IP Telephony to Have a Dramatic Impact on Asian Voice, Data Communications
Madanmohan Rao reports from the first iLocus Internet Telephony
conference in Bangalore
It won't be fully legal in India until April 2002, but Internet
telephony is already changing the face of voice and data communications
in countries across the worldfrom Chile and China to Brazil and
And a new generation of start-upsthe dot-telecomsis driving
yet another wave of innovation in consumer markets, enterprise
markets, and local and international markets.
There are over 1,800 companies operating in the IP (Internet Protocol)
telephony market todaymost of which were launched less than two
years ago, according to Jahangir Raina, director of iLocus, a
London-based market research firm. The company recently hosted
India's first IP telephony conference in Bangalore, which was
attended by more than 250 delegates and exhibitors who represented
140 companies and 20 countries.
"Asia is the most promising region for the growth of IP telephony
due to increasing deregulations in voice and data communication
markets, coupled with the maturation of IP telephony technology
itself," Raina said. Eastern Europe and Latin America also have
potential for IP telephone growth.
"The service sector for IP telephony was worth US$1.8 billion
in 2000, with a compound annual growth rate (CAGR) of 120 percent.
The equipment market for products in this sector was worth US$2.08
billion last year," said Raina.
As of December 2000, IP telephony networksbased on data packet-switching
as opposed to traditional circuit-switchingaccounted for an estimated
1.6 billion minutes of traffic per month. Executives in countries
around the world are already leveraging the gains of voice-traffic
over managed IP networks, followed closely by consumers making
voice calls over the public Internet.
Leading players in this market are IP-public switched telecommunications
network (PSTN) gateway vendors (Cisco, Clarent, Nuera, Vocaltec,
Lucent, Sonus, Unisphere, Convergent Networks), carriers (ITXC,
Genuity, NetVoice, Net2Phone, iBasis) and network operators (such
as Concert, PointOne, China Telecom). Two of the fastest-growing
technology companies in North America over the last three years
are in the VoIP (voice over IP) market: ITXC and iBasis.
Nearly half of the carriers use Cisco gateways; the company has
a diverse portfolio and is also able to finance start-up carriers.
Clarent, Sonus and Nuera are strong in Asia.
Lucent has good relationships with almost all incumbent telecoms
and usually takes up large and long-term orders. Net2Phone has
excellent marketing prowess, and has formed strategic alliances
with major portals like Yahoo, AOL, Netscape, and MSN.
Key challenges for telecom operators will lie in ensuring seamless
migration paths from existing legacy infrastructure to IP technology.
Major incentives for them to migrate include: better functionality
at lower costs; faster deployment; potential for new applications;
and the emergence of a new generation of computer-friendly users.
"By 2010, all voice traffic will be over IP networks," said Tom
Evslin, chief executive officer of ITXC, the largest wholesale
carrier of IP telephony traffic in the world, with 466 points
of presence in 263 cities and 96 countries around the world.
IP infrastructure can simultaneously handle the needs of both
voice and data communications, and it is advisable for companies
entering recently deregulated telecom marketssuch as Indiato
seriously consider choosing IP telephony solutions, Evslin said.
"We entered China two years ago when deregulation permitted IP
telephony for carriers China Telecom and China Jitong. Today,
more than 18 Chinese cities have IP telephony connections. We
may see even more explosive growth here in India, regulations
permitting," said Evslin.
IP telephony is explicitly legal in 15 countries, including much
of Western Europe and North America, and parts of Asia like Japan,
Korea and Singapore. It is illegal in another 15 countries, and
the rest of the world falls into a gray regulatory area.
High telecom rates for domestic and international long distance
calls are detrimental to commercial growth in a fast-paced global
economy. At a time when capital markets are drying up and making
it difficult for telecoms to raise money to build new infrastructure,
the significantly lower costs of IP telephony make it a better
alternative, says Evslin.
Founded as recently as 1997, ITXC has forged alliances with most
of the leading telecom carriers in the world as well as numerous
start-up carriers. The New Jersey-based company has grown to 270
people with US$26 million in revenues in the first quarter of
The company has been granted five patents for its best-value routing
technology, and has filed for a dozen more, according to Evslin,
who was formerly with AT&T's internet service provider WorldNet.
ITXC claims that it has the capacity to deploy full gateway solutions
for carriers in 6 days flat.
According to research firm Telegeography, three percent of international
phone-to-phone calls travel over IP networks today; ten percent
of the calls from the United States to Mexico are already traveling
over the Net. "We would like to see the other 97 percent of international
traffic also move to IP networks," said Evslin.
According to the World Telecom Policy Forum, IP telephony will
account for 25 to 40 percent of all international voice traffic
Contrary to popular misconceptions, the quality of VoIP service
has actually improved dramatically, and the major carriers of
the world have been steadily incorporating IP networks; many people
today may not even be aware that part of their long distance voice
traffic is being carried over IP networks, said Evslin.
"India may be one of the countries to benefit most significantly
and quickly by VoIP services, since teledensity is at a mere three
percent today and there is a huge emerging market for value-added
services like call centers. In fact, by 2005, we may see the majority
of international voice traffic for India going over IP networks,"
IP telephony is already making a big splash across the border
in China. Launched in May 1999, China Unicom today has the world's
largest VoIP network implementation in the world, accounting for
usage of over 2.5 million minutes a day, ten million calling cards,
and revenues of US$200,000 a day.
IP telephony application service providers (ASPs) are driving
new applications for VoIP markets in areas like Web interfaces,
call roaming, distance learning, and electronic customer relationships
management (eCRM), said Srinath Beldona, a consulting engineer
for Cisco Systems.
Such dot-telecom startups include BeVocal, PhoneTree, Edge2Net,
MediaRing, eYak, Pagoo, and Go2Call.
It would be advisable for emerging private players in India to
develop shared infrastructure, said N. P. Sen, managing director
of S. M. Telesys in New Delhi, and a former Department of Telecommunications
"Every operator wants to have his own private fiber network and
not buy anything from the competitor," Sen said. There will also
be challenges in devising low-cost IP phones which still work
when electrical power is cut, as with present phones.
Existing telecom players like BSNL in India will also be reluctant
to switch completely to newer IP solutions. As such, there will
be a need for managing hybrid networks with switches from different
VoIP is already allowed in India in closed user groups, but not
for the average consumer using the public Internet, said Vijay
Yadav, country manager in India for CommWorks, a wholly owned
subsidiary of 3Com.
Huge markets will open up in India for services like PC to phone
communications, unified messaging, network-based call centers
and clearing houses based on open settlement protocols, Yadav
While many VoIP players seem quite bullish about the Indian market,
some like Jan Burdinski, director of Berlin-based Gecco.net, are
more wary. "The Indian market will not open up as fast as everybody
would like to believe," he said.
Telecoms will also have to deal with shorter network planning
cycles and short equipment depreciation periods, said Venu Sriperumal,
CEO of Amoeba Telecom in Coimbatore.
And return on investment on equipment has dropped from expectations
of ten years to three years, added Manoranjan Mohapatra, chief
operating officer of Hughes Software Systems in Gurgaon.
Fortunately, there is more standardization of equipment and services
in VoIP as compared to other telephony devices, thanks to interoperability
fairs called 'bakeoffs.'
"With proper partnerships, we shall see a surge in demand for
value-added services like talking yellow pages, map and direction
services, scheduling meetings within specified distances, and
click-to-dial," said Mohapatra.
In a world of shifting alliances and changing technologies, 'coopetition'
will be a key requisite for VoIP players, said Lena Chung, managing
director of Hong Kong-based Concert Global Clearinghouse, which
offers multiple termination options with transparent fees for
VoIP carriers and telecoms.
Concert, a joint venture of AT&T and British Telecom, offers international
services for call-routing, usage recording and inter-network authentication.
Many Asian regulators and monopolies seem nervous about emerging
technologies and dropping telecom rates, Chung observed. "But
take a look at Chinalong distance call rates were recently cut
by 50 percent, but traffic growth increased so much that profits
continued to flow in for the telecoms," she said.
Incumbent Indian telecom players may certainly lose traditional
revenuesbut they gain new markets in the process, Chung said.
"Voice commerce or voice-assisted Web browsing for online shoppers
is a good example of new revenue streams via VoIP," said Ira Palti,
president of VocalTec in Israel.
Now supporting over 100 telephony protocols, VocalTec was one
of the earliest pioneers of VoIP way back in 1995, and has a strong
presence in the PC-to-phone and Web call center markets. Its clients
include carriers; leading ISPs; call-back companies; mobile carriers
and calling card companies. The roster spans Deutsche Telecom,
AT&T, France Telecom, China Telecom, and Marconi.
Voice will become yet another application on IP networks, in addition
to news and weather; VoIP will eventually become "the world over
IP," Palti said.
"By 2010, the telecom market worldwide will be open and hyper-competitive
with many-tiered operators. End users will have unprecedented
control over their telecom service packages. Carriers of today
must reinvent themselves for tomorrow," he said.
The recent VoIP experience of other Asian countries like Thailand
should also be informative for India, said to Vorasakdi Arora,
Bangkok-based managing director for the Indian Ocean region at
iBasis, a leading wholesale VoIP carrier.
Thailand has introduced VoIP services in rural areas, enabling
rural users to make long distance calls at one fifth of the normal
cost. "Price per minute certainly falls, but call volumes also
increase," Arora said.
Users will also benefit from Internet-based applications. Thanks
to the global nature of the Net, users of VoIP services will be
able to tap applications from around the world and not be bound
to their local service providers in the PSTN model, said Gene
Cohen, cofounder and chief technology officer of IPX, a VoIP clearing
house based in New Jersey.
As a major call center destination, India stands to gain a lot
from VoIP, said Keith Fiveson, founder of the IT Enabled Services
Alliance in New York. The number of call centers worldwide will
increase from 100,000 today to 300,000 in year 2004.
"Competition has intensified in the global village, and there
will be a growing need for 24X7 customer service. IP telephony
has made outsourcing and offshoring of CRM an important option
for major global players," said Fiveson.
By 2005, 35 percent of call center agents worldwide will be using
IP telephony solutions, according to market research firm Ovum.
Technology has matured to the point where all information about
a customer is available on one single system, said Bart Bartolozzi,
director of strategic development at Net2Phone, whose VoIP CRM
solutions clients include Avis, AT&T, and several airlines and
brokerages. M-commerce solutions can integrate voice, which can
also activate other applications like calendaring, he said.
"For call centers, every cost is cheap in India except telecommunications.
These costs must come down and be integrated with IP if India
expects to remain a significant player in this market," said Nick
Lau of Vocaltec.
International VoIP is growing at a CAGR of 278 percent, according
to Avinash Vahistha, managing director of IT services firm neoIT.com
in California. In Asia, emerging economies like Malaysia are already
issuing VoIP licenses.
By 2005, 50 percent of the private branch exchange market of telecoms
will be captured by IP PBX devices, said Rupa Rao, senior project
manager at Bangalore-based TeleSoft, which specializes in Web-based
network provisioning systems for VoIP.
One of the spectacular success stories of VoIP in the consumer
market is DialPad, which registered 13 million online users in
its first year of operation, with one million users signing on
in the very first eight weeks of launch in 1999.
"We have over 15,000 users signing up each day now," said Venkat
Ganesan, international business development manager for DialPad
in Santa Clara, California.
"VoIP disrupts the existing cost structures of telecom calls,
and telecom incumbents always fear disruptive technologies and
innovations," Ganesan said.
DialPad has 46 percent of the global retail market share of VoIP,
and 22 percent among global VoIP carriers.
"There is a concern in India that the country's gross domestic
product will drop if Videsh Sanchar Nigam Limited (VSNL) loses
revenues to VoIP companies. But new markets actually open up,
and the decrease in cost will be passed on to the end-users,"
Calls from the United States to India used to cost US$2 per minute
in 1998; now they have dropped to 55 cents a minute, and people
are actually talking more and spending more on calls, according
"VSNL may continue to block our user datagram protocol packets,
but Indian users are still using Microsoft and Yahoo to make phone
calls over the Net," he said.
Ganesan added that cybercafés in India have very good potential
for launched value-added VoIP services further on down the road;
an estimated 60 percent of Indian users access the Net from cybercafés.
Small infostructure providers like cybercafés and public call
booths will play a key role as resellers of VoIP services in the
future, said Ryan Hendricks, founder of VoIP start-up STDbooth.com
It's like 1981 all over again, when the PC era dawned; the same
paradigm shift is hitting the telecom industry and a global rebalancing
of players is beginning, he said.
"You can't stop VoIP, just as you can't stop call-back services.
India is already five years behind China and will soon be two
years behind Nepal and Pakistan on the telecom regulatory front,"
according to Hendricks, who formerly launched a VoIP company in
"India should not become the black hole of south Asia in terms
of telecom obstacles. Banning VoIP merely hits small and medium-sized
enterprises and workers and encourages voice pirates who siphon
off precious revenues. I support VoIP in India but do not want
to become a voice pirate and spend time in telecom jail listening
to VSNL theme music," joked Hendricks.
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