Telecom, 
      Teknekron, Aspect, Solid State Systems
      Lets computers "understand" and respond to the human voice. AT&T, Texas 
      Instruments, Kurzweil, Dragon, Verbex, Voice Control Systems
Before it's here, it's on the Bloomberg Terminal.