Bank of America Corp.’s decision to convert its entire telecommunications network to use Internet voice systems highlights the growing acceptance of the format as a mainstream technology, an analyst said.
The Charlotte company announced Tuesday that it will install 180,000 Internet protocol phones in phases over the next three years.
Though a growing number of banking companies have implemented voice-over Internet protocol technology in recent years, B of A’s is one of the largest corporate deployments and can be seen as an endorsement that this once-experimental communications method is now considered both effective and secure.
Elizabeth Herrell, an analyst at Forrester Research Inc. of Cambridge, Mass., said the B of A announcement signifies that voice-over-IP is maturing.
“I think the technology is ready for prime time,” she said in an interview Wednesday.
Cisco Systems Inc. of San Jose, Calif., will provide the equipment and Electronic Data Systems Corp. of Plano, Tex., will be the systems integrator for the project, which will involve telephones at 5,800 branches and other facilities in 29 states and the District of Columbia. B of A is to mothball 362 private branch exchange systems and move more than 100,000 employee voice-mail boxes from a variety of messaging systems to the Cisco system. A single network will handle both voice and data communications.
Voice-over-IP technology converts traditional phone conversations into a digital format, and breaks down the signal into packets that are transmitted across a data network in much the same manner as routing an e-mail message across the Internet. However, voice traffic must be sent and reassembled much faster than standard data, because even slight delays can produce poor sound quality and awkward gaps in IP telephone calls.
The technology has been around since at least the mid-1990s, but these delays relegated it to the ranks of technology hobbyists and people who were willing to endure clunky conversations in order to save money on long-distance charges, especially international calls. Only in recent years has the technology advanced to the point where major corporations are willing to shift their traditional phone networks to voice-over-IP systems. (Cisco said that the aerospace giant Boeing Co. announced in June that it would also install 180,000 IP phones.)
Ms. Herrell said Internet voice systems could eventually become the norm in the corporate world because of their flexibility and the potential savings from sending voice packets across an existing data network.
“As a replacement for conventional PBXs, I expect all major corporations will move to IP telephony. It is a given,” she said. She noted that Avaya Inc. and Nortel Networks Corp. offer products similar to Cisco’s.
But companies should be cautious about claims that shifting to voice-over-IP can provide an immediate bottom-line lift, Ms. Herrell said. “While there can be some savings, there also can be considerable network upgrade costs” to accommodate the increased volume of voice traffic on the data lines, she said.
One banking company that has reported big savings from the technology is SouthTrust Corp. of Birmingham, Ala.
In 2000, SouthTrust (which is being bought by another big Charlotte bank, Wachovia Corp.) began shifting almost all of its telephone systems to voice-over-IP technology, also from Cisco. By October 2003 it was reporting savings of 20% on local phone charges, 38% on long distance, 51% on switching lines and adding new phone numbers, and up to 95% on conference calling.
Merrill Lynch & Co. has also installed voice-over-IP systems.
B of A would not make an executive available to discuss its plans. In a press release, Steve Venezia, the managing director of the network computing group and network services, said the move “will help us realize operational and telecom cost savings as well as improved system management and employee productivity.”
