Home Asia-Pacific I 2003 Global Clearing House – Facilitating the Way the World Communicates

Global Clearing House – Facilitating the Way the World Communicates

by david.nunes
Vivek JhambIssue:Asia-Pacific I 2003
Article no.:4
Topic:Global Clearing House – Facilitating the Way the World Communicates
Author:Vivek Jhamb
Title:Executive Vice President – Technology & Carrier Business
Organisation:Data Access (India) Ltd
PDF size:76KB

About author

Vivek Jhamb is the Executive Vice President for Global Carrier Business and Chief Technology Officer of Data Access (India). As such, he is responsible for Global Sales & Marketing, Carrier Relationship and Business Management as well as technical support for carriers and the deployment of new technology. Prior to joining Data Access, Vivek was the CEO of Omincomm WebTec Ltd, a broadband ISP and B2B exchange. Mr Jhamb’s was formerly with the Workgroup Business Unit at Cisco Systems, USA, and was amongst the founding team at iBEAM Broadcasting Corporation, USA. At iBEAM Broadcasting Corporation, he was responsible for the Content Deliver Network for streaming media. He also led a team for the development of Voice Over IP (VoIP) product at Network Programs. Vivek Jhamb is a Gold Medallist in Electrical and Electronics Engineering from Birla Institute of Technology and Science, Pilani (Rajasthan) and M.S. in Computer Engineering from Stanford University, Stanford, CA, USA. He has over 10 years of experience in telecommunications, networking, software development and business management in United States and India.

Article abstract

The voice arbitrage business, or global clearinghouse is a one-stop solution for worldwide carriers, but this sort of solution has not been used in India until now. Global revenues for these operations are to $20-25 billion. Clearinghouses handle 65 billion minutes a year of call traffic volume (2003 estimate). Indian companies would like to capture 5 per cent of this traffic, 3.25 billion minutes, the equivalent to 65 per cent of India’s international traffic. This would make Indian telecom companies global telecom players.

Full Article

April 2002 was a landmark month for Indian telecom. After years of protecting India’s telecom enterprises, the Government decided to de-regulate the sector. Following this landmark judgement private sector telecom players have pro-actively shown interest in upgrading the face of Indian telecom. A fresh infusion of funds, coupled with state-of-the-art technology, is part of the plan. Private telecom companies have entered the sector with big-ticket investments and introduced state-of-the-art technology, which has enabled Indian telecom to overcome technological bottlenecks and integrate with the world economy. The telecom players have invested approximately $11 billion since the de-regulation of the 1990s. Investments to the tune of $2.3 billion are projected during the current fiscal year. A significant part of this investment can be apportioned to the public sector while the rest is likely to be contributed by the private sector. The results are there for all to see. Apart from achieving significant growth in the cellular telephony sector, mainstream landline penetration is also expected to grow from an abysmally low 4.29 per cent at present to 16.7 per cent over the next seven years. The overall strong growth of the Indian economy has also contributed to a rise in the voice and data traffic needs of the country. “A global clearinghouse also has the added advantage of being a foreign exchange earner. This is more important in the case of a fast-developing country like India and makes tremendous economic sense.” The strong projected growth in voice and data traffic means an ever-growing demand for International Long Distance (ILD) services. To offer ILD services and to expand into new markets global carriers need to have interconnect agreements in place with other carriers. This is a long, drawn-out, and cumbersome process for most carriers. Instead, a more convenient option for these carriers is to sign a single interconnect agreement with a global clearinghouse that will distribute this traffic to other worldwide carriers. This is fast, convenient and a cost effective solution as well. In India, the global clearinghouse concept is relatively unknown. Part of this can be attributed to the fact that the volumes of traffic never justified the investment in setting up a global clearinghouse. But now the realization is that with a burgeoning Indian economy, the time is ripe to invest in this kind of a facility. A global clearinghouse also has the added advantage of being a foreign exchange earner. This is more important in the case of a fast-developing country like India and makes tremendous economic sense. One of India’s leading telecom companies has already evinced keen interest in setting up a world-class global clearinghouse in Bangalore, often called India’s silicon valley. The economics of a global clearinghouse work in the following manner. The clearinghouse acts as a reliable intermediary for the financial settlement of telephone traffic. The member ITSPs (Internet telephony service providers) and carriers are in the Asia Pacific, Europe, Middle East, Australia and the Americas. The ‘multilateral’ feature of the network enables each member immediate access to this ‘network of networks’ with termination in more than 240 countries worldwide. The logistics are straightforward. After deployment and testing, each new member establishes a rate for providing a service within its own service area. A global clearinghouse takes care of the rest, including publishing the rates, facilitating the traffic exchange and even settling traffic records between members. In return, the member carrier is presented with a monthly settlement in a single currency, showing the number of minutes originated and terminated. A global clearinghouse will not only streamline the process of call pick up and termination but also addresses the greater needs of a growing economy to showcase and attract business from world-wide carriers which will translate into significant earnings for the state exchequer. For example, it is estimated that following the growth in voice traffic from 5 billion minutes at present to 7.6 billion through 2005, the hard currency earnings so vital for a developing economy will also grow from $600 million now to $912 million in 2005. Compare this with the worldwide figures. The global clearinghouse business is worth an estimated $20-25 billion. The volume of call traffic through global clearinghouses stands at 65 billion minutes a year (2003 estimate). According to conservative estimates, if Indian telecom companies can tap 5 per cent of this traffic, it will be 3.25 billion minutes, about 65 per cent of the total Indian ILD traffic. Of course, this will have its socio-economic repercussions. India is already the world’s fourth largest economy on the basis of Purchasing Power Parity (PPP). Its emergence as a major force in world telecom will be significantly facilitated after India steps into the business of global hubbing. It is the collective effort of Indian telecom companies that will help propel India into the ivy league of world telecom giants and make it a force to reckon with in the integrated world of telecom. The Indian government has to do a lot of hand holding of Indian companies to not only promote the growth of the Indian telecom sector, but also fuel the growth of Indian telecom companies to become world players. The National telecom Policy (NTP) of 1994, and the new policy in 1999, are positive steps in this direction and show the Indian government’s willingness to bring about a rapid transformation in the way Indian telecom companies conduct “According to conservative estimates, if Indian telecom companies can tap 5 per cent of this traffic, it will be 3.25 billion minutes, about 65 per cent of the total Indian ILD traffic. Of course, this will have its socio-economic repercussions.” business. The rapid de-regulation of this sector has already benefited Indian callers in ways more than one. Not only has the network infrastructure improved. More calls to and from India have led to a significant decline in calling rates. The setting up of a global clearinghouse will further this overall government objective to make telecom more affordable for the masses. This will be possible as the Indian companies will be in a position to offer better settlement rates which will be passed on to the customers. This will trigger off a cyclical phenomenon. The fall in rates will lead to an increase in volumes, which will improve the cash inflows of the companies and further make global telecom affordable. The competitiveness of Indian companies is also expected to improve with the increased international exposure Indian companies will get. This will further fuel the growth of the Indian telecom sector, which is currently estimated to be worth $9.7 billion per year, and projected to go up to $12.6 billion per year by the end of the 2006 financial year, according to industry analysts in Morgan Stanley. Of that, $1.84 billion is projected to be in the sector of international long distance telephony. The Indian government has to ensure that the growth momentum is maintained and does not slacken. The critical factor here is the implementation of the National Telecom Policy of 1999 and subsequent policy measures that were taken to ensure this growth. A significant reason of the current success of Indian telecom can be apportioned to the strong backing, with real constructive thinking, of the Indian government lending it further growth. Truly, India can become a showcase to the world on how a country can leapfrog from a developing state to a developed state in the context of telecom. A wireless world is more of a reality in India than ever before. Overall, India has witnessed the introduction of new technologies in the telecom sector within the short span of ten years. The growth has been especially stupendous in wireless telephony. India is touted to be the next big destination for telecom growth after China. The fundamentals are all correct and the policies are moving in the right direction. The new telecom policies have ensured that a new generation of telecom companies grow and prosper. It is now a matter of time before Indian telecom companies offer services, not just be within India but also abroad, on a par with their counterparts abroad. The Indian telecom sector is poised to chart out a new growth path. Setting up global clearinghouse operations is a step in the right direction.

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