In many ways, the telephone conversation I had this week with Ron Ferro encapsulated why there is so much excitement about voice over Internet technology.

I called Ferro, a Vancouver-based telecommunications engineer, on his 604-area-code phone number, but he picked up the receiver in his hotel room in New York City. He was actually speaking to me through a Voice Over Internet Protocol (VoIP) box that was connected to the hotel’s high-speed Internet connection.

Because he signed up for the service from Comwave, a residential VoIP newcomer in Canada, in Vancouver, all calls to his phone from a 604 exchange are billed as local.

There was a bit of an echo at times, but the sound quality was reasonably clear and certainly better than a lot of cellphone conversations I’ve had. “I’ve been on the service for about a month,” said Ferro, 32, who is self-employed and travels extensively in the U.S. and Europe on business. “I know the wave is going to be IP phones, so I thought I’d try it out myself.

“It’s made my life a lot easier. I can be here in New York and my family and customers in Vancouver can call me on a local telephone number.” Ferro has signed up for the $14.99 basic monthly package with Comwave, plus the $5 add-on bundle that gives him features such as call waiting, call display and call forwarding. A keen techie, Ferro kindly agreed to my request to have picture of himself and the Comwave IP device taken with his digital camera.

He then e-mailed the picture to me.

VoIP, for those who aren’t yet familiar with the term, packages voice calls as data and sends them over broadband connections. The technique is less expensive, but more importantly opens up a wide range of new features that aren’t possible on analog copper phone lines.

Although VoIP is still a relatively small blip on the consumer’s radar screen, it has the telecommunications industry bubbling. The technology has been around for a few years in the business world and is just now starting to make modest inroads with consumers. But, due to its radically different nature from traditional landline telephones, it has the potential to rattle the industry to its core.

Michael Powell, chairman of the U.S. regulatory body Federal Communications Commission, has called VoIP “the most important shift in the entire history of modern communications since the invention of the telephone.”

Lofty words indeed, but Felix Narhi, a telecommunications analyst with Vancouver investment firm Odlum Brown and author of a recent report on the industry in Canada, said Powell is not exaggerating. “VoIP unglues the service — in this case, voice — from the actual network,” said Narhi. “In the past, you had the telephone companies that provided voice services and the cable guys who provided television services.

“IP just turns everything into a software application, so it doesn’t matter whose network you run it on. We’re just at the beginning of this, but 10 to 15 years from now the traditional telephone network will be largely marginalized and it will all be IP telephony.”

Besides Comwave, companies such as Primus Canada and U.S.-based Vonage have already entered the Canadian market with residential offerings, with the larger telecom players getting ready to weigh in. Burnaby-based Telus Corp. and Bell Canada — the country’s two largest phone companies — both already offer business VoIP and will soon offer it to consumers, while cable firms Rogers and Shaw have also announced plans for voice-over-Internet service.

Perhaps the most contentious aspect of the VoiP wave is the regulatory environment. Currently, the incumbent telephone companies — notably Telus and Bell Canada — are bound by price regulations for phone service, while other VoIP players aren’t.

The Canadian Radio-television and Telecommunications Commission is currently in the midst of a policy review regarding VoIP. “The [CRTC’s] preliminary view was that things would not change — the new entrants would be able to price at whatever they want and we’d have the same restrictions,” said Telus spokesman Charlie Fleet.

“This is watershed moment in terms of technology so the commission needs to look at this carefully.”

Expect the big players to compete more on product bundling — TV, with high-speed Internet and phone — than price.

But VoIP has a number of issues to sort out before it becomes a popular consumer phone service. For one, it’s a big jump psychologically to consider abandoning the wireline network that goes back to our grandparents’ time.

But Shaw Cablesystems president Peter Bissonnette doesn’t think that will be an issue once customers experience his company’s residential VoIP service when it is rolled out at the end of this year.

“It’s dial-tone and away you go,” he said. “I think there will be a demand for our service from those customers who may not be enamored with Telus.”

Another hurdle is that you need a broadband connection for VoIP and high-speed Internet is still at about 50-per-cent penetration in Western Canada.

As well, service is only as good as your broadband connection and, because it depends on the regular power grid, if that goes, you have no phone. The traditional phone network has its own power.

© The Vancouver Province 2004