New service searches for the right connection

Voice over Internet protocol has been touted as both a huge cost-saver and the beginning of a wave of new services, many of which have yet to even be imagined.

But for all its promise, the technology is rolling out slowly to Canadian businesses and consumers, who appear hesitant to replace legacy voice systems that work so well with something so radically different and largely unproven.

"There's a huge education burden towards migration," says Karen Sheriff, president of the small and medium business division at BCE Inc.'s Bell Canada.

One small company that jumped on the bandwagon recently is Richardson Partners Financial Ltd., a wealth management firm based in Winnipeg. The one-year-old company has 150 employees and branch offices in five cities across the country.

Richardson Partners represents the most common type of VoIP user among businesses today. It's a new firm that built its internal communication system from scratch and was prepared to take on some risk in return for big savings.

"Taking a chance as an early adopter, we got very good pricing," says Stan Eng, the firm's chief technology officer. He estimates that Richardson Partners paid about the same for the new technology -- installed by Cisco Systems Canada -- as it would have paid to install a legacy voice system, but as a benefit the company has cut its operating costs significantly.

"We had the advantage of a blank sheet of paper and took advantage of the latest technology," adds chief executive officer Mike Miller. "It was, at the end of the day, a no-brainer."

Investment firms often budget as much as 1 per cent of their revenue for long-distance fees, but for Richardson Partners, long-distance calls are now virtually free, Mr. Miller says.

The firm says that not only has the technology worked smoothly, but it's bringing more flexibility to staff, who can take their office phone number with them on the road by plugging their portable computers into any high-speed Internet connection.

"The technology has actually become attractive as a recruiting tool," Mr. Eng says.

Many firms want to see large companies adopt VoIP first. Some service providers say that part of the problem with getting the ball rolling is that many businesses don't understand the full potential of the technology.

"Only 5 to 10 per cent of SMBs [small and medium businesses] really get it," Ms. Sheriff says. "Many think IP is simply about cheap voice." In reality, Internet telephony services include rich, inexpensive features, such as unified messaging, audio-video conferencing and on-line document sharing.

In June, Bell Canada launched an IP telephony service for businesses.

The carrier has a handful of government and banking-sector customers using the service, but adoption has been slow, admits Isabelle Courville, president of Bell Canada's enterprise group. "It's hard to convince customers to convert to a new network without a killer application."

The company has rolled out a variety of IP-based applications since the summer, including a service for institutional investors that connects their trading systems to partners around the world, but the pump is still being primed, Ms. Courville says. (BCE Inc. is the parent of Bell Canada and Bell Globemedia, the owner of The Globe and Mail.) In the end, the answer to what to run on these new networks may be more obvious than anyone imagines.

"Voice may be the killer application," says Mario Belanger, president of Avaya Canada Corp.

Speech recognition software has advanced to the point where banks, retailers and movie chains across North America are relying on interactive voice response software to handle customers. The application uses prerecorded voice responses cued by voice or keypad commands.

Mr. Belanger also points to a service called skill-based routing that the network equipment maker has brought to several large corporate customers, including the giant lingerie retailer, Victoria's Secret.

With the service, a company's network is able to instantly call up customers' information when they dial in, and then direct the calls to the appropriate agents.

Large companies have or are moving to converged IP networks, but most small and medium-sized companies are still unclear about how to use Internet-based applications to improve operations.

"The infrastructure is there, but it's not fully utilized today," says Terry Walsh, president of Cisco Systems.

Increasingly, Canadian companies are lagging behind their U.S. and European counterparts in adopting the technology. The delay will lead to significant productivity shortfalls in Canada if the issue isn't remedied soon, Mr. Walsh says.

Cisco, in fact, has recently called on the federal government to step in and help drive adoption by helping educate smaller businesses about the benefits of IP communications and by offering incentives, such as tax credits.

One of the issues dampening enthusiasm for the new technology is a concern about security.

While traditional voice systems have impeccable reputations for security, IP-based networks run the risk of falling victim to increasingly sophisticated hackers and viruses.

As the number and speed of attacks rises, the companies building the converged IP networks are rethinking the way they address security.

Until recently, security has been thought of as an add-on, where defences such as firewalls are attached to a network and anti-virus software is installed on desktop computers.

These tools are effective, but they don't provide total network security that people demand today, says Brian McFadden, chief technology officer of Nortel Networks Corp.

The company has recently shifted its strategy to examine security across the entire network, rather than just on a product-by-product basis. It's also investing in such technology as deep packet inspection, which improves the level of security without slowing down traffic flow, and centralized control centres, which manage the services on a network, Mr. McFadden says.

In the consumer market, only a tiny fraction of Canadian households have signed up for VoIP services.

Part of the problem is that most of the providers are small companies. The major carriers are still testing their services and the nation's major cable companies won't begin selling VoIP until some time next year.

The cable players have spent hundreds of millions of dollars upgrading their infrastructure, but they are tweaking their pricing models, billing systems and other back-office functions before rolling out VoIP.

'There's a lot of work still to be done and that's why the cable companies are all being somewhat vague about 2005: It's yet to be seen whether they're going to hit their targets," says Evan Kelly, a partner at PricewaterhouseCoopers LLP who leads the firm's information and communication practice in Toronto.

Canada's cable industry is about one year behind the U.S. cable industry in developing voice services. But when the cable firms do complete their work, Mr. Kelly says, they will likely be able to offer VoIP to 90 per cent of Canadians.