What is Microsoft's ideal view of IP telephony? Let's say you use a cable modem for Internet connection. Every time you log on to your account at MSN or your MSN Instant Messenger, colleagues will know. Just as when you know that friends on your IM buddy list are online, people will be able to see if you're sitting at your computer before they call.

Also, regardless of whether you're actually online, Microsoft's telephony software will enable cool telephony features like "follow-me" call routing. When a call comes into your computer, Microsoft software will ring your telephone. If you don't answer within, say, three rings, the software sends your call to your mobile phone. If you don't answer that within, say, three rings, the software routes your call to your voicemail, which, of course, is recorded on your computer's hard drive.

Even cooler are features that will let one determine how calls are handled based on who is calling. You'll simply open the Microsoft Outlook contact information and tell the computer to enable the follow-me scenario. As for your ex-wife, well, she'll be leaving a lot of messages because Outlook can be asked to send her calls directly to voicemail.

Many boxes and Internet-based application service provider (ASP) software packages already perform many functions that Microsoft plans to enable. But, obviously, you don't have one of those boxes at home now, and the ASP guys don't exactly have the same credibility -- or the marketing clout -- of Microsoft. Most important, Microsoft's ubiquity is what can really begin to drive the success of its computer telephony services.

Eyeing the Competition

The Times article noted that this new functionality of Windows XP puts Microsoft in direct competition with voice carriers. This competition is taking place in several areas:

1. The call-holding, call-waiting, caller-ID, voice-messaging, three-way calling or other features that your local carrier provides you are very high-margin and growing revenue sources. Microsoft's computer telephony services render the monthly charges for such services obsolete. Why pay BellSouth when you can get it virtually free from your desktop?

2. That dial tone and simple voice service (POTS, which stands for plain old telephone service) that comes over your plain old telephone loses importance -- and eventually relevance. If you've got a cable-modem connection and begin using your desktop as the primary telephone, why would you pay for a redundant POTS connection? The answer is that most of us wouldn't. Again, it's not as if cable companies aren't already beginning to offer voice services, but with Microsoft's new software comes a real push for the industry. (Of course, the industry standard of 99.999%, or five-9s, reliability comes into question, particularly relative to 911-type emergency access. But that's a whole other mess -- partially a political mess -- that won't be addressed here.)

3. The long-distance that your traditional carriers (AT&T, WorldCom and Sprint) provide, mostly over their own legacy networks, becomes threatened, too. Doors really begin to open up for upstart IP-telephony carriers that route calls over the public Internet (rather than just Internet Protocol-based calls over one's own asset-based network -- like, say, a Broadwing or Genuity that I wrote about last time). Companies like ITXC or iBasis that already wholesale millions of minutes of long-distance phone calls over the public Internet now have a potential customer with every Windows XP license sold.