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The History of VoIP and Internet Telephones

This article by Robert Pepper was originally posted on

The history of Internet phones and VoIP dates back farther than you probably know, and moves faster than pretty much any communication technology, except maybe smartphones. VoIP has a rich history, with famous names, government agencies and educational institutions all making their mark on this wonderful technology.

1928: The Roots of VoIP Are Technologically Formed

In 1925, AT&T, the only major name in telephone communications, opens Bell Laboratories. The purpose of Bell Labs is to invent, design, and improve technologies that will allow AT&T to expand its service. In 1928, Homer Dudley creates the first electronic voice synthesizer, known as the Vocoder. The vocoder worked by analyzing the sounds created by our mouths and vocal cords, and being able to recreate these analogues of human speech. This is similar in concept to today’s packet transmission, which records voice samples on one telephone and recreates them on another. The Vocoder would later be used to transmit secret messages during World War Two, and become popular decades later with off-beat musicians like Kraftwerk using it.

1969: The ARPANET is Built

After more than two decades of theoretical research, scientific papers, and the like, The government agency Advanced Research Project Agency (ARPA) builds the first packet-switched network. Packet switching works by collecting data into datagrams and sending them independently, rather than having a dedicated circuit that must always be connected end-to-end. The ARPANET worked by having small computers interconnected by modems. Vint Cerf and Bob Kahn are credited with creating the protocols that would create the Internet.

1973: First Voice Data Packet Transmitted

The federally-funded Lincoln Lab at MIT develops, as it continues to do today, advanced technology in the interest of national security. Bob McAuley and Charlie Radar develop the first voice packet over the nascent ARPANET. It uses something called an LPC, or linear predictive coder, to transmit voice.  In 1974, the lab successfully ran a test between them and Culler Harrison, Inc., which was in California. By 1976, Culler Harrison and Lincoln Labs had a conference call over LPC. In 1982, they achieved a major milestone by using LPC to connect over a local cable network, a mobile packet radio net, and an interface with the PSTN.

1975: CompuServe is born

Golden Life Insurance develops a computer time-sharing program to rent time on its digital servers to other companies during non-office hours. In 1975, they spin off the Compu-Serv program into its own unit and change the name to CompuServe in 1977. Compuserve becomes synonymous with the Internet, much like AT&T with the telephone. Computer users are able to exchange messages over electronic bulletin boards and email. In 1980 it releases the first chat service. CompuServe is the first instance of every day users using the computer to communicate with each other. CompuServe wouldn’t see real competition until the 1990s, but when it did, it lost, and was bought by rival AOL in 1997.

1988: The First Wideband Audio Codec

The ITU-T approves the G.722 audio codec. The audio codec written in Lincoln Labs, known as G.711 has a bitrate of 64 Kb/s, and is “toll quality,” meaning it is comparable to PSTN phone sound. This wideband audio codec has twice the bitrate of previous audio codecs, resulting in a far superior sound, but still only needs 64 Kb/s.

1991: First VoIP Application Released as Public Domain

John Walker, founder of Autodesk, moves to Europe to expand his company’s operations there. The technology at the time requires a speed of 64 Kb/s in order to run voice applications, but Wiles writes a decimation/expansion scheme that is able to reduce the necessary bandwidth to just 32 Kb/s. He releases the program to the public domain under the name NetFone. NetFone, later known as Speak Freely, is the first software-based VoIP phone. He uses it primarily to listen in on meetings and talk to other programmers within his own company.

1993: First Video Telepresence System

David Allen and Herold Williams develop the first telepresence system, calling it Teleport, although they change the name to TeleSuite soon after. Allen and Williams developed the idea from their experience in the resort business, where they noticed customers would cut short their stays in order to attend business meetings. Hilton Hotels was their first major client, with the intention of installing telepresence systems in their hotel rooms. The deal later fizzles out, and Allen purchases all the company’s assets. He makes several attempts over the next few years to create a profitable company, but he eventually sells his patents to Polycom in 2007.

1994: Free World Dialup

Jeff Pulver, an Internet pioneer investor, teams with Brandon Lucas and Izak Jenie to fund the first business venture in VoIP. Although it’s unable to make outbound calls to the PSTN, its primary focus is to create a network where it is possible to talk over the computer to other subscribers of the service. Free World Dialup, also known as FWD, is free, and may be just a proof-of-concept for Pulver’s later, extremely successful venture. Over a decade later, in 2008, FWD would charge a $30 annual membership fee, and two years after that, shut down entirely.

1995: First For-Profit VoIP Application

Alon Cohen and Lior Haramaty founded VocalTec Commununications, an Israeli telecom company in 1989. Their VoIP application, VocalTec Internet Phone, is considered to be the first commercial VoIP application. It needs a 486 processor, 8MB of RAM, a 16-bit sound card, and an SLPP or PPP connection, which is pretty high-end for its day.  It also runs on the H.323 protocol. The original VocalTec application is half duplex, meaning only one side can talk at once, but soon upgrades to full duplex. VocalTec, unlike Free World Dialup, is a for-profit venture, charging a registration fee and per-minute fees. But compared to long distance and international rates, talking over the computer costs a fraction as much. In 2007, VocalTec releases MagicJack, one of the first VoIP hardware devices to hit the mainstream consumer market. Early versions of the MagicJack work by hooking up a regular telephone to a dongle on the user’s computer, and charging an annual fee far less than telephone companies charge. Buoyed by positive reviews from magazines, MagicJack eventually becomes so successful that it takes over its parent company.

1996: The First Hosted PBX Solution

California-based Virtual PBX releases the first hosted PBX solution. Hosted PBXs provide features like find me/follow me, and web portal control, which on-premise PBXs will not have until years later. Unlike an on-premise solution, hosted PBXs scale up and down easily, and do not require buying or leasing hardware. The first hosted PBX does not use VoIP, but instead uses the copper wires of the PSTN to connect within an organization.

1996: Development of SIP

Originally developed to invite people to multi-point conferences on the Internet Multicast Backbone, SIPin this stage has nothing to do with VoIP. The first draft of SIP has only one command, to setup a call, but by 1999 they establish six. One major advantage of SIP is that it scales better that H.323. Cell phone companies eventually adopt SIP as their protocol of choice for mobile VoIP.

1999: Asterisk, The first IP-PBX Developed

Mark Spencer owns his own Linux technical support company, but needs a PBX to talk to his employees and to have them talk to each other. Lacking enough money to buy one, he instead programs his own IP-PBX, calling it Asterisk. Asterisk, he decides, will be open-source, rather than stay proprietary. As Asterisk gains popularity, he moves away from supporting Linux and instead focuses on support and hardware for Asterisk. Asterisk, the open-source program, is developed over the years by thousands of programmers who each contribute to the growth of the software.

2003: Skype Peer-to-Peer Internet Calling

Niklas Zennstrom and Janus Friis found Skyper, later shortened to Skype. With the help of a few developers, the Estonia-based company quickly gains ground in Europe and then the U.S. Skype allows free communication within its network and charges for calls made to the PSTN. Skype is a hybrid P2P and client-server system. Skype later adds video, the ability to “Skypecast,” file transfer, and other features. In 2003 it is bought up by eBay, and in 2011, it is purchased by Microsoft. With over 100 million users, Skype is the first name in video chat.

2004: Vonage Hits The Shelves

In 1998, Jeff Pulver founded, which in 2000 changed their name to Vonage. After a few years of development and investment, retailer Circuit City is the first to sell Vonage hardware, and Vonage airs commercials for its service. Within two years, it has nearly 2 million subscribers.

2004: The FCC Weighs In

Federal Communications Commission chair Michael Powell makes a landmark decision declaring that VoIP is an information service rather than a telephone service. This means lower taxes for VoIP customers than landline or cellular phones, and that States should not be able to regulate VoIP services. In 2005, the new chair, Kevin Martin, takes a more hands-on approach, mandating that VoIP services that connect to the PSTN must be able to make 911 or equivalent calls.

2004: VoIP Users Skyrockets

The number of VoIP users skyrockets from 150,000 in 2003 to 1.2 million at the end of 2004, and this figure doesn’t even include PC-to-PC VoIP users.

2005: First Dual Wi-Fi Cellular Phone

After two years of development, Calypso Wireless introduces the C1250i, the first mobile phone with Wi-Fi connectivity. It’s the first phone that can seamlessly switch between standard cellular link tower and local Wi-Fi connections. The integration of the two allows users to make real time two-way video conferences, VoIP calls, and network-based gaming. Calypso is recognized by Frost & Sullivan for its innovation.

2006: First Mobile VoIP App Unleashed

James Tagg, Alexander Straub, and Alistair Campbell form Truphone, a company designed to make mobile VoIP apps for smartphones. The app is first available for Nokia phones, but soon after is released for the iPhone, Android and BlackBerry platforms. The app is able to make free calls within its network, send text to other networks, including Skype, and make VoIP calls to the PSTN. The app, which uses SIP, makes calls over Wi-Fi and wireless Internet, rather than making calls over the cellular network. The app is later released as a softphone as well. The parent company, Truphone Ltd., also makes SIM cards designed for international travelers.

2012: VoIP is Mainstream

The global VoIP market—residential and business—totals $63 billion. Hosted VoIP and UC services grow 17% over the year before, and SIP Trunking makes massive inroads, growing 83% from 2011 to 2012.

2013-2014: VoIP & Beyond

VoIP is predicted to reach $74.5 billion globally by 2015. Businesses are expected to adopt VoIP in even greater number numbers. Major expansion is also predicted in mobile VoIP, with analysts predicting that segment of the market to reach $1 billion by 2017. As a technology, Voice over IP has proven to be so much more effective than copper circuit-switched networks that AT&T has petitioned the FCC to allow it to discontinue legacy copper wire in favor of fiber and IP switches. As a business solution, every provider puts their own spin on VoIP, offering goodies like specialized software, which keeps the market competitive. The creators of VoIP and related technology come from all around the world. Anyone from a tiny startup to a huge corporation can make their mark on the world of VoIP. If the past of VoIP tells us anything, it’s that the market for Internet telephony is huge, and continues to grow.

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