Alexander Graham Bell wouldn't even recognize business telephone service circa 2007.

Not only do we have businesses substituting cell phones for wireline phones and opting to route phone calls over the Internet, but some of the newer offerings take telecom even a step further away from what the telephony pioneer originally envisioned.

The year 2007 didn’t bring flying jet cars and instant transporters as science fiction predicted, but there have been developments in telecommunications that will impact fast-growing businesses for years to come. Some companies are completely doing away with the PBX closet and hiring companies to "host" their voice over Internet Protocol (VoIP) service. The video phone did arrive this year, although as a phone that also plays downloaded videos not necessarily one that shows business partners in their suits and ties while discussing deals. Instead, Web conferencing took off, reducing the reliance on business trips and face-to-face meetings.

More than large corporations, small and mid-size businesses are sometimes more likely to try some of the newer telecommunications options because they tend to be more nimble and open to change. "It’s less structured, so we have a lot of mobile people, people telecommuting, and more of a need for them to share information and work together,” says Gary Chen, small and medium business analyst for the Yankee Group, of Boston.

Not only VoIP, but hosted at that

The adoption rate of small and mid-size businesses switching to VoIP is not yet up to that of consumers. Some are still concerned about the stability and reliance of IP-based service. But the need to stretching often tight telecommunications budgets has made VoIP attractive and that is why a growing number are opting to switch to managed or hosted VoIP service.

Whereas some early adopters of VoIP experienced issues with performance and call quality, hosted VoIP allows businesses to benefit from IP telephony features without the problems associated with managing an on-site IP PBX system. Many small and mid-size businesses don't want the headaches associated with installing and configuring IP telephony hardware and doing the necessarily network upgrades to support such a system. That's where hosted VoIP solutions come in. Service providers take care of management and support so small and mid-size businesses can benefit from VoIP without the upfront costs.

"We do for phone systems what does for their customer relationship management," says Dan Hoffman, president and chief executive officer of M5 Networks, a New York City-based provider of hosted VoIP service. "Our clients just have phones. We take care of the rest."

The new-fangled video phone

Merely a decade ago, forecasters predicted that telephony would be revolutionized by the advent of a video phone that would transmit pictures of people as they were speaking. Today, the closest the market has gotten to a video phone is the device used by correspondents in war-torn Iraq or Afghanistan who transmit sometimes grainy and slow-motion moving pictures of themselves narrating the action. For business use, what's been more revolutionary has been the growing of Web conferencing tools that allow participants to speak over telephone lines while sharing presentations and/or white-board space to collaborate over hosted applications.

The appeal of Web conferencing reflects several trends in the business marketplace. The number of telecommuters has been rising at small and mid-size businesses, in addition to larger enterprises. At the same time, some businesses are foregoing business travel in the face of increased security precautions and delays involved with flying. The broadband Internet revolution, meanwhile, has paved the way for Web conferencing tools.

Chen says the best measurements are the popularity of Microsoft Live and the new Google Office. Geared towards small businesses, Microsoft Office Live integrates email, documents and website management into one portal. Meanwhile, the free Google Office has a robust document suite, with spreadsheets and word processors, channeled through the Internet to make sharing easier. “Online collaboration will be big,” Chen says. “A lot of people are headed in that direction.”

As for the video phone, perhaps the closest we'll get is in the form of the much-hyped iPhone, which was unveiled earlier this year and is due to be marketed this summer. Apple's long-anticipated foray into the mobile phone market combines phone, Internet, email, and a large-screen video iPod into one hand-held device. A palm-sized laptop for the YouTube age, if you will.