Although VoIP seems to be most attractive, the technology has not been developed to the point where it can replace the services and quality provided by the PSTN. First it must be clear that VoIP will indeed be cost effective. In order to compete with today's PSTN, there must be significantly lower total cost of operation. This savings should initially be seen in the area of long distance calls. VoIP provides a competitive threat to providers of traditional telephone services that will clearly stimulate improvements in cost and function throughout the industry.      Another immediate application for IP telephony is real-time facsimile transmission. Fax transmission quality is typically affected by network delays, machine compatibility and analog signal quality. To send faxes over packet networks, an interface unit must convert the data to packet form, handle the conversion of signalling and control protocols and ensure complete delivery of the scan data in the correct order. Packet loss and end-to-end delay are even more critical here than in voice applications.      Many other applications have been identified to be implemented by VoIP. For example, voice messages can be prepared using a telephone and then delivered to an integrated voice/data mailbox using Internet or intranet services. Voice annotated documents, multimedia files, etc. can easily become standard within office suites in the near future.      The main justifications for development of VoIP can be summarized as follows: Cost reduction. As described, there can be a real savings in long distance telephone costs which is extremely important to most companies, particularly those with international markets. Simplification. An integrated voice/data network allows more standardization and reduces total equipment needs. Consolidation. The ability to eliminate points of failure, consolidate accounting systems and combine operations is obviously more efficient. Advanced Applications. The long run benefits of VoIP include support for multimedia and multiservice applications, something which today's telephone system can't compete with.      Growth in the VoIP market is expected to be considerable over the next 5 years. Estimations put the annual growth rate for IP-enabled telephone equipment at 132% between 1997 and 2002 with an expected market of some $3.16B in 2002. Annual revenues for the IP fax gateway market are expected to increase to over $100M by the year 2000 (from less than $20M in 1996).      This expected growth is encouraging to prospective developers of VoIP products. However, there still remain many challenges facing developers of VoIP equipment, both in terms of voice quality, latency and packet loss as well as call control and system management.