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TeleEvo 2006, Moscow, 25 October 2006 1
Phillippa Biggs, Economist, ITUTeleEvo 2006
Radisson SAS Slavyanskaya HotelMoscow, 25 October 2006
VoIP: Current Trends and
Future Evolution
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TeleEvo 2006, Moscow, 25 October 2006 2
Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution5. Conclusions
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Agenda1. Market drivers:
- IP as a key enabler NGN- Development of the broadband market- Price reductions (operators & consumers)
2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution5. Conclusions
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1. Market drivers: IP as a key enabler
Evolution from multiple separate networks(each optimized for one service) to a
unified IP-based multi-service network
Telephony
Internet
Television
Multimedia Services
Telephony
Internet
Television
…
IP-based network
Control layer
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IP-enabled Next Generation Networks (NGN)
ITU Workshop “What Rules for IP-enabled NGN?”23-24 March 2006- Policy and regulatory implications- Market developments- Issues surrounding interconnection and universal service
http://http://www.itu.int/osg/spu/ngnwww.itu.int/osg/spu/ngn//
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The transition towards NGNOld World
(PSTN telecom)New World
(IP-based Internet)
Circuit-switched Packet-based, based on IP
Interconnection P2P peering arrangements
Capacity-based – QoS guaranteed Quality of Service (QoS) class (best effort)
Cost orientation, focus on marginal cost Bundled offers: marginal costs near zero
Calling Party Pays (CPP) Unclear… Bill and Keep? (Scott Marcus’background paper and WIK Institute’s workshop on this subject).
Key issues – asymmetric regulation (numbering, universal & emergency service)
Unlicensed bands, spectrum trading, competition policy, emergency service
Network-centric control & intelligence Edge-centric - intelligent nodes at edge
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Forces driving VoIP (cont’d)• Consumers – cheaper, single provider,
simplicity of flat-rate billing.• Operators:- Reduced costs of new & legacy networks- Tapping into growth in new markets;- Alliances with service and content providers, in
new, converged business models- Growth in broadband networks.
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Increasing availability of broadband…Number of countries with broadband
commercially available
81
113133
145
166
020406080
100120140160180
2002 2003 2004 2005 2006Source: ITU World Information Society Report.
Source: ITU
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…At faster speedsGrowth in max. broadband speed available
0
5
10
15
20
25
30
35
40
256
512
768
1024
1280
1536
1792
2048
2304
2560
2816
3072
3328
3584
Mor
e
Speed (kbps)
Num
ber o
f cou
ntrie
s
2003 2005 2006
2005
2003
2006
Source: ITU.
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Growth in broadband in subscribers & share
0
100
200
300
400
500
1995 1997 1999 2001 2003 2005
Internet subscribers worldwide, in millions
Fixed-line narrowband
Fixed-line broadband
Mobile broadband
Source: ITU
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International voice traffic (bn mins)
15.5%13.1%
11.8%7.4%
4.8%1.6%0.2%
0
25
50
75
100
125
150
175
200
1998 1999 2000 2001 2002 2003 2004
VoIP
PSTNAs % of total
Source:ITU.
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Falling price (& revenue?) in int’l voice traffic
323539
4451
5863
35
40
45
50
55
60
1998 1999 2000 2001 2002 2003 2004
Revenue (US$bn)Price per minute (US cents)
Source: ITU World Telecom. IndicatorsDatabase
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Transition to VoIP: incentives for operators
0%
20%
40%
60%
80%
100%
1995 1997 1999 2001 2003 2005
Costs
Competitors
Profits
Incentives in the Development of the Market (figurative)
Time
??
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But beware: price reductions for consumers!
$16.81
$37.44
$60.74
$34.28
$28.20
$12.94
0
10
20
30
40
50
60
70
Cos
t (U
SD)
20032005
mobile basket-12% p.a.
20 hours' Internet access-12.5% p.a.
broadband($/100 kbps)-20% p.a.
Average cost of ICTs worldwide2003-2005
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Incentives with price reductions
0%
20%
40%
60%
80%
100%
1 2 3 4 5 6 7 8 9 10 11Costs
Profits
Incentives II (Taking into account declining costs)
Time
Costs
Competitors
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Agenda1. Market drivers2. Defining VoIP
- ITU work and “working terminology”- Country definitions- Regulatory treatment
3. VoIP market4. Future Evolution5. Conclusions
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2. Defining VoIPITU Internet Report 2001IP TelephonyIP Telephony – carriage of voice over IP-based networks irrespective of ownershipVoice over Internet Protocol (VoIP) – voice traffic carried wholly or partly using IP over broadband networks competing with incumbent operators
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2. Defining VoIP: Country definitionsDefinition Selected countries
QoS, now replaced by Functionality
India, JapanHong Kong
Numbering system Japan, Taiwan-China
Netwk. Architecture Israel, Saudi Arabia
Degree over PSTN& terminals used
Israel, JordanIndia, Japan, Malaysia, Spain
Service Egypt, Barbados, Indonesia, Italy, Jordan, UK, United States.
Users Australia, Chile, Tunisia
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Regulatory status of IP Telephony, 2005
2
7 8
33
10
5
3
2
2
5
7
2
124 6
4
113
3 3 3
11
3
9
0%
20%
40%
60%
80%
100%
Africa Americas Arab States Asia-Pacific Europe/CIS
No policy forIP Telephony
Prohibited
Restricted
PartialCompetition
FullCompetition
Note: Based on responses from 149 economies. “Prohibited” = no service is possible. “Restricted” = only licensed PTOs can offer service. “Partial competition” = non-licensed PTOs may use either IP networks or public Internet. “Full competition” = anyone can use or offer service.Source: ITU World Telecommunication Regulatory Database (2005 questionnaire).
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The spectrum of regulatory treatment of VoIP, 2006
Explicitly legal(57 countries +)
Explicitly banned (at least 23 countries) Yet to be
made legal-“Twilight Zone of regulatory ambiguity”
“If in doubt, hold a Public Consultation”(22 countries
+)
“Under consideration” by gov’t/regulator (30+).
Explicitly deregulated and/or light regulatory touch (19 countries+)
License required(26 countries+)
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& Russia? “Directive on Telematic Service”
Source: http://www.minsvyaz.ru/site.shtml?id=3075
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Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market
- Subscribers & distribution- The problem of the missing millions- Revenues
4. Future Evolution5. Conclusions
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3. VoIP market - strong growthWorldwide VoIP Subscribers
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011
Mill
ions
0
2
4
6
8
10
12
14
16
18VoIP subscribers (millions)VoIP share of total mainline subscribers
Source: IDATE.
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Distribution of VoIP subscribersDistribution of VoIP subscribers, mid-2005
Japan62%
North America
16%
France11%
Germany2%
Norway0%
Neth.1%
Sweden1%Italy
5%
Korea2%
Source: Point Topic.
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But – how to measure the missing millions?Household VoIP in the UK
(1.8 million)
150,000 8%
1.35m 75%
300,000 17%
Skype/Vonage
BT
WanadooOrange
Source: OFCOM
Difficult to estimate!
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Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution
- Market projections- Voice in bundles- The transition to flat-rate pricing
5. Conclusions
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4. Future Evolution: Market projectionsEstimates of international VoIP traffic
05
10152025
3035404550
1996 1999 2002 2005 2008
% o
f tot
al in
t'al m
inut
es
Yankee Gp.
Telegeography /PriMetrica
Tarifica
Delta Three WP
Delta Three White Paper
Analysys
Yankee Gp.
ITUSource: ITU et al.(ITU estimate refers to IP Telephony)
Pink lineTelegeograhy
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Voice included in bundles (UK)
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Shift towards flat-rate pricingEvolution in Pricing Strategy
133145
166
020
406080
100120140
160180
2004 2005 2006
Num
ber
of c
ount
ries
Data TimeBoth Flat-rate
75%68%
81%
Data: billed by data downloaded or time spent online or combination “both”.
Source: ITU
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• VoIP is a growing reality – for operators, consumers and regulators, with strong growth by all metrics.
• Opportunity or threat?• A bit of both!• Despite regulatory uncertainty in many countries, it
may still be best to engage:Operators – early mover advantage; Consumers – benefits in cost reductions;Governments – help shape/develop a stable market, instead of holding it back.
5. Conclusions