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VOIP: A Fad or the Future?

Open any general interest magazine, newspaper or web site and chances are there's another story about the wonders of Voice Over Internet Protocol, or VOIP. The media technology darling of the moment marries old school voice telephone communications with new school high-speed Internet services, promising flashy new features combined with steeply lower prices. While nothing can live up to the initial

Open any general interest magazine, newspaper or web site and chances are there's another story about the wonders of Voice Over Internet Protocol, or VOIP. The media technology darling of the moment marries old school voice telephone communications with new school high-speed Internet services, promising flashy new features combined with steeply lower prices. While nothing can live up to the initial hype surrounding such a media frenzy, you might want to take a hard look at VOIP. For a number of reasons, this is a technology that will have special appeal to many truck fleets.

In the simplest terms, VOIP uses the data network created by the Internet to bypass the traditional telephone network. When you make a call over the standard phone network, telephone company switches establish a dedicated connection between two phones using 10-digit telephone numbers to route calls to the right phone. With VOIP, voices are digitized, split into data packets and transmitted over the Internet as data using a unique IP address like the one assigned to a Web page to make the connection between VOIP phones.

Substituting the Internet for traditional phone networks offers two potential advantages. First, costs can be substantially lower since there are no charges for local service connections or long-distance calls and companies do not have to install and maintain a PBX (private branch exchange) system to provide individual phone lines for their employees. Second, and most likely to be more important for businesses in the long run, voice communications can be integrated with other data functions to deliver advanced features unavailable with standard phone service.

Despite the sudden widespread interest, VOIP has been around for almost as long as public Internet access. But slow, dial-up access speeds limited that interest to hobbyists and technically savvy consumers who wanted to keep in touch with distant friends and relatives without large telephone bills and were willing to put up with frequent disconnects and poor voice quality.

Today one-quarter of all Internet users in the U.S. have some type of high-speed broadband access that can handle reliable, high-quality voice communications, creating a much larger potential market for VOIP service and hardware providers. With an eye firmly on that expanding market, both traditional telephone companies like AT&T, Qwest and Verizon as well as Internet service providers like Covad and Global Crossing have begun actively pursuing VOIP business.


Substantially lower cost for long-distance calls and local service are the most obvious advantage for consumers and companies alike. Cutting out dedicated telephone networks not only reduces those charges, but also sidesteps the taxes on traditional telephone service. Observers point out, however, that the untaxed status of VOIP could disappear once legislatures begin seeing significant reductions in tax revenues from traditional telephone service.

Another significant savings comes from the elimination of separate service lines for voice and data. For example, most businesses with 20 or more lines on a PBX lease a T1 line for that voice network, as well as a separate T1 for Internet access. With VOIP, one costly T1 lease can be eliminated. Smaller locations could retain whatever broadband service they currently use and eliminate all or most of their phone service.

American West Worldwide Express, an LTL and logistics company that's switched to VOIP, says those savings initially cut monthly voice communications costs from $30,000 to $20,000. And once the transition to VOIP is completed across all of its locations, the monthly cost should drop to $15,000 for a 50% savings, according to Curt Scott, VP of information technology.

“We cut our long-distance charges in half, eliminated one T1 line in larger locations and reduced local-service charges even in the smaller locations without T1 service,” Scott says. American West's initial investment in VOIP hardware was $75,000, giving it an ROI of less than a year on service charges alone.

The key to cost reductions of that magnitude is long-distance use. In fact, at least two fleets that investigated VOIP found that most voice traffic at their terminals was largely local and that they couldn't cost-justify the switch at this point.


For smaller fleets looking to install a PBX or for larger ones that need to upgrade current private phone systems, VOIP cost justification is much easier, according to Jed Stafford, president of INET Pricing, a company that specializes in VOIP services for business clients.

PBX hardware is not only expensive, but it also requires on-site maintenance. In return, you get individual phone lines for each employee as well as voice mail, conference calling, call forwarding within the network and similar features. VOIP provides a virtual PBX without the local hardware investment or maintenance, says Stafford.

Not only is the initial hardware cost lower, but VOIP features can be far more advanced than even the most sophisticated PBX. For example, a web interface can allow each user to set up a list of multiple phone numbers so calls to the VOIP number can automatically find or follow you to those other phones. The same control might allow you to set up and control screening that only allows or blocks calls from specific numbers. Voice mail can be forward to email addresses, and both voice mail and faxes can be managed with a visual mailbox like one used for email.

For mobile workers, a laptop with Internet access can be turned into an office phone with all the same advanced features. Receiving calls over the VOIP network doesn't necessarily even require a special VOIP phone since calls to an office number can be forwarded to a cellphone or home number. “That means you could tell a system to forward calls from a customer to a driver's cellphone without giving them the driver's number,” Stafford says.

Since a VOIP phone number is tied to a virtual Internet location, not a physical one, systems are not tied to one location and even offices become mobile. For example, when American West moved its Los Angeles offices to a suburban location, the VOIP virtual PBX meant that once the server was up and running in the new location, all phones began working instantly with the same phone numbers and features.


While potentially lower costs and advanced features are immediately available with VOIP, perhaps the greatest potential benefit to businesses like trucking will come from easier integration with existing IT applications such as dispatch and customer-service call centers.

While still in its infancy, the first simple integrated functions, like INET Pricing's “click to call” from Microsoft Outlook contact lists, hint at the potential created by this meeting of telephone and computer. It doesn't take much imagination to see vehicle location applications offering similar click-to-call functions for quick connections to driver cellphones.

Linking customer account files or shipping documents to incoming phone numbers is another obvious opportunity for integration.

And with the growing reliance of fleets on web-based applications, integration with telephone service based on Internet protocols could prove to be the real killer app that pushes VOIP into the mainstream for trucking.


As good as VOIP looks at first glance, it has its critics, or at least skeptics raising legitimate questions about reliability, cost and other potential problems.

Reliability is the most common, probably because we've all experienced service failures while browsing the Web. Most of those failures, though, are due to traffic surges to a particular IP address or server problems, not network issues. In fact, the T1 lines used for most voice traffic to and from PBX systems are identical to those used for Internet access, says Stafford. “They both have the same failure rate, which is less than 0.01%,” he says.

As for VOIP's cost advantage, a significant portion of that advantage is due to the lack of taxes. With user numbers still relatively low — well under 1-million by most estimates — VOIP has not yet attracted much attention from federal and local tax collectors.

Realistically, though, if revenues from traditional phone service begin to drop due to wholesale movement to VOIP, the various government bodies responsible for those taxes are certain to turn their attention to the newcomer. Competitive fairness to the traditional providers also argues in favor of examining VOIP's tax advantages some time in the future.

Another cost issue sometimes raised is the relatively rapid obsolescence of computer technology. Traditional telephone technology moves at a glacial pace compared to computer hardware and software, so worries about shorter usable life cycles for VOIP systems should factor into investment decisions. However, the large cost differentials already exhibited by even first-generation VOIP systems can take much of the sting out of the more rapid turnover.


As we've seen throughout history, new technologies also always seem to create their own new problems. Everyone with an email address curses spam, but at least it's easy to erase without even opening. Now imagine your voicemail box filled with pitches for Viagra, porn and get-rich-quick schemes.

Although it hasn't happened yet, apparently VOIP phones could be susceptible to voice spam since every phone number is an actual IP address. Instead of dialing individual phones, telemarketers could use VOIP to automatically contact thousands of IP addresses at once. In fact one software developer has already created an application that can send a 30-second recording to 1,000 VOIP phones every five minutes.

However VOIP defenders say networks can be engineered to prevent such intrusions. Others say such automation is actually a benefit rather than a problem since companies could use it to communicate with large numbers of mobile workers.

At this early stage, though, it looks like the benefits, especially the cost advantage, will outweigh those initial concerns, and VOIP will become an essential building block in business IT systems. And if it lives up to even a small portion of its potential for integration, it could even end up as the foundation.

Two for the price of one

Doug Andrus Distributing of Idaho Falls, ID, is a mid-sized truck truckload operation with just over 200 tractors. The company also owns four other related businesses - a truck wash, a truck dealership, a truck stop and a convenience store. By moving to VOIP, the company not only cut its fleet telephone bills by 40%, but it also got a high-speed data network that integrated all five of its businesses, according to vice president Jason Andrus.

The company began the switch to VOIP in Jan. 2003 using a local provider who agreed to set up and maintain the necessary servers. The only hardware needed at each of the five Andrus locations was a switch, router and compatible phone sets. A T1 line was also leased for each, replacing a variety of slower Internet access points.

Since the four subsidiary businesses are essentially local, they have a low volume of long distance calls and cost savings for those operations have been minimal. “But getting them all on a single network without any major investment on our part made (the switch) well worth it,” says Andrus. “We could have done that ourselves, but it was much more affordable doing it with the (VOIP) phones.”

The fleet is a different cost story. With 30 phones in its offices and a high volume of long distance calls, VOIP has delivered a large savings, says Andrus. The fleet even runs it's drivers' phone cards through the system, cutting long distance rates in half, he adds.

In addition to advanced features like caller ID and conferencing, VOIP has also proved to be more flexible than the PBX it replaced. For example, the company recently built a new shop facility that included new offices for its dispatchers. “Our dispatchers just unplugged there phones in the old offices, moved to the new building, plugged them in and they were ready to go,” says Andrus. “They had the same numbers and the same personal settings without any programming. With the old system, every phone would have required reprogramming.”

The switch wasn't without problems, though. “We had significant problems with the company we initially chose,” Andrus says. “For about eight months we lived with a lot of downtime. So we switched to another Idaho Falls provider, NSI Communications. They'd made the investment in quality equipment, and service has been very good since then.”

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