Home EuropeEurope 2006 Challenges facing the dissemination of IP-based telephone services

Challenges facing the dissemination of IP-based telephone services

by david.nunes
Kálmán KovácsIssue:Europe 2006
Article no.:3
Topic:Challenges facing the dissemination of IP-based telephone services
Author:Kálmán Kovács
Title:Minister of Informatics and Communications
PDF size:84KB

About author

Kálmán Kovács is The Republic of Hungary’s Minister of Informatics and Communications. He has served his government in numerous posts including as Vice Chairman in the Committee on Economy of the Hungarian Parliament, as a member of the Sub-Committee on Informatics and Infrastructure, as the president of the Hungarian Space Board, and as a member in the Steering Committee for National Informatics Strategy. Mr Kovács was a Member of the Hungarian Parliament, and the Parliamentary State Secretary of the Ministry of Transport, Communications and Water Management. Minister Kovács was a member, and a Majority Leader, of the General Assembly of Budapest. He began his career in the Technical Department of the Hungarian Chemical Industries Engineering Centre, worked as an Assistant Professor at the Department of Mathematics at the Technical University of Budapest, as a researcher at the Mathematics Research Institute of the Hungarian Academy of Sciences and was an Associate Professor at the Institute of Mathematics of the Technical University of Budapest. Minister Kovács has won several awards including the Baross Gábor Commemorative Medal and the Eisenhower Fellowships Chairman Award. Kálmán Kovács is a graduate of the Technical University of Budapest’s Faculty of Mechanical Engineering and of the Hungarian Academy of Sciences Institute of Mathematics seminar on the Approximation Theorem.

Article abstract

In Hungary, new technologies such as VoIP are dramatically changing the structure of the market, forcing incumbent operators to adopt the new technologies and act aggressively to survive mounting competition. Hungary seeks to align its regulations with those called for by the EU and, in addition, develop policies and regulations that meet the country’s specific needs. High among both Hungary’s and the EU’s priorities are the need to stimulate competition, protect the consumer and encourage the growth of new services.

Full Article

According to the findings of the European Union December 2003 study on the telecommunications sector, the 4th Report on Monitoring EU Candidate Countries, the market for Internet services provision in Hungary is already relatively developed. Nevertheless, the Information Technology Ministry has had to tackle a number of challenges in order to set the country on a development trajectory that can, in other areas as well, ensure that Hungary improves to the level of the more developed member states. In 2004, Internet use was four percent higher than during the previous year and had reached a penetration rate of 29 per cent of the population. The dissemination of ADSL (Asynchronous Digital Subscriber Line Broadband) increased, whilst dial-up access decreased. By the summer of 2004, the proportion of Hungary’s enterprises with Internet access was 67 per cent. The Internet was implemented to the greatest extent among governmental institutions related to the budget; there, Internet usage came close to 90 per cent by the summer of 2004. It is a characteristic of the ISDN (Integrated Services Digital Network) residential switched line and of the ADSL Internet services provision markets that the local incumbent providers – that is, Hungarotel, Invitel and, primarily, Matáv – fix the user access prices. CATV (cable TV) broadband Internet, and not ADSL, forced the introduction of price-reducing competition to some extent. Fixed-line voice communication is characterised nowadays by competition between traditional line-switched technology, and modern packet switching technology. The dissemination of Internet telephony is one of the most important technological trends today. Internet telephony, or VoIP, is considered a very promising solution globally and, indeed, is expected to remain so for years to come. According to available data, VoIP technology is quickly establishing a firm foothold in Hungary as it is in most of the cost-sensitive Central European market. VoCATV (voice over cable TV) a new form of IP-based telephony made its debut in the Hungarian market not long after the appearance of CATV-Internet in 2005. UPC, the CATV provider, first made cable telephone service available. It has since been offered by several other service providers, using their existing broadband Internet access infrastructure, at prices lower than those of traditional competitors making the service increasingly affordable to subscribers. Requirements In Hungary today, 512kbs download and 64kbs upload speeds are generally the minimum requirements to define a connection as broadband. It is important to note that, even with these bit rates, many applications still cannot run effectively and that their operation can be quite cumbersome. Over the long run, twice or thrice this bit rate, defined as a minimum value, would be necessary in most cases, for the effective use of the possibilities that IP offers. IP (Internet Protocol) based telephone services first appeared in the corporate market in Hungary, prior to the opening up and liberalisation in the telecommunications sector. Only later did it appear among residential users. Generally, companies start using IP-based telephone systems for the sake both of reducing their costs and to increase efficiency. Cost reduction, in general, results from the reduced cost of making calls within the company’s network as well as the lower rates for international calls. As a result, the number of corporate IP-telephony users in Hungary almost doubled from 2003 to 2004. Published estimates of the expected development of VoIP are also favourable; according to these, nearly 30 per cent of major corporations, and roughly 20 per cent of mid-size businesses plan to make investments connected to IP telephony. The intensive competition that developed was a consequence of the regulation formulated to liberalise electronic communications. The regulations stimulated almost every one of the traditional telecommunications providers to offer some sort of cheaper VoIP-based voice service to its customers. At the same time, numerous new VoIP telecommunications providers also appeared in the market. The success that such smaller IP-based carriers have is primarily derived from their ability to react more flexibly to the vertical demands generated by certain niche markets, to their application of cutting-edge technological solutions and, as well, to their more cost-efficient business models. According to international observers, all these trends should eventually result in a significant reshuffling in the fixed-line telephone services market; this, however, has yet to be seen in Hungary. As for the prices currently in effect on the VoIP market, we can state that Matáv, now called Magyar Telekom Rt, continues to be the price-setting player. The remaining service providers align their prices to those specified by Magyar Telekom. Price competition usually develops field by field. Until now, only the areas of business communication and international voice have seen serious price reducing competition. With respect to the future of Internet and VoIP services, conventional wisdom about the market has it that IP-based services and networks are the future. Market players are expecting the appearance of ever more integrated services and ever-greater bandwidth demand. They expect that the authorities will facilitate, as far as possible, the establishment and the widest possible dissemination of these new solutions or, at least, that the authorities do not hinder the growth of the market. Internet strategy From the perspective of Internet-regulation, we can state that the Hungarian Government’s Internet strategy is much broader in scope than the portions of the electronic communications regulations that pertain to the Internet. It encompasses a far greater area than just electronic communications although essentially “patchwork” in nature. The government’s Internet strategy includes, among others, such priorities as encouraging electronic administration, electronic public procurement, electronic commerce, and the Internet-based modernisation of public administration to make it more user-friendly and efficient. We are making a considerable effort to develop electronically accessible content and make it as diverse as possible. Although this raises content-regulation and governmental content provision issues, it is necessary because the government has a wide range of social objectives to achieve and its Internet related responsibilities consist of many more than just regulatory questions. In this respect, our activities tend to mirror those upon which the European Union embarks and urges its member states to follow, or expedite, in accordance with its directives. In light of current European electronic communications legislation, the fundamental question of regulating Internet access is the scope, as well as the manner, in which ex ante regulation is introduced on markets impacted by Internet access. With regard to services, the bandwidth is the primary factor defining regulatory approaches; currently, narrow and broadband access markets are managed, and regulated, as separate entities. This differentiation should diminish as time goes by and technological, as well as infrastructural changes occur. As for narrow band regulation, the focus is essentially upon two areas: first, pricing and miscellaneous regulation pertaining to Internet services provision as set forth in the ECA and, second, the regulation of services according to market considerations. The regulation of broadband fundamentally depends upon the Authority taking specific steps in accordance with the framework established by legislation. This is done, primarily from the manner whereby it adds meaning to the legal framework in the area of SMP (Significant Market Power) designation. The Authority currently performs market analysis of the Wholesale Broadband Access Service market (number 12) in accordance with the Recommendation. In our opinion, since Internet regulation is within the competence of the National Communications Authority, from both the retail and the wholesale perspectives, the regulatory body can do no more in this respect than specify telecommunications policy targets. The regulation of VoIP service types must be considered in context, taking into account both the European and the much broader scope international regulatory concerns. At present, legislative and regulatory efforts to comprehensively evaluate specific regulatory concepts have either not yet begun or are only just beginning. One question that needs to be resolved from the regulator’s perspective, relates to the fact that VoIP cannot completely satisfy some of the technical requirements for telephony systems that were formulated in the past based on the traditional public switched telephone networks’ characteristics. Needless to say, numerous other technological aspects, and interests also play a role in the regulator’s behaviour, including the protection of incumbent carriers from new competitors in certain parts of the world typically outside of Europe and the United States. Regulatory systems When formulating the concepts for specific regulatory systems, key aspects typically include facilitating and encouraging competition, the diversity of services, and the reduction of prices, whilst providing support for the broadest possible dissemination of VoIP. Consumer protection perspectives often simultaneously point in opposite directions. In the case of VoIP, consumers expect the quality of PSTN (Public Switched Telephone Network) calls. The convergence of technologies and the rapid growth of the Internet Protocol based networks are tending to eliminate the traditional networks. IP technology is playing an ever increasing role in the provision of every single electronic communications service, including, especially, the “classic” public telephone services. Hungarian regulations were drafted based upon a group of provisions derived from EU directives. The EU directives, though, only resolve a limited set of VoIP related regulatory issues. In the interest of encouraging more effective competition, additional measures seem justified: – The identification and elimination of problems slowing down the liberalisation process and, as well, the temporary strengthening of asymmetric regulation; – The further support of service-based competition by means of the validation, and dissemination of the favourable possibilities that the ECA provides; – The definition of resolute short-term and mid-term governmental goals with measurable milestones; – The implementation of full-fledged cooperation between the Ministry of Information Technology and Communication, and the National Communications Authority, with respect to both regulation, and execution and – The optimisation of the Authority’s operation and structure. Given the framework established by the ECA’s provisions, the National Communications Authority is the appropriate channel to coordinate the goals set forth. Within the framework of the Act on Electronic Communications, as well, it is the National Communications Authority, fundamentally, that can act appropriately in this field in the interest of accepted goals. From the regulatory side, facilitating the dissemination of IP-based services can best be accomplished by enforcing the obligations of the impacted markets’ resolution (the EU’s significant market power, SMP, designation is applied to operators or a group of operators that alone, or jointly, have sufficient control over the market to suppress fair competition. In these cases, operators so designated can be subjected to specific regulations designed to minimise unfair market influence). In the case of a DSL (Digital Subscriber Line) dominated, very rapidly developing, broadband market, the regulatory goal is to prevent the owners of the infrastructure from blocking their competitors’ access to the retail market. The regulation is also intended to facilitate the evolution of a market structure similar to that of the fixed-line telephone market by the time the DSL retail market reaches maturity. One of the most efficient tools for this is to prescribe access obligations and, as well, an adequate wholesale price structure for the access that SMP operators must provide to competing operators. There are three priorities for VoIP regulation: facilitating competition, consumer protection, and telephone number allocations. From the perspective of competition, we have found that VoIP is primarily, even today, a replacement technology for traditional telephone services. As VoIP technology develops and both quality and services improve, the replacement process will accelerate, greatly threatening the businesses of traditional service providers. From this perspective, therefore, the Authority and regulators must take into consideration the fact that facilitating the dissemination of VoIP raises significant market policy questions. The handling of these market policy issues dictates that: – There should, by no means, be any judicature, or regulatory administration, of VoIP that is more burdensome than that to which service providers using different technology are subject (vide-consumer protection); – The special obligations of VoIP services and service providers must be limited to those that are obviously necessary during the initial period of service deployment, and the regulatory authority, counting on the development of technology and upon the gradual development of service and the growth of investment, should ensure a kind of grace period, needless to say within the scope of legislation, for these services. From the consumer protection perspective it is fundamental that regulators take into account the fact that VoIP, although its capabilities are developing rapidly, does not yet unconditionally and constantly provide the same quality of service or network availability (network, terminal devices) levels as do PSTN-networks. Furthermore, VoIP is not yet technically capable of completely complying with certain statutory service requirements or obligations. As for numbering, it is obvious that guaranteeing that each VoIP operator has telephone numbers that it can allocate to its users is indispensable to the growth of the sector. Providing appropriate regional numbers is justified for fixed VoIP services, and the creation of special number fields is recommended in the case of non-fixed, nomad, VoIP services.

Related Articles

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More