Voice and data technology have been converging for a number of years, and GonzoBankers, the convergence is now upon us. If you deal with telephone issues at your bank, it is time to understand what this newfangled phone technology is all about because it will be affecting your bank over the next few years.
“VoIP,” the latest telephone technology, stands for Voice over Internet Protocol. “POTS,” which has been around for a long time, is a wonderfully non-technical acronym for Plain Old Telephone Service.
Back in the stone ages of data communications, circa 1970, data and voice systems utilized analog technology. If you think telephone communication has changed over time, it has not. This is the same technology Edison created in the 1800s. Sound is converted to a weak electrical signal which is transmitted over the telephone line. The telephone on the receiving end receives the signal and reconverts it to sound.
A computer works with ones and zeroes which cannot be transmitted with a copper wire. A modem (modem is actually an acronym for MOdulate DEModulate) converts digital data (all those ones and zeros that a computer understands) into telephone-friendly analog signals so that it can be transmitted as an electrical signal. Isn’t it nice to know that voice and data were originally joined and separated over time?
Unfortunately, converting digital data to an electrical signal does not permit high speed transmissions. The Need for Speed caused the split into two technologies – analog and digital. Data circuits became digital circuits, very distinct from analog voice circuits. Communication over the copper wire (and ultimately optical cable) used digital signaling concepts that are used by computers. Speeds went well beyond those possible using voice circuits. Business usage of analog (voice or telephone) circuits is almost unheard of today. Many homes continue to use analog technology to “dial up” their Internet or America Online connection to check email. In this usage, the slow speeds of 28.8K or 56K are sufficient.
Voice continued as analog technology with virtually no change, and data continued to use digital technology. Due to the distinct differences, voice and data were usually managed by separate groups with very different skill sets.
When the Internet was created, the Internet Protocol (IP) was born. A protocol is the set of rules for establishing communication between two points, then moving information between them. IP, which quickly became the protocol of choice for most networks, was successful because it was simple and could be used as the standard between disparate networks. In fact, the name Internet was coined from the technology’s ability to interconnect multiple networks, i.e. inter-network or Internet.
With IP, data could be moved throughout the Internet, your local network or intranet. It did not take long for one of the “data” network geeks to wonder why the data network couldn’t also move “voices.” Accomplishing this feat required the telephone conversation to be converted to a digital form (converted from a sound into a series of ones and zeros representing the sound). The digitized data is then broken into small chunks for transmission to the recipient’s destination, where they are reassembled into the original message. Each “chunk” of digitized data is sent to the recipient using the same network used for your bank’s data. Finally, the digital message is converted back to sound and can be heard through the earpiece.
Whew, that’s a lot of work for a phone conversation, but it is exactly how VoIP works.
With VoIP, your employee’s telephone simply becomes another IP address on your network (in case you don’t know, every device on your network has an address including computers, printers, etc.). In many respects, it acts just like another computer. One of the great advantages is the ability for employees to take their telephone sets with them when they change offices. When they get to their office, they simply plug the telephone into the network, just as they do their computers. The phone will function just as it did at the old location. This move does not require any changes by the telephone group. With analog technology, the voice group spent large portions of their time reprogramming the telephone switch and physically changing wires every time someone changed offices.
It is estimated that more than two million telephones in the United States now utilize VoIP technology – and this number is growing rapidly, with a million more expected to be added this year alone.
Why should you be interested?
So, VoIP, POTS or – Not? It is clear that VoIP (sometimes called IPT, or Internet Protocol Telephony) will be the standard way to deliver telephone services in the future. We believe there should be an event to trigger the move to VoIP. Some of the events that would cause a serious look include the following:
As little as three years ago I would have told you to leave your checkbook at home because this technology was not ready for prime time. Since then, it has become mainstream and is beginning to mature in a corporate environment.
Not surprisingly, the big player in VoIP technology is Cisco, a data network company. Traditional telephone equipment companies such as Avaya (formerly Lucent, formerly AT&T) and Nortel (Northern Telecom) lagged behind with their offerings. However, the gap is closing and more companies are joining the fray.
Get ready, VoIP will be in your bank before long. Perhaps the next time I talk with you it will be on your new VoIP telephone.
-caf