TDM and VOIP

Analysts: Nortel wise to walk away from Avaya
By Ed Gubbins
Jun 5, 2007 12:13 PM

After reportedly entertaining acquisition offers from Nortel Networks, enterprise telephony equipment vendor Avaya today announced an $8.2-billion acquisition by private equity firms TPG Capital and Silver Lake Partners. Some analysts are saying Nortel was right to walk away.
“Even if it were financially possible, an acquisition of Avaya by Nortel would likely have been messy, fraught with integration issues,” RBC Capital Markets analyst Mark Sue wrote in a note today.

The combination of Nortel and Avaya would have created an 800-pound gorilla in the enterprise telephony space: a vendor with about 30% of the market—nearly twice that of its closest rivals, Cisco Systems and Siemens. It also would have more than doubled Nortel’s services business, from more than $2 billion to nearly $5 billion, fulfilling Nortel’s stated goals of growing that segment. But the combination also would have posed significant challenges, UBS Investment Research analyst Nikos Theodosopoulos wrote in note issued today.

UBS imagined $250 million in synergies from a Nortel/Avaya merger over several years, with $50 million to $100 million coming in the first year. Synergies would come mainly from product-related sales, general and administrative expenses but would have been harder to find in product development and supply chain areas, UBS said.

Avaya’s many enterprise customers would require ongoing support without service disruptions, likely forcing Nortel to maintain redundant products for a long time, UBS said. And while Avaya sells most of its gear directly to its customers, Nortel relies much more on resellers, making it harder for the combined company to unify and rationalize its sales channels. Avaya wouldn’t do much for Nortel’s revenue growth, either, UBS said, anticipating nearly 3% growth from Nortel next year and a little more than 4% growth from Avaya.

The deal announced today allows Avaya to solicit competing bids over the next two months, but analysts don’t expect Silver Lake to be outbid since it has already outbid its rivals.

As for Nortel, Sue suggested the company consider acquiring another IP telephony vendor, Mitel. “Across the metrics of synergies, product rationalization, integration and geography, Mitel is a better fit for Nortel than Avaya would have been,” Sue wrote.

Eric Lai and Nancy Gohring, IDG News Service

May 14, 2007 (Computerworld) SEATTLE -- Microsoft Corp. today trotted out what one analyst called a "very impressive" list of hardware makers that plan to build telephony gear compatible with its soon-to-be-released unified communications software.
Nine vendors are creating an initial batch of 15 phones that will be certified for use with Microsoft Office Communications Server 2007 and Microsoft Office Communicator 2007, both of which are expected to finally be released this summer.
T
he vendors include leading manufacturers such as Samsung, LG-Nortel, NEC, Plantronics, Asus, GN, Polycom, Tatung and Vitelix.

"My first impression is -- very impressive," wrote Blair Pleasant, an analyst at Santa Rosa, Calif.-based CommFusion LLC in an e-mail. "The demos were cool, showing how the devices leverage the capabilities of [Microsoft's software] and let users do things like dial by name and click to call. ... Microsoft is pushing the idea of reaching a person not a number, which is really key."

The Microsoft communications software is available to users that are part of a public beta program. Combined with other Microsoft programs, they unify e-mail, instant messaging and videoconferencing functions so that users can do things like click on an e-mail message to make a voice-over-IP call to its sender. The software also supports standard desk phone features.
Microsoft did not announce how much its partners will charge for the phones when they hit the market later this year. The company's goal is to encourage partners to build a wide variety of compatible phones so that prices quickly drop, Pleasant said.

That would make the overall package -- Office Communicator/Communications Server, plus telephones -- more financially attractive than integrated products from established players such as Avaya Inc. and Cisco Systems Inc., which list their VoIP phones for as much as $800 retail, according to Pleasant.

Microsoft is also intent on ensuring that all phones work out of the box. To do so, it is setting up a new qualification program for hardware makers. Those products will be tested by Microsoft to assure buyers that devices will work as expected with Office Communications Server or Office Communicator, said Eric Swift, senior director of unified communications product management at Microsoft.

Certified handsets must include wideband audio support, comply with a wide range of VoIP codecs and include specific user-interface elements. Swift also said that most existing VoIP gear today that works with services such as Vonage or Skype should work fairly well too.
"We're looking to ignite partner innovation to bring software economics to what has been proprietary," he said.

Some of the new phones connect directly to a USB port, so mobile workers can bring the phone with them and use it along with their laptops to access features typically only supported on desk phones, like call forwarding and conferencing. Other new phones include Bluetooth and video capabilities.

By themselves, none of the phones offers as many features as those from Cisco or Avaya, Pleasant said. But "when integrated with [Microsoft's software] these devices offer capabilities like presence, integration with the Microsoft Office Suite, the ability to view missed calls and return a call," she said. "It's not the Microsoft partner devices in and of themselves that are powerful, it's the fact that they offer seamless or embedded integration with [Microsoft's software], which is very powerful."

As for uptake of Microsoft's software, Pleasant believes companies adopting Office Communicator or Communications Server will keep their existing PBXs or IP PBXs "for the next few years" to lower the risk of hiccups in their phone service.

That means companies may initially eschew some of the lower-end phones -- such as those that lack actual keypads and require users to make calls from their PCs using Office Communicator or Communications Server -- in favor of more expensive devices, Pleasant said.

Microsoft made the official announcement at its Windows Hardware Engineering Conference in Los Angeles.

Robert Poe on Oct. 17th, 2006

The Internet telephony trailblazer is taking serious steps to ease the fears of network administrators.

Enterprises have long viewed Skype as the bad boy of VoIP, and for good reason. The peer-to-peer Internet phone service snuck through firewalls like a cat burglar, appropriated bandwidth and processing power from users' systems, and cloaked its traffic — which could include text messages and file transfers as well as voice calls — in a blanket of encryption. It amounted to what one observer called a "free-range rogue application" that network administrators found nearly impossible to detect, much less control. And it made them about as comfortable as would tattoos and facial jewelry in the boardroom.
Now the wildly popular service (113 million users at last count, with updated figures due this week), brought to you by the creators of the controversial Kazaa file-sharing service, seems set on respectability. It is making an earnest effort to ingratiate itself with enterprise IT departments, mainly by bringing out a new version of its client that it says will let network administrators manage Skype the way they do more conventional applications. But because Skype is inherently so unconventional, there's no certainty that the effort will ultimately win over those administrators.

In fact, Skype could hardly do a better job of rubbing enterprises the wrong way if it were deliberately designed to do so. Rather than sending its traffic through a single well-known port, for example, the way respectable applications like those of Oracle, Siebel and SAP do, it skips around almost randomly. Often it chooses port 80, the default http port, effectively disguising its activities as Web traffic.

Nor does it set up its connections by handshaking with a single location the way normal applications do. Rather, it does multiple handshakes to multiple unpredictable destinations. Each of the handshakes by itself gives no hint that it's guilty of association with Skype. The result is that IT administrators, an understandably control-obsessed lot, find it almost impossible to know whether Skype is running on their networks.

Also upsetting is that Skype can (it's in the user agreement) turn users' computers into so-called supernodes, using their processing power and network connections to relay calls of other Skype users. Administrators and security specialists worry that that can put a significant yet undetectable processing and bandwidth load on the enterprise network. In its defense, Skype's literature carefully states that "a Skype client that is unable to receive inbound network connections (such as a user behind a NAT or firewall) will never become eligible to become a supernode nor will it ever be asked to relay a third party's traffic."

Perhaps scariest of all, Skype's end-to-end encryption means that, even if they can somehow detect and monitor its traffic, enterprises have no way to tell whether it is sending sensitive corporate information, whether by voice or via Skype's messaging and file transfer functions, to the outside world. That can be a particular concern for companies such as financial firms that are required to monitor the information they provide to outsiders. Indeed, there is a new breed of security software intended for converged applications and specifically instant messaging and voice, that is supposed to automatically apply corporate compliance rules for regulations like SOX and HIPPA. This software intercepts every outbound message (email, instant message, VoIP, file transfer) and examines it for non-compliant content and then automates the process of complying with regulations – encrypting patient data automatically for messages bound outside the organization for example. Skype’s encryption could defeat the purpose of such software. Encrypted file transfers also provide an undetectable path by which viruses and other bad stuff might make their way into an enterprise, immune to eradication by anti-virus software that typically scans incoming documents such as e-mail attachments.

Skype has intensified such concerns with its almost pathological secrecy. Both its communications protocol and its encryption system are proprietary. It makes public almost no information about them, though it did once commission an audit by cryptology and computer security expert Dr. Thomas Berson, who concluded that its encryption methods at least were solid. But for the most part, how it works remains one of the great mysteries of the VoIP world.

All in all, say security experts, Skype's unconventional ways of doing things add up to a giant red flag. "For the most part, if you're following best security practices, Skype would be considered a major threat to any environment," says Jon Kuhn, product manager at Internet security vendor SonicWALL.

Rodney Thayer, a Mountain View, California-based security consultant, agrees. "I think Skype has way too many unanswered questions to be considered safe to use in a business environment," he says. "I always recommend that people don't use it, and that they prohibit it by policy." As for the company's secrecy, he adds, "If you are doing a security evaluation of a vendor, a 'We don't comment' answer is a failing score."

Skype, for its part, has clear reasons for doing things the way it does. For one thing, any application well-behaved enough to meet the approval of enterprises would by definition be one they can detect and block at will. And that would defeat Skype's purpose in life.

"Skype is attempting to proliferate as much as it can in the real world," explains SonicWALL's Kuhn. "To do that it has to take measures to connect out to that real world completely independently of the type of security you're using. The more they can make sure administrators don't know Skype is connecting outside to the Skype network, the more people they're going to have using it because it functions right out of the box."

Too, highly secret protocols and technologies, if done well, can be harder than their more public counterparts to compromise. "Skype is proprietary and encrypted, so it's difficult for people to figure out how to exploit it," says Mark Collier, CTO of enterprise telephony management vendor SecureLogix. "If they make it more enterprise friendly…and publish the protocol, the nasty side effect is that people will start to analyze it and take advantage of it." Collier points out that most VoIP handsets currently use proprietary protocols. "There are few attacks on Cisco's Skinny [client control] protocol, but you see tons of them for SIP," he notes. "The fact that [SIP] is published makes it easier to exploit."

The counter-argument is that, in the long run, public scrutiny can be the best way to make a security technology bullet-proof. That's because the number of good guys trying to find and patch the holes exceeds the number of bad guys trying to exploit them. Some experts also note that Skype itself has apparently been compromised at least once, as evidenced by security bulletins on its Web site involving buffer overflow and other issues. And at least one source, a company in China, claims to have reverse-engineered Skype software.

Regardless of the merits of the arguments on either side, Skype is taking steps to make itself more enterprise-friendly. The biggest step will be the upcoming release of a new version of the Skype client that will, according to chief security officer Kurt Sauer, let enterprise IT administrators control its use the way they do any other application on their networks.

The new version will not be a special enterprise-only edition, but simply the latest release of the Windows version of the standard client. Sauer says it will allow enterprise administrators to turn on or off various Skype capabilities, from file transfer to messaging to sending or receiving authorizations to changing privacy settings, all via standard Windows network management tools.

The tools employ documents called "policy objects," which allow administrators to designate how the machines in the network, or specified groups (domains) of them, can install and use various applications. Because the policy objects get pushed to all the machines involved, administrators don't have to know which users, if any, have installed Skype in order to control what they can do with it. Although the current version already lets them turn off file transfers, according to Sauer, the new version will extend such control to a dozen or so functions.

And Skype aims to make it as easy as possible. "They will be doing what they're already doing," Sauer explains. "They've already got machines sitting in domains, and we can simply leverage that. All we will do is provide IT administrators with the technical literature they need to create those policy objects. We're going to create a set of templates that are basically plug and play administrative templates they will be able to download from our site that have all of the control switches preloaded, and they can set them however they want."

Although it sounds reassuring, security consultant Thayer argues that, unless it's done carefully — and, at least as important, thoroughly explained — such a one-client-fits-all approach can, for complex technical reasons, at least raise suspicions that the solution itself opens up new paths of attack. And so the controversy continues. Thus it remains to be seen whether Skype's new approach will make enterprises feel better about it, given that, underneath it all, the service breaks so many of the conventional rules of application behavior.

According to at SonicWALL's Kuhn, in fact, Skype's greatest threat is not the specific danger it poses to enterprises, but rather what it might lead to. "I'm concerned about the precedent it sets," he says. "It's one of the first programs to operate in such a stealthy nature, and has the characteristics of proliferating very fast, using supernodes, etc. Some people may say that it's benign. But when is the next application going to come out that will basically hide everything you do through some proxy, that proxies all of your Web traffic out through a connection that is hidden and encrypted? When it does, content filtering and all the other provisions that organizations use today to find out what employees are doing are now obsolete. By setting a precedent with Skype, you're announcing that your acceptable use policy is that any application sitting on that PC is OK."

On the other hand, it may be enterprises themselves that end up having to adjust to new realities. As Skype security chief Sauer notes in the accompanying Q&A interview, a veritable avalanche of new peer-to-peer applications is in the works. Some if not most may work as unconventionally as does Skype. Enterprises that don't find some way to come to terms with them may find themselves falling irretrievably behind the times. And that may be the scariest danger of all.

By Bryan Betts
Published Sunday 1st October 2006 06:02 GMT

Demand for fibre-optic networking gear is on the rise at last, according to Nortel.

The company's CTO John Roese said he's heard telco CTOs and CEOs say they're finally starting to fill some of the optical fibre capacity that they over-built back in the 1990s.

Much of the extra bandwidth is being eaten up by new wireless services, broadband access and rich-media applications such as voice and video, Roese told a sold-out meeting at the Ottawa Centre for Research and Innovation.

He said that three or four years ago many people in the industry wondered if the next generation of the optical Internet would ever happen.

"We are beginning it now, and it will be absolutely critical for the next 10 years," he added.

However, other networking experts said that a big reason why those new services and applications consume so much bandwidth is that they are inefficient. Fixing those inefficiencies could be more cost-effective than adding extra fibre, they claimed.

"Service providers can't solve application inefficiencies," said Craig Stouffer, marketing veep of WAN acceleration developer Silver Peak Systems. "But they are starting to see that they can add value by optimising how applications run over the WAN."

"Take what you've got and try to improve it - it's cheaper and lower risk," agreed Chris Bell, the European director of network monitoring specialist WildPackets.

Buy now, or wait to see how hard a complete integration all the way to the desktop is going to be?

Robert Poe on August 17th, 2006

Those who feel they really need an IP PBX will face a painful decision over the next year or so. The decision won't about what model of box to buy, though. It'll be about whether to buy one at all, or to hold off a while longer. The cause of all this uncertainty will be the new "unified communications" products Microsoft will be introducing through the middle of next year. Some observers think the products could seriously disrupt the enterprise VoIP market, if not dominate it. The million-dollar question: Will they be worth waiting for?

The products, announced in late June, take advantage of Microsoft's key strength in everything it does: the fact that its products are everywhere in the enterprise, and they all work together. Or to use the jargon, they're ubiquitous and integrated.
The centerpiece is the Office Communications Server 2007, a SIP-based communications platform that provides presence-based VoIP call management; audio, video and Web conferencing; and instant messaging, all working in conjunction with existing software and applications. There is also a unified messaging server, called Exchange Server 2007, that integrates e-mail, voice mail and faxing.

A soft phone called Office Communicator 2007 will work with the communications server. Microsoft Office Live Meeting will provide feature-rich conferencing services. And an audio-video collaboration device called Microsoft Office Round Table will incorporate a 360-degree camera that lets participants see everyone in the room at the other end of the conference. Additional software will let IP phones from Polycom, LG-Nortel and Thomson Telecom work with the other products.

The software giant will start shipping the various products between the end of this year and the second quarter of 2007. And the fact that they're indisputably on the way sets Microsoft up for a momentous clash with existing IP PBX makers, according to Thomas Valovic, author of a newly released report by IDC.

The clash has been a long time coming. IP PBX makers have for some time realized that proprietary hardware and feature sets that users couldn't easily customize and integrate with desktop applications weren't the way to go, according to Valovic. To compete in the future, they needed to have features like presence detection, SIP-based services, click to conference, and sophisticated service personalization capabilities. Avaya has done a particularly good job of moving in that direction, Valovic adds.

In short, PBX makers have been "moving up the value chain going beyond voice towards these enhanced capabilities," he explains. At the same time, "Microsoft has had these enhanced capabilities, but they didn't have the voice. So they're moving down the stack."

But until now Microsoft's move hasn't been all that convincing. "The question for years has been how aggressively Microsoft is going to go after voice," Valovic says. "Do they just want to use it as an enhancement or bundle it with some of their other capabilities, or are they going after the primary voice market?" The unified communications announcement was important, he claims, "because Microsoft finally opened the kimono and stated that they are going after this primary voice market in the enterprise."

Each side will have particular advantages — and challenges — in the battle. Microsoft, for example, will have its ubiquity and integration. On the other hand, it's just getting started in the enterprise telephony game. So at least at the beginning, the call control features it can offer will be minimal compared to what the IP PBX makers have on tap.

"The IP PBX makers have been concerned about Microsoft for several years," explains Valovic. "It will take some time for Microsoft to develop their level of feature richness. They have spent millions of dollars and many man hours developing a lot of the feature sets and capabilities and reliability they offer."

On the other hand, the report says the IP PBX vendors will have to work harder to integrate their products with the IT world, and "strengthen their capabilities in SIP-based applications that integrate with applications that are available on the desktop and enhance business processes."

It could represent a tricky balancing act on both sides. Microsoft, for its part, will have to continue to cooperate with the IP PBX vendors, and make sure its applications work with their products. And in fact, less than a month after the unified communications announcement, it announced a major collaboration with Nortel.
IDC doesn't think IP PBX vendors will start to lose much share to Microsoft until 2008, with what it terms "significant" loss coming in 2009 and 2010. But there may be an even shorter-term effect: IDC thinks Microsoft will be able to convince some customers to delay their purchases until it can "beef up" the call control functions in OCS 2007.

That means some customers could get caught between Microsoft and leading IP PBX vendors like Avaya, Cisco and Siemens, with one side encouraging them to wait, the other urging them to buy now. Thus their decisions will depend not just on how good the products are, but how desperate they are. That's never the best basis for a significant purchase, or any other major decision for that matter.

Marin Perez on September 1st, 2006

Testing company Minacom says call quality is increasing for VoIP phone calls, but not for computer-to-computer services like Skype.

VoIP phone services worldwide sound better than the standard public-switched phone network, according to research from Minacom. But, these findings do not apply to PC-to-PC VoIP calling, like Skype, for a variety of issues. The company's data from the last 12 months showed that the quality of VoIP services offered by broadband VoIP providers, cable operators, and telecos has increased , with an average Mean Opinion Score of 4.2, compared to 3.9 for the PSTN. Minacom said, “Based on a MOS threshold of 3.6, only one out of 50 calls in North America were considered to be unacceptable – one in 10 worldwide – while greater than 85 percent of VoIP calls exceeded average PSTN quality of the same period.”

Additionally, VoIP phone calls were found to connect quicker overall, 8.2 seconds on average compared to 8.7 seconds on a PSTN. Minacom's findings did not apply to PC-to-PC VoIP services, like Skype.

The study comes as Brix Networks recently indicated that 1 in 5 Internet phone calls were classified as unacceptable, and that call quality was declining.

“Minacom felt is should be clarified for both those in the VoIP industry, and individuals and enterprises considering VoIP service, that (Brix's) report evaluated computer-to-computer Internet phone service, similar to those offered by Skype, Google Talk, MSN and Yahoo Messenger,” The company said in a written statement. “The quality and service reliability of these applications does not compare to that of the VoIP phone services offered by telecos, cable operators, and broadband VoIP providers who carefully deploy, monitor and manage the the quality of their services.”

“PC-PC VoIP quality is subject to many diverse impairments, including firewall settings, computer performance, antivirus installations, high-compression codecs, and Internet bandwidth shared with gaming, file downloads, Web surfing, and e-mail. By contrast, VoIP offered by service providers is switched using telecom-grade equipment, uses lower-compression codecs, and is prioritized over regular Internet traffic using sophisticated, standards-based multimedia telephone adapters maintained and monitored by the operator.”

VoIP call quality is a very important and sometimes frustrating thing. A report by Telephia showed that more than 27 percent of VoIP subscribers who are likely to change providers do so because of network quality. Adding credence to Minacom's report, J.D. Powers & Associates had their own report which found cable TV providers who offer telephone service ranked higher than traditional phone companies in customer satisfaction.

Still unsure what's all the fuss about VoIP? Please visit here to see if VoIP service is right for you, and here to see 10 questions to ask before you sign a VoIP contract.

By Ed Gubbins

Sep 1, 2006 1:41 PM


The shedding of Nortel Networks’ UMTS access business adds more clarity to the company’s priorities as it continues to evaluate which markets it will invest and compete in and which it won’t. The company will continue to focus on mobility in the areas of CDMA, GSM and LTE, with a greater focus on 4G. Meanwhile, it will aggressively pursue enterprise markets and the services business.

In a note issued this morning, UBS Investment Research called Nortel’s UMTS access sale “the first major step from [Nortel’s Chief Executive Officer Mike Zafirovski] consistent with his strategy of focusing only on areas where Nortel can be a meaningful player.”

In February, Zafirovski vowed to commit Nortel only to markets in which it could hold a 20% share. But he also highlighted three areas in particular that he felt were critical to the company’s future: WiMax, IMS and IPTV.

Since that time, Nortel’s optical business has been growing (up 30% sequentially in the second quarter and up 7% from a year earlier), and the company created a new metro Ethernet division. Both areas fall outside the three Zafirovski listed as priorities, leading some analysts to wonder aloud whether Nortel is still reaching too broadly.

As Nortel’s chief strategy officer, George Riedel, explained in June, “Those three areas--WiMAX, IMS and IPTV--aren’t the three pillars of the company going forward. I’d characterize them as important new investment areas we launched earlier in the year that fit in the broader context of the strategic plan--a subset of the strategic plan.”
Backing out of the UMTS access business--where Nortel has only 2% of the market--lets Nortel focus more intently on other mobility areas. The company will continue selling UMTS core gear.

Although some employees dedicated to Nortel’s UMTS business will be transferred to Alcatel as part of the deal, remaining resources that were previously dedicated to UMTS will now be redirected to other Nortel efforts, Zafirovski said today. UBS estimated the company’s UMTS access business--which is being sold for $320 million--generated annual revenue between $400 million and $500 million and losses up to $200 million.

When asked today whether Nortel would need a partner in order to continue selling its core UMTS business without the access portion, the company pointed to a sale of strictly core UMTS gear to Cingular Wireless earlier this year.

The sale of the UMTS business follows another step toward clarifying its business focus Nortel took earlier this summer. The company affirmed its commitment to enterprise markets with a Microsoft partnership aimed at co-developing and cross-licensing intellectual property to bring unified communications solutions to business customers.

“This is part of our business transformation,” Zafirovski said in a press conference today, citing both the MicroSoft alliance and the sale of its UMTS business announced today.

By Kevin Fitchard
Sep 8, 2006 4:03 PM

Nortel Networks is stopping development of its own presence server for its IP multimedia subsystem (IMS) portfolio in favor of using that of a third-party vendor, Followap.

Rob Scheible, leader of Nortel’s VoIP product and technical marketing group, said Nortel developed its own presence solution four years ago and has sold it as part of its multimedia portfolio to some 40 customers. “We decided, though, that is was not a technology that we wanted to continue to develop,” Scheible said. “We wanted to focus on our core IMS products.”

Scheible said Nortel chose Followap because it had the most complete portfolio of presence products, leaving Nortel free to focus on the critical components of the IMS architecture, the call session control function and home subscriber server as well as its VoIP and session initiation protocol expertise.

The Economist Group is using a complete Nortel IP communications solution at its second London office in Red Lion Square to allow its editors, analysts and business staff to communicate more effectively. Nortel's IP-based voice and data network for TEG delivers a simplified personal communications management system to its staff. This allows users to access telephony, fax, e-mail, voicemail and wireless through personal computers and IP telephony handsets anywhere in the TEG office.

The converged solution, which is capable of supporting Quality of Service (QoS) from the edge to the core of the network, was completed in conjunction with Allnet, a Nortel channel partner and is based on Nortel end-to-end enterprise portfolio.

Nortel Ethernet Routing Switch 8600 at the core, Nortel Ethernet Routing Switch 5520 at the edge, and Nortel Communication Server (CS) 1000 IP telephony solution provide The Economist Group with a system designed to handle 'mission critical' information cost effectively and with high reliability. Nortel solution for the media Group also includes wireless local area network capability.

The Economist Group also chose to converge its network to enable its entire staff to benefit from a flexible, mobile environment using 400 Nortel 2004 and 2002 Internet Phones.