INTERNET TELEPHONY
Voicing VoIP
Internet telephony is experiencing a roaring success world-wide, and appears to be threatening the revenue bases of incumbent carriers—domestic and international—as well as new service providers.
T
he Voice-over-IP (VoIP) or Internet/IP telephony enables voice calls and fax transmission over data—predominantly IP—networks. Beginning with hobbyists, who used Internet to make cheap long distance calls, IP telephony has slowly grown and created a revolution—or storm—in the telecom world. Most countries faced with the prospect of unchecked mushrooming of VoIP operators have preferred to legalize it by suitable licensing process. And that includes Asian countries like China, Japan, Singapore, etc.
The revenue generated through IP telephony traffic is expected to reach $10 billion by 2001, accounting for almost 25 percent (presently believed to be around 5 percent) of international calls. Another indicator of this growth is the world-wide market for IP telephony gateways, which has increased from $250 million in 1998 to $500 million in 1999, and is expected to reach $2 billion in 2001 (as reported by Frost & Sullivan). The aggressiveness of the players is apparent from the fact that carrier class H.323 VoIP gateways were the give-aways at Telecom’99 at Geneva to ISPs and other competitive carriers. The aim was to make them jump-start and encourage usage and drive the market. Of course, it was believed to come with a commitment of wholesale purchase of about 2,50,000 minutes per gateway per month.
Need to Differentiate
Initially, many considered VoIP as a dubious service. In the connectionless packet-switched world of IP*—as against the traditional circuit-switched networks—the packetization breaks a conversation into packets of data and sends them over many routes (a best-effort delivery vehicle provided by IP) for reassembling at the other end. This obviously does not work perfectly due to problems like delay, jitter between packets and even loss of packets. And hence, the voice quality suffers. Despite the limitations, the world-wide market is booming as this technology is being capitalized upon more and more due to the falling prices. IP networks being far more bandwidth efficient, the commoditization of bandwidth has further helped the process.
However, VoIP, with poorer voice quality compared to that of Public Switched Telephone Network (PSTN), requires to be positioned differently in the marketplace. VoIP marketing has many challenges—not only setting up the necessary all-digital networks, but also putting resellers in place.
IP Wholesaling: A Golden Opportunity
A new breed is now emerging on the horizon—wholesalers dealing in Internet telephony minutes. They may also facilitate traffic over the public Internet network or private data networks among affiliates who may form a network of IP telephony gateways—some being called originators and some terminators, or both. The wholesaler sells them minutes at wholesale prices purchasing unutilized minutes—mostly during off-peak hours—from carriers at attractive prices. According to Phillips Tarifica, "IP wholesaling will be bigger in Asia than possibly anywhere else in the world. Although the opportunity will play a role in the short term, it is the sheer volume of traffic, combined with creeping liberalization, that is making the Asia Pacific region a very attractive place to do business." It appears to offer, by all accounts, a golden opportunity.
Fresh Look at Business Plans
IP telephony is roaring and is threatening the domestic and international revenue bases of incumbent carriers as well as new service providers. The big operators are expected to lose hundreds of millions of dollars every year. Their responses have been varied from doing nothing to embracing IP telephony and having a fresh look at their business plans as traditional models for costing/pricing and international accounting rates may not work anymore. Networks using IP platforms cost much less and are believed to be less cumbersome to maintain. It is easier, cheaper, and faster to enter a new marketplace.
As billions of dollars worth of circuit-switched networks are at stake, strategic decisions are required before another billions are invested in packet-switched networks including for access and call completion between networks. Regulations need to be rewritten. Business processes need to be reengineered to meet the new scenario.
As the amount of data traffic has caught up with, and is even surpassing, voice (see graph), it makes all the sense for voice to travel on the high-speed, high-bandwidth multimedia transport networks rather than pushing data into conventional networks.
Many Challenges Ahead
Besides improving voice quality, various conventional value-added services like call transfer, call forward, and ISDN services need to be replicated over data networks too. And then there is the issue of rapidly catching Intelligent Network (IN) services. New applications may be created and marketed. The billing systems for the packetized world also need to be different. They could be even simpler than for the conventional voice systems. Instead of adopting the conventional method of billing by minutes, the new paradigm will require billing by packets. Systems will require granularity into network elements that can extract, collect, and consolidate information about various services. As IP networks become more intelligent, it will be possible to guarantee end-to-end Quality of Service (QoS) for IP traffic, besides guaranteed bandwidth.
India Likely to Move
The usual barriers to introduction of newer technologies generally cannot stop the technology. Ultimately, people do understand the benefits of technology and embrace it. India too, is finally serious about introducing this latest technological marvel. And why not? It is the consumer who is ultimately going to benefit.
By
Niraj K.Gupta, Voice & Data, March 2000.