Voip phone device

Holly Andrews' new-fangled phone is actually a Cisco computer. The calls are so clear that the marketing director for USAgencies doesn't even notice her voice being turned into digital bits and sent across a network that works like the Internet.

Likewise for the hundreds of employees at the expanding Baton Rouge-based insurance agency, which is adopting the new technology called "Voice over Internet Protocol" in a quest to improve productivity and lower costs.

Law firm LeBlanc & Waddell switched to a broadband Internet telephony system a year ago. The law firm, says senior systems administrator Tim Ryan, is saving $100,000 per year on phone services, including getting its long distance calls between offices in New Orleans and Baton Rouge for a flat fee. And the law firm will own the VoIP equipment in five years; it was leasing its PBX system.

Governments are making the switch, too. The City of New Orleans, for example, hopes to save $1 million per year.

What is VoIP?

Broadband telephony allows voice communications over a fast connection using VoIP--the standard technology for moving data on the Net. Calls are routed over the public Internet or a carrier's private network. The networks link up with traditional systems, so someone on a regular landline and another using VoIP can talk to each other.

VoIP arose in the mid-1990s, when early adopters used headsets connected to computers to place free calls across the Internet, especially to avoid pricey overseas toll calls. But the connections often broke up, and conversations were plagued by lag times.

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Software and hardware improvements to VoIP, especially in the past year, have done much to bring quality up to par with regular phone systems. So has the rise of private networks, which avoid the sometimes busy and unreliable public Internet.

The improvements are giving rise to new companies such as Razorline of Baton Rouge and New Orleans. The firm, started this year, offers VoIP over a private network and targets smaller businesses.

A company with roughly 30 phone lines can save 30 percent to 40 percent on its phone bill with a number of new features by switching to Razorline, says co-founder Gene Dry.

Expect the ranks of companies like Razorline to grow because the cost of getting into the business is low, says Dan Ahern, president of the Gonzales-based Eatel, an established telecom that is testing VoIP for reliability before deciding whether to offer it.

"It's difficult to predict, but it's something we are very interested in."

Cox Communications plans to offer VoIP in Baton Rouge starting this fall. Like Razorline, Cox is using a private network, not the Net, to keep quality high. Cox spokeswoman Sharon Kleinpeter expects the service to be phased in, eventually reaching business customers.

National carriers, including Bell-South, have announced VoIP services, providing the impetus for fast growth of the technology and prompting some industry experts to ring the death knell for traditional telephone services.

Radicati Group, a market research firm, predicts the share of business lines using VoIP will soar from 4 percent now to 44 percent in 2008. By then, corporate spending on VoIP should hit $5.5 billion, up from $1 billion now. And research firm Stratecast Partners estimates the VoIP market will grow fivefold, to 5 million subscribers, by 2007.

Part of the growth is spurred by new features made possible by the fact that VoIP is computer based. Besides getting the usual caller ID and call-forwarding services, Razorline's General Sales Manager Randy Hymel can use his phone to check his messages on his computer and to place calls from his e-mail software address book. He can prompt his Cisco desk phone, which is connected to a computer linked to the company network, to find him on a cell phone or other wireless device if he's away from the office.

VoIP phone systems also can show the availability of everyone on the network, so a user can check whether someone is busy or away. Because they are computers, the phones are flexible, permitting some calls to be routed to voice mail and others to cell phones. And the phones can be connected to Bluetooth handsets for wireless and hands-free conversations.

VoIP phones have an Internet address, so one can be taken on the road and plugged into a high-speed connection at a hotel, where it will ring when someone calls your office number.

USAgencies makes the change

USAgencies switched to VoIP technology in December when "it was no longer bleeding edge, but was cutting edge," says James Holland, VP of information systems. Holland oversaw a team that examined the new technology for five months before spreading it throughout the company.

The networked phones permit employees of the auto insurer to combine e-mails and voice mails and access them through one interface, which boosts productivity, especially by reducing the workload of the claims department.

"When adjustors receive several e-mails and voice mails from clients, they can store them in common folders and retrieve them and not have to fumble around in different storage locations," Holland says.

There are other savings, such as the expense of moving phones when an employee switches offices. Holland no longer has to dispatch a technician for that task. Since the phones have an Internet address, the moving employee simply plugs the device into the company's computer network.

Holland's team came up with a return on investment forecast on the switch to VoIP. So far, the estimate is on track to produce a return after 30 months of operation. Already, the company saves at least 30 percent per month on phone operating costs.

Still, with all the favorable reviews of VoIP, telecommunications experts remain cautious about the technology.

Ahern, Eatel's president, says some issues remain to be worked out. For instance, telecommunications companies offering VoIP don't have to charge for universal service--a subsidy that ensures phone service is available in rural areas. That may change, which could increase the cost of VoIP.

Ahern also warns that the low cost of entry will spark the creation of new VoIP telecoms, many of which won't have the capital to survive or to provide the necessary back-office work, such as billing and technology support.

Ryan of LeBlanc & Waddell says his firm's VoIP system originally was plagued by software problems. They have been cleared up, but new products are likely to pop up that aren't reliable.

Still, VoIP is ready to become the next technology blip to change business. "I think it's the future," says Ryan. "It's a cheaper way to do things."

MUKUL VERMA covers technology and commercial real estate. Reach him at mverma@businessreport.com.