|Issue:||Latin America III 2000|
|Topic:||Internet Telephony How Latin American Carriers Can Compete|
|Title:||Chief Operating Officer & Executive Vice-President|
The world of telecommunications is rapidly changing-countries are deregulating, prices are decreasing, and phone calls are traveling over the public Internet. How can Latin American carriers compete in this New World of telecommunications? According to Frost & Sullivan, “The Latin American telecommunications market, which two years ago was worth US$51 billion, will grow to more than US$90 billion by the end of 2000. South Americas biggest economies – Argentina, Brazil, Chile, Colombia and Venezuela – will account for nearly 70 percent of that total.” Along with this growth, prices are decreasing. As Latin American countries deregulate, competition enters the country. In order to compete, carriers lower their prices. The good news is that teledensity is increasing, people are making more telephone calls, and as prices decrease, the duration of calls tends to increase.
In order to compete and improve margins, Latin American carriers should be using the Internet to transport their calls rather than the legacy public switched telephone network (PSTN) or leased data lines. If they arent, their competitors are and are enjoying significant efficiency and cost advantages. Today, we are at the beginning of a telecommunications revolution and the Latin American carriers and PTTs that prosper and rise to the top will have recognised that all voice communications, fax, and video will be on the Internet. Being on the Internet dramatically changes the cost models. Transport is cheaper, faster, and more efficient. These Latin American carriers and PTTs will have taken the proper steps to ensure that their voice communications travel on the Internet and not on the PSTN. ITXC Corp®, a wholesaler of voice and e-calling services on the Internet, believes that all phone calls will be on the public Internet by 2010. According to Ernst & Young (1999), “IP (Internet Protocol) voice and fax will reach US$30 billion in revenue over the next five years. Some observers expect the total volume of IP-based traffic to surpass that of the circuit-switched PSTN as soon as 2004.” How can Latin American carriers and PTTs benefit from Internet telephony today? Today, many Latin American carriers are getting better margins by originating calls onto the Internet and are receiving, incrementally, new revenues by terminating calls from the Internet. With Internet telephony, Latin American carriers do not have to build or own their own networks. They simply need to connect their switches to wholesale Internet telephony carriers. Corp and their calls are carried to and from them over the Internet. The wholesale Internet telephony carrier controls the quality. The use of new technologies, such as BestValue RoutingTM, assure carrier-grade quality to carriers over ITXCs network. This is currently the worlds largest Internet telephony network with 273 IP PoPs (points of presence) in 155 cities in 63 countries. Currently, thirteen out of the top fourteen U.S.-based international carriers, the leading European competitive carriers, and thirteen PTTs worldwide send their traffic over this network. There are three ways that carriers and PTTs can send their traffic via Internet telephony carriers network. The first way is to connect to an Internet telephony carrier in the same way that they connect to wholesale PSTN carriers. Latin American carriers can lease a line to a central hub, where PSTN and Internet telephony carriers house their telecommunications equipment. Carriers connect their switches to the Internet telephony carriers switch that connects into an IP telephony gateway. IP telephony gateways convert calls between circuit-switched and IP formats. The calls then travel from IP telephony gateways over the Internet to an IP telephony gateway in the country or city in which the calls are destined. The terminating IP telephony gateway converts the calls from the IP format to the circuit-switched format and sends the calls over the local PSTN to traditional end user phones. The second way that carriers can connect to an Internet telephony carrier is via equipment located at the customer premises. Carriers connect their switches to this equipment installed at the customers premises. The equipment converts the calls from circuit-switched to IP format and sends the calls to the Internet telephony carriers network directly from the carriers premises. This eliminates the cost, the time interval for provisioning, and the need for carriers to lease lines to a hub. This could not happen in the PSTN world. “Latin American carriers can own their own IP telephony gateway; this is the third way that they can connect to an Internet telephony carrier.” Latin American carriers can own their own IP telephony gateway; this is the third way that they can connect to an Internet telephony carrier. It is similar to using the customer premise equipment described above, except that the carriers own and manage their own IP telephony gateways. To send calls directly over the Internet the carriers and customers with on premise equipment, need adequate Internet bandwidth (an amount determined by the Internet telephony carrier), at least 30 local telephone lines, an IP telephony gateway, and 7 days a week / 24 hours per day technical support. Since carriers are originating calls onto the Internet, there has to be IP telephony gateways terminating calls on the other end. Latin American carriers can earn extra money by directly terminating (transmit to final destination) calls originating in other countries but destined for Latin America. Carriers can own their own IP telephony gateway or use customer premise equipment to terminate calls. In this situation, carriers need sufficient bandwidth (determined by IP telephony carrier), an IP telephony gateway, local telephone lines, and 24/7 technical support. The Internet telephony carrier then pays the local carrier for every minute that they terminate. In addition to originating and terminating calls via Internet telephony carrier networks, Latin American carriers can use Internet telephony carriers to gain additional revenue and differentiate themselves from other carriers. Internet telephony carriers can offer Latin American carriers an Internet alternative to ITFS/UIFN numbers (these enables them to provide customers with direct international access to their voice services platform). There are services that provide carriers with local access numbers that their customers can dial in other countries to gain direct access to systems and services in their home country. Carriers can use these numbers to market a variety of international voice services to retail customers at substantially lower costs. A few examples of how carriers can use the direct access numbers to offer services to their customers include: In-country international pre-paid card services targeting customers living in other direct access countries; In-country international call-home services targeting subscribers living in other direct access countries; International calling card access for existing and new subscribers roaming to other direct access countries; In-country access for customer service applications with call centres in other direct access host countries. “Latin American carriers, as well as competitive carriers and PTTs world-wide, are and will soon be using the Internet to offer e-calling services.” How can Latin American carriers benefit from Internet telephony in the future? Latin American carriers are now using Internet telephony to get better margins and to increase revenues. That will continue to happen but Latin American carriers, as well as competitive carriers and PTTs worldwide are and will soon be using the Internet to offer e-calling services. E-calling services are voice services on the Internet that are better, not just cheaper, than those offered on the PSTN. The PC-to-phone calling phenomenon that began in 2000, could not have happened without the public Internet. People placing calls from their PCs are connected to the public Internet. PC-to-phone calling has opened up a world of users who are already talking into their PCs. These “web talk” users make e-calls instead of phone calls. According to IDC Research, “There will be 416 million web talk users by 2004.” Latin American carriers can offer web-based calling as an added option for their high-end customers. Another type of e-calling service that people are currently using is the “Push to Talk” service. By “clicking” the appropriate option on a web page, Push to Talk type services allow on-line business customers to talk, in real time, to a live customer service representative of the company whose web site they are viewing. This service greatly increases the volume of sales closed through web sites. Future e-calling services will include voice instant messaging services, integrated messaging services, and conferencing services. Conclusion E-calling will change the way the world communicates. The Internet will be the infrastructure for voice and data. Latin American carriers can connect to wholesale Internet telephony networks now. This sort of connection can accelerate their entry in the IP telephony market. In this way, local carriers can build their experience with the IP world where better margins and incremental, increasing, revenues exist and begin sooner to deliver the e-calling services available only on the Internet.