Small and medium businesses (SMBs) are rapidly transitioning to from public switched telephone network (AKA plain old telephone systems) to voice over internet protocol (VOIP) according to the Yankee Groups recent report. The growth potential of this emerging technology is great and is creating a digital rift in the business communications world. Making business calls is becoming easier, more efficient and cheaper much to the dismay of traditional phone companies, causing 70% of businesses to give preference to hosted VOIP solutions.

The possibilities are many, including cost saving solutions such as free or reduced toll calls, network management features and the ability to focus on core business instead of diverting funds to telephony. Productivity increasing solutions make communications within a business more efficient so less time is wasted.

Customer service was one of the focal points for the report, and one company came out on top. M5 networks was found to be a competitive market force that offers hosted VOIP systems in a customer friendly, professional environment. M5 offers outsourced IP communications that eliminate the hassle and maintenance of having a premise-based system so management costs are eliminated.

Over 400 SMBs in the New York Metropolitan area have already made the switch, proving the feasibility of such a technology to infiltrate a market.

The problem is that SMBs are less likely to make the actual transition, but SMBs as a whole have more of an interest in transitioning than other types of businesses. The desire is there but they are hesitant to make a change. They want to adopt this new technology, so the question remains—why haven’t they?

In response to this question, Matthew Del Percio, Associate Analyst of the Yankee Group responded, “We have talked to a lot of SMBs about VOIP, in terms of adoption and penetration, but the numbers are still in the single digits as they were in 2004-2005″

In response to why SMBs interest remains consistent, but in a dormant state he said, “SMBs are constantly looking for solutions, such as VOIP because there is limited risk involved; you are outsourcing it to an organization that is dedicated to providing that service. They will do all the upgrading – it is one less thing to worry about.”

So the verdict seems to be that although SMBs are still currently hesitant to make the switch, it may just be a phenomenon of no one wanting to be the gunea pig. There is safety in numbers and it is easier to get on board with a VOIP system after seeing others implement before you.

As a wrap up, Del Percio had this to say, “What we are seeing in the market today is an interest in VOIP systems. Not a day goes by that there isn’t some new information about the great potential in VOIP as a market potential. Despite the potential, the momentum has not picked up because of these barriers to adoption that I mentioned to you earlier. Given those challenges, the two headed monster of the benefits productivity and cost saving makes it a formidable foe. It is really going to continue to drive momentum so hat adoption will eventually take place.”

According to TheVoIPWeblog which received a tip regarding Overdo’s Land of Nothingness blog entry, Microsoft is planning on using MCI for VoIP termination.

TheVoIPWeblog writes, “According to a tipster, Microsoft will soon be announcing that it has contracted MCI to provide outbound PSTN calling for click-to-call applications and for Live Messenger. This would provide outbound dialing capability a la SkypeOut. Hit the link for the tip-off.”

You can read more about Microsoft offering PSTN termination here on the Microsoft Live site.

It still remains to be seen how successful Microsoft will be at convincing users to make VoIP to PSTN calls. After all, they failed with Microsoft NetMeeting and they failed with Windows/MSN Messenger to attain a critical mass of users terminating to the PSTN. And then Skype came along and really put the final nail in the coffin of both Netmeeting and MSN Messenger - as it pertains to VoIP-to-VoIP and VoIP-to-PSTN calling.

According to PRNewswire, “Verizon Airfone has made significant progress toward providing wireless broadband services for U.S. air travel. The announcement follows the FCC’s establishment of rules for auctioning spectrum in the 800 MHz band dedicated to commercial air-to-ground telecommunication services. The FCC’s action will enable the agency to auction spectrum licenses early in 2006 and puts Verizon Airfone one step closer to providing its customers with broadband services. An auction early next year will enable Verizon Airfone to begin offering inflight wireless Internet access in 2007 (subject to acquiring a license from the FCC).”

I’ve writen about broadband wireless on airplanes utilizing AirCell’s technology that works with any WiFi or cellular wireless technology. In fact, AirCell told me that “targeted for commercial deployment in 2007, the AirCell Broadband System will enable airline passengers to use
their own Wi-Fi & cellular devices such as laptops, PDA’s, phones and Blackberries in a fully-integrated wireless cabin over an affordable, broadband air-to-ground link.” With broadband on airplanes I can stream my home Windows MCE video & audio content using Orb (or a Slingbox) and even stream live TV when flying non-JetBlue airlines which don’t typically have TVs. (Side Note: What’s up with JetBlue being the only airline carrier to offer TVs for every passenger?)

“We are pleased with the FCC’s efforts to promote the development of broadband services, and we urge the FCC to move as quickly as possible to auction new licenses in the 800 MHz band,” said Bill Pallone, president, Verizon Airfone Inc. “Verizon Airfone is excited about the opportunity to provide innovative wireless services to the flying public, and there are many interested airlines and general aviation operators that share our commitment to this broadband vision.”

Verizon Airfone, first to use third-generation (3G) CDMA (Code Division Multiple Access) technology in an airborne system, has been demonstrating the system to commercial airlines by conducting flight tests since September 2004 that have achieved ground-to-air peak data speeds of 2.4 Mbps (megabits per second). In June 2005, Verizon Airfone became the first company to receive Federal Aviation Administration (FAA) approval to install the necessary cabin equipment to enable passenger and crew use of wireless (Wi-Fi) devices onboard U.S. domestic commercial aircraft.

Verizon Airfone is working with industry leaders to ensure the highest quality connectivity for its customers. Working with QUALCOMM Incorporated, a leading developer and innovator of CDMA and other advanced wireless technologies, Verizon Airfone completed its first commercially packaged air radio prototype in July. Supporting CDMA2000 1xEV-DO, special features of this air radio include provisions for extended distances and Doppler compensation for high-speed aircraft.

Working with Airvana, an innovator and leader in broadband CDMA network infrastructure systems based on 3G EV-DO wireless packet-data technology, Verizon Airfone has developed a customized radio base station with unique RF filtering capabilities to ensure that no interference is caused to systems operating in adjacent radio bands.

With Verizon Airfone’s faster and more affordable wireless broadband service, passengers can expect to gain access to the Internet; corporate VPN (Virtual Private Network) e-mail and personal e-mail accounts (e.g., Yahoo!, AOL, MSN); streaming video; and VoIP (voice over Internet protocol) services. Once Verizon Airfone’s broadband network is in place, airlines and general aviation operators only need the addition of an avionics box, a wireless access point and a directional antenna to begin offering wireless broadband services to their passengers.

Verizon Airfone plans to upgrade its existing North American ground network with the broadband technology that will provide passengers, airlines and general aviation operators with many benefits over the existing Airfone system available today. Currently, passengers are staying connected to work, family and friends using Airfone Service on United Airlines, Continental Airlines, US Airways, Delta Air Lines and more than 3,000 general aviation aircraft.