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<p>COLUMBIA, S.C. – Serving up cutting-edge technology to a tech-savvy membership wasn’t the goal of Blackhawk Credit Union when it decided to go with IP telephony for its phone service. In fact, the $190 million, 40,000-member community CU in southwestern Wisconsin made the move to cut phone bills and create more ways to encourage its membership to embrace low-cost touchpoints provided by high-speed data transmission and online services. The Janesville, Wis., credit union’s base for years was industrial workers at the plants scattered around its multi-county service area. And when Sean Rathjen came aboard as president and CEO about 18 months ago, he found that while 58% of Blackhawk’s membership had Internet access, only 7 or 8% were using it for online banking. He also found that Blackhawk’s strategic plan was well under way and that it included a strong emphasis on technology aimed at doing business more efficiently. Online loan approval, a robust call center and other typical high-tech applications were on tap, and putting the phone system online followed naturally. Besides saving on long-distance bills, member-service improvements for the 105-employee credit union will include live chat from the Web site, voice and e-mail contact and Web collaboration, in which a caller can allow a member-service representative to actually take over the mouse and help a member through the site. “If you understand the technology and see where it’s heading and how to leverage it, financially and operationally it makes sense,” Rathjen says. “My first experiences with IP telephony was making phone calls over the Internet on the old Net2Phone technology, and the quality was horrible. “But it’s improved so much now that members don’t even realize they’re on that kind of system.” A big, broad fiber-optic cable is what made it possible for Blackhawk. A 5-megabit line, part of the local cable company’s service, is the pipeline for data between the credit union’s four branches. An IP phone system, in this case from telecommunications giant 3Com, has allowed the credit union to save money on long-distance phone calls between branches, as well as combine voice and data in ways that will continue to unfold. “Where we’re heading with this is remote training. We have enough bandwidth that we can do that through our lines, and by doing that we can train people without them having to drive 45 minutes to get here,” Rathjen says. Executives at two California credit unions – Pacific Community in Fullerton and Valley First in Modesto – made the same kind of decisions. “We decided to go to IP telephony last year because it was the cleanest solution we could find that would connect our main branch to our outlying branches seamlessly,” says Terri Holveck, vice president of information services at $165 million, 26,000-member Valley First.”The quality of the calls is excellent. No one has mentioned any difference.” As was the case at Blackhawk, the IP telephony solution occurred during an overall network upgrade. “We already were setting up IP routing for our data network, and our voice communications vendor was able to provide the additional voice-routing equipment to share the T-1 or frame-relay line with the data equipment. From our point of view it was no more challenging than setting up data over IP,” Holveck says. Valley First is using a local Pacific Bell subcontractor and Toshiba equipment that doesn’t integrate with its other equipment, and like Blackhawk, its old PBX system is still there as a backup. Holveck says the setup was “very pricey, but I look forward to seeing the pricing improve as the technology becomes more widely used.” She adds: “Ultimately, this solution will be extremely cost effective. All we will need is a voice server and IP phones. No more separate cabling or separate phone lines.” Valley First is considering using Cisco equipment for a branch it plans to open later this year. “Cisco assures me that their equipment will integrate with our PBX and our data side as well, adding the ability to use Outlook address books and voice recognition software that allow the member to speak a name and be connected,” Holveck says. “In the future, we should be able to have the member’s account screen pop onto the call-center representative’s screen by using caller ID when the call is answered,” she says. “We can have calls follow us anywhere. I can see call-center representatives working from their homes late into the evening, giving our members the personal attention we strive for,” Holveck says. Kevin Pendergraft is similarly optimistic. “There are really a lot of capabilities we haven’t tapped yet,” says the president and CEO of Pacific Community, a 15,000-member, $110 million CU serving communities in Orange and Los Angeles counties. And, he notes, he didn’t consider the move to IP telephony to be particularly adventurous. “We really considered it current technology,” Pendergraft says. “And it really came off without a hitch.” “Our vendor, Inter-Tel Co., provided the entire system. We have IP handsets that simply plug into the WAN (wide-area network) just like you plug a computer into the system, and it operates like any other business phone after that,” he says. Pendergraft expects his CU to see significant long-distance savings (Pacific Community’s branches are in three different area codes) and is confident enough in its new system that the old PBX system is gone. Of course, all these changes come with technical challenges. For instance, Blackhawk had to experiment with its switching capacity to find the right speed of ports to make sure the phone quality was good. And, looking at the technology as a whole, latency can still be an issue, according to Christine Hartman, Texas-based research director of voice-over-packet markets for Probe Research in Cedar Knolls, N.J. Voice-over-packets and IP telephony are terms that can be confused or used interchangeably, Hartman says. They are similar, and a key thing to remember is that the data, in this case voice transmissions, moves out in packets from one end and reassembled at the other. There’s no fulltime circuit devoted to each call, as in a traditional phone system. Packets can be dropped because of latency issues, leading to scrambled calls, but Hartman says the technology is swiftly improving. She also sees major carriers such as Sprint and WorldCom as well as big hardware vendors like Cisco, Nortel, Siemens and Ericsson competing to make voice-and-data transmission more reliable and less expensive, and more widely available. Any increased adoption of IP phones by credit unions would be part of a worldwide trend, Hartman says, and that will only result from significantly increased mass-market demand. And she sees that as not happening until “network externalities are in place that will expand their acceptance beyond the enterprise arena.” “Current IP phone products are focused on either complementary business systems or cheap long distance,” Hartman says. “As service providers roll out packet-based offerings, IP phones will initially be offered in addition to other alternatives that enable the business to operate with currently owned phone devices. “Later on, advanced service only available via IP phones directly connected to service-provider networks for either Centrex/hosted PBX or single-line service will begin driving IP phone sales.” How will that vision become manifest in credit unions? “Well, one of the key things about IP telephony is that it’s not just about voice and data,” Hartman says. “It’s about voice and data and video. The long-term vision is that of sharing voice, data and video to improve interaction with the member. “Who knows how that’s going to roll out? It’s going to be interesting.” -</p> <p>[email protected]</p>

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