132 Part I • Information Technology
Internet Explorer, dramatically reducing the cost to deploy
and support Internet-based information services.
In time, engineers familiar with Internet technology
began to reengineer traditional voice communication.
Carriers began using Internet Protocol (IP) communication
for voice traffic within their own networks, thus achieving
significant savings. The broad acceptance of the need to adopt
“open” standards drove traditional PBX manufacturers to
accept Internet-based standard protocols for communicating
within a network, making it possible for commodity priced
components to be used with previously closed systems.
By 2006, many of the proprietary PBX and KTS
manufacturers were reengineering their systems to include
IP technology. However, they generally continued to deploy
a proprietary system that limited the functionality available
to their customer, and did not offer much cost savings. In
order to take advantage of the cost savings available through
IP networks, the customer had to go beyond the VoIP equip-
ment sold to them, and reengineer their network. To see a
savings, the POTS network needed to be replaced with an IP
network. Then either the installed PBXs had to be replaced,
or the customer would have to purchase expensive gateways
that turned the new IP communication network back into
POTS communication that the old PBXs could support. In
short, achieving significant cost savings from network inte-
gration using the altered PBX or KTS systems was consid-
ered difficult by many smaller businesses.
Alternatively, organizations such as Digium, the
authors of Asterisk, and Pingtel, developed application soft-
ware that functioned just like a PBX, yet ran on commodity
PC hardware under Linux. These systems, available for free
and distributed as “open source” applications, provided vir-
tually all of the features of a proprietary PBX, plus directly
support IP trunking, and at a cost of as little as 10 percent of
the cost of a traditional vendor’s PBX.
In summary, as of June 2006, suppliers of voice
communications systems for the small and midsize busi-
ness market were selling:
a. Hosted VoIP solutions as replacements for long dis-
tance service, to both residential and commercial
customers;
b. Proprietary telephone systems that utilized IP tech-
nologies for their internal workings; and
c. System integration solutions, such as VoIP2.biz’s,
which applied IP technology to address the entire
business communications infrastructure and thereby
deliver substantial enhancements in call processing
andlower monthly costs.
The alternatives for the small and midsize business
customer are summarized in the table on page 133. Hosted
VoIP providers provided an additional phone number, sold
long distance service, and linked to the existing Public
Switched Telephone Network (PSTN) for delivering calls.
Either the supplier or provider could provide the telephone
handsets. The provider didn’t integrate with the rest of the
business’s telecommunications services and equipment,
leaving that effort to the customer. System VoIP providers
left even more functions to the customer. Management
considered VoIP2.biz’s solutions unique in offering the
customer a single point of service and accountability for
the entire telecommunications infrastructure.
The market for VoIP was typically measured in terms
of how many POTS lines were available to be switched to
VoIP service. In 2005, nearly 50 million POTS lines that
could be switched to VoIP were installed in small enter-
prises in the United States. (The small enterprise market
was defined as 100 telephone lines or less.) In Indiana, this
market was estimated at 1 million POTS lines, and across
the Midwest, it was estimated at 8.8 million POTS lines.
Through 2005, it was estimated that less than 2 percent of
these POTS lines had been converted to VoIP.
Management at VoIP2.biz summarized the small and
midsize business market for their services as:- These customers represented a large business
opportunity; - Currently, the customers were not appropriately
served by the traditional telephone companies or car-
riers and were frustrated in their inability to work with
these companies to get their business needs addressed; - Most customers lacked the internal IT and
telecommunications staff to manage their growth
and required changes; - A customer could dramatically decrease their
monthly communications cost by moving to VoIP; - In order to take advantage of IP networking cost
savings and enhanced features, a customer had to
replace its existing PBX; - Less than 10 percent of the PBXs on the market had
some type of IP capability; - The forecasted spending on IP PBXs was estimated
to grow from $1 billion worldwide annually (2002)
to $8 billion worldwide annually by 2008; - Open source IP PBXs, such as Asterisk, could be
implemented for 10 to 30 percent of the cost of a
traditional vendor’s IP PBX; - To reach its objectives, the company would have to
secure only 2 percent of the business market with
100 lines or less; and - Expanding the target market to businesses with
400 lines or less would increase the market size an
estimated 40 percent, and VoIP2.biz would need to
only secure 1.4 percent of this expanded market.