Microsoft as Phone Company?

The article in Business Week is indicative of the upheaval that’s coming in the telecom world:

On Feb. 12, the Federal Communications Commission ruled that a voice communication between two people using PCs is more like an e-mail than a phone call. This decision on a petition brought by Jeff Pulver, the entrepreneur behind the Free World Dialup Internet phone service, meant that the hundreds of thousands of people who now use broadband connections for voice conversations can continue to do so unmolested by the tariffs that are levied on traditional phone calls to support 911 service and universal access to the phone network.

Replace Pulver, whose system now has 175,000 users, with Microsoft (MSFT ), however, and the FCC ruling could have enormous significance. The software king has for years made noises about augmenting the voice-communication capabilities in its operating system to allow any two Windows PCs to create a voice link over the Net.

“The Pulver petition becomes important for the market when Microsoft pushes a voice product,” say Blair Levin, an analyst with Legg Mason and former chief of staff at the FCC under William Kennard during the Clinton Presidency. “If you can turn each Windows PC into a voice device, you suddenly have a whole new phone network that never touches the public switched telephone.”

The Windows XP operating system already contains so-called session initiation protocol (SIP) software. SIP is an industry-standard technology that defines how computers interact with the public phone network, instant-messaging software, and Internet telephony networks and applications. The Pulver decision effectively clears the way for Microsoft to move forward on these initiatives without worrying about getting tapped to pay charges and fees levied by on regular phone companies and wireless carriers — and possibly in the future on VoIP providers that don’t use direct PC-to-PC connections.

In an effort to start tying these loose ends together, last August Microsoft launched its Live Communications Server (LCS). This piece of software could turn into the killer phone application that SBC feared. Aimed at big corporations seeking to leverage their PCs to create unified communication systems on the desktop, LCS can perform a wide variety of tasks, from creating secure instant-messaging connections to alerting members of a workgroup that a key document has been posted to a virtual whiteboard.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.