The current development on telecommunications industry is changing the use of telecommunications networks remarkably. People use telephone lines more and more for data transfer instead of ordinary voice calls. At the moment the data traffic is estimated to be equal to voice traffic but the estimate by the year 2001 is that the data traffic will be one hundred times greater than voice traffic.

IP telephony, or voice over IP, means that voice and fax calls are transmitted over an IP network such as the Internet, rather than over the familiar public switched telephone network (PSTN). During the last three years IP telephony has become a hot topic. Five years ago IP telephony was virtually unknown technology but at the moment it seems that IP telephony will revolutionize voice call business and technology used to transport voice calls. Since access to the Internet is available at local phone connection rates, an international or other long distance call will be much less expensive than through the traditional call arrangement.

On the Internet, three new services are now or will soon be available:

The ability to make a normal voice phone call (whether or not the callee is immediately available; that is, the phone will ring at the location of the callee).

The ability to send faxes at very low cost (at local call prices) through a gateway point on the Internet in major cities.

The ability to leave voice mail to a called number.

There were research activities of transmission of voice signals over packet networks in the late 70's and early 80's. In the late 70's there was discussion and experiments with packetized voice over ARPANET, the predecessor of the Internet using IP and specialized coding and packetizing equipment . The real development in IP telephony started in 1995. VocalTec pioneered the IP telephony market in 1995 with PC software which opened a voice connection between two PCs over IP-based network. The product was ideally suited for the Internet. After that, several other competing software packages were launched consecutively. In 1996 first internetworking trials between IP network and PSTN were made. In 1997 the Delta Three launched the first phone to phone service for commercial use. The development of IP telephony is summarized in the following :

1995 - The year of the Hobbyist

1996 - The year of the IP Telephony Client

1997 - The year of the Gateway

1998 - The year of the Gatekeeper

1999 - The year of the Application

In the beginning of the next millennium IP telephony will be used over mobile IP network such as GPRS (General Packet Radio Service) or UMTS (Universal Mobile Telecommunications System). This is an opportunity to the new mobile telephony operators because they do not have to build separate networks or parts of networks for voice and data. It also offers opportunities for new mobile applications.

Advantages of IP telephony include lower cost long distance call and reduced access charges, more efficient backbones and compelling new services. The benefits of shifting traditional voice onto packet networks can be reaped by businesses, Internet Service Providers (ISP), traditional carriers etc. Business benefits from IP telephony because it takes advantages of existing data networks, reducing operating costs by managing only one network and enables them to enjoy almost-toll quality voice.

The communication industry is going through a period of explosive change. Data is becoming a more significant proportion of traffic compared to voice. IP is today considered the most promising platform on which to build new services. IP telephony service shapes the Internet for real-time services.

PC to PC

PC to Phone

Phone to Phone

IP telephony can be used in three basic situations: PC to PC, PC to phone (and vice versa) and phone to phone. IP telephony market is growing very rapidly at the moment. The prices of IP telephony call are essentially lower than in PSTNs.