The VoIP revolution

According to industry analysts, there were almost 80 million voice over Internet Protocol (VoIP) subscribers worldwide in 2007, with the global market’s worth expected to rise to US$48.9 billion by 2010. Michelle Mills investigates what slice of this growth operators in the region are likely to enjoy as third-party provision of VoIP is liberalised over time

Etisalcom’s Al Snan says the entry of third-party VoIP providers is inevitable in every telecoms market and incumbents and regulators ought to prepare for that

The region’s VoIP community assembled at a conference in Dubai last month, which reinforced the impression that there remains no universal strategy among regional regulators as to how best to accommodate the use of web-based and third-party provided VoIP services.

While most regulatory authorities allow VoIP for licensed operators, many restrictions remain, related to private corporate networks, peer-to-peer communications and control over access to Internet ports.

The UAE’s Telecommunications Regulatory Authority (TRA) currently allows Etisalat and du – the licensed incumbents – to provide VoIP services that originate and terminate within the country, but prohibits VoIP-based international phone calls. VoIP services over public Internet are also banned including services, software and hardware that utilises the Internet as a means of voice communication.

The TRA’s Mohammed Al Ramsi, manager for Next Generation Networks, said the regulator plans to modify its policy later this year to allow licensed operators to provide international calls using VoIP. This modification would be the first since VoIP policy was issued in December 2006 and looks to smooth the way for a more keenly awaited wider deregulation of VoIP in the country.

“We are also considering the implementation of VoIP over public Internet but with some requirements, such as emergency services will remain within the existing policy,” Al Ramsi stated. In contrast, Bahrain’s TRA opened up its VoIP market in 2005 and has since issued 33 international service licences (ISLs). While many of these are not operational, the majority of those that are provide VoIP services for international calls.

One such company is Etisalcom, which not only has an ISL concession but was also awarded licences for the provision of national fixed-line, international facilities, Internet services and value added services. It has also been looking to establish itself as a reseller in Oman, allowing it to operate as a mobile virtual network operator of sorts should it be able to reach agreement with a host network.

In Bahrain Etisalcom capitalises on its entirely IPbased infrastructure to offer international calling cards targeted towards the expatriate community, with discounts of up to 80 per cent to some destinations. For example, a BHD1 (US$2.65) call to India with Batelco used to last three or four minutes, while with Etisalcom that same amount now lasts for half an hour.

Etisalcom also launched the first national telephony-over-the- Internet service using Session Internet Protocol (SIP), which provides its own number range under the brand name ‘Etisl’. “You can have a Bahraini number where ever there is an Internet connection,” advises CEO, Rashed Al Snan. “You are not limited by the boundaries of your country – the boundary is the Internet. You can have a local number on your laptop and now on your mobile where there is a 3G network.”

Al Snan believes opportunity exists in the VoIP arena because international calls usually account for as much as 40 per cent of a traditional incumbent’s revenue stream and this can easily be penetrated by newcomers. “All you need is VoIP softswitches, gateways, interconnect and off you go,” he says. The impact of increasing competition on incumbent Batelco is clear with more than 60 per cent of Bahrain’s international minutes now being captured by VoIP carriers.

Al Snan says this is despite Batelco introducing its own low-cost service called ANIS to compete more

effectively with the new entrants in the market. “Sixty per cent of the international minutes go through the VoIP carriers, but VoIP only generates 40 per cent of the revenue,” Al Snan clarifies. “So the dominance remains in the case of the fixed-line services and that’s why many of us in Bahrain are going to introduce fixed-line services.”

Al Snan quotes figures from the Bahrain TRA that show international traffic in the kingdom continues to grow rapidly. From second quarter 2006 to second quarter 2007 traffic grew by 84 per cent, with calls to South Asian countries growing by 166 per cent.

International revenues from first quarter 2007 to second quarter 2007 grew 18 per cent to BHD16 million (US$42 million), with prepaid calling cards representing 39 per cent of total international revenue. Al Snan attributes Etisalcom’s operational efficiency, low overheads and fast product development to its success in providing low-cost calls and ability to compete against Batelco.

Rob Middlehurst, director of market and competition at TRA Bahrain, is satisfied with the country’s current competitive situation and confirms that his job as a regulator is to ensure consumers receive good quality services at a fair price.

TRA Bahrain’s Middlehurst believes his role as a regulator is to safeguard the consumer

“There was a comment about some governments saying we wait (to liberalise the market) where VoIP is banned. This is clearly designed to protect the revenue stream of the incumbents. I don’t want to see that,” Middlehurst states.

“I want to promote competition and I think in Bahrain we’ve demonstrated this quite well. We are open to competition, we want people to come in and we want operators to be successful.” However, Middlehurst says this approach has to be balanced with economically efficient investments. He also says VoIP in a regulatory world is very difficult to manage because there are no clear laws in every country and that even within the Arab Regulators’ Network (AREGNET) there is no common approach.

“The approach that sits within AREGNET is a collective thought and we go back to our countries to see if we can implement that. There is no directive that comes from it,” Middlehurst comments. “Each country has its own jurisdiction, each country has its own rules, each country will implement the way it sees fit,” he adds.

Other challenges are that in the traditional TDM world, quality is assured, whereas with IP that is not guaranteed. While IP is feature-rich it can also create problems with respect to interoperability. Middlehurst contends that location is fundamentally important because the TRA in Bahrain does not have jurisdiction outside of the country, though if Bahraini citizens are being targeted via public Internet then the carriers can be regulated and will require a licence.

Regulators often resort to blocking websites found on the public Internet in order to serve their regulatory purposes domestically and Middlehurst believes that developing the right model for regulating VoIP and other Internet-based applications will take time.

“If we rush it, I can guarantee regulators will get it wrong. The impact of that is huge,” Middlehurst advises. “From the consumers’ perspective, what they enjoy could be downgraded. From operators’ perspective, their ability to make profit could also be damaged. A pragmatic approach is the only way forward and there needs to be patience, some sharing of information and collaboration between regulators, operators and vendors to fully understand the implications,” he adds

Statistics

• The global VoIP services market reached US$15.8 billion in 2006, an increase of 66 per cent over 2005, and is on track to triple to US$48.9 billion by 2010
• There were almost 80 million VoIP subscribers worldwide in 2007, led by the Asia Pacific region
• The industry forecast growth in IP-based customer equipment
  compared to the TDM: IP PBXs are expected to grow to 66 per cent in 2011 compared to 40 per cent in 2007 Spending of IP PBXs compared to TDM PBXs are expected to grow from just more than 50 per cent to just below 100 per cent in 2011

Source: Infonetics Research

VoIP regulation in the region

Source: Various regulator’s website