VoIP Quality - Does It Come At A Cost?

In the early days, we were all used to a VoIP service where the cost was low, and so was VoIP quality.

A few years ago, as the first wave of VoIP operators started to emerge in the market, offering cheap international calls mostly as part of a prepaid package, many consumers tried the new VoIP service with an air of excitement and optimism....

The costs were a fraction of the price of their incumbent operator (£0.03/min form the UK to the USA!) and it meant you could now chat freely with friends and loved ones overseas and not break the bank.

However, reality in most cases was a service plagued by voice delay, ie not hearing the other person's voice for a couple of seconds, and an annoying amount of echo which made a civilised conversation almost impossible.

So what was wrong, what has changed, and has this stigma stuck - that VoIP quality will always be poor if we are offered cheap phone calls? Thankfully, no.

Reasons For Improvements In VoIP Quality :

1. The advent of broadband - consumers and businesses alike now have direct access to the Internet from their homes with much higher speeds than were previously possible. The result is that calls over the Internet are now more feasible - part of the problem was the local access from the home via a phone line, which restricted the amount of data that could be sent. With broadband, speeds of 2-20Mbit/sec mean the flow of packets can all be sent out without congestion constraints.

2. Investment Growth - incumbent and alternative operators all around the world are investing heavily in an IP infrastructure, and the ability to offer their customers VoIP services. VoIP quality as a result is improving dramatically. Not only is bandwidth available from the customer site through to the far-end, but the right equipment is in place to ensure a sufficiently good level of service.

3. Improvements in hardware technology and manufacture mean that any VoIP network is far better equipped than ever to manage an increased traffic load. Monitoring of traffic has also improved sufficiently, so network or hardware problems can be solved by the service provider based on real-time diagnostics.

4. Growth of Competition - the VoIP market has expanded at an alarming rate over the past 5 years. There are now estimated to be more than 2,000 operators offering wholesale VoIP service, and hundreds more offering a product to the consumer. With this increased competition, consumers now have more of a choice and are demanding a certain level of VoIP quality that they wouldn't have expected before. Service Providers are therefore having to provide this.

5. The advent of QoS networks, ie where voice packets take priority over other non-real-time media streams, have meant that the IP networks are being used more efficiently, and as a result VoIP quality has improved.

VoIP Quality Has Improved, What About Cost?

In the early days, there was a huge gap between PSTN and VoIP costs, mainly due to the aggressive pricing by new entrants and the 'grey-service' offered. there has been some interesting market dynamics over the past 2-3 years that have started to change this model :

1. Market Transparency - as VoIP has become less of a grey market throughout the world, this opening up has led to more transparency of pricing. Many of the low-end operators, working on little cash flow and offering poor VoIP quality, have failed to survive. The impact has been a slight comparitive rise in VoIP termination costs, particularly to international destinations.

2. Reduction In 'Closed Markets' - VoIP has led to the opening up of many voice markets around the world that previously had been incumbent-controlled in terms of price. This laternative market has forced those incumbents to slash their prices in a bid to win back traffic. The resultant impact has been to narrow the gap between PSTN and VoIP costs.

3. IP Bandwidth Growth - when bandwidth is scarce, eg into developing (eg Central Africa) or closed markets (eg Cuba), price is obviously high. IP has offered an alternative route into many of these markets, and Voice Over IP has benefitted from the more plentiful supply of IP bandwidth. The result has been a driving down of the market cost of termination in many instances.

4. Excess Bandwidth Supply - in countries where there is no such scarcity of bandwidth, the VoIP termination model becomes a little more flaky. For example, across much of continental Europe, there are huge supplies of both national and cross border bandwidth, meaning market prices on the whole are very low, and VoIP does not offer the customer a huge saving. On the whole therefore, we can see certain trends that VoIP has brought to the market :

Summary

Quality

VoIP quality has some way to go, and the consumer is still not clear what they are getting. However, capital expenditure by service providers, constant demand from customers, and general market development mean VoIP quality has improved considerably, and looks set to continue to do so over the next couple of years.

Cost

The early days of VoIP brought a large gap between VoIP and PSTN costs. The force of VoIP is bringing down PSTN costs, limiting the super-normal profits service providers can make, and leading to a true commodity-type market. However, these forces of demand and supply mean pricing is becoming more transparent, and the consumer will have far more power in the price they are willing to pay.

The net effect can only be positive both for the business and consumer users of VoIP. Aggressive pricing together with improved VoIP quality mean VoIP can only continue to grow as a product.

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