|Topic:||IP telephony – bring on the change|
|Title:||Executive Vice President, Products, Technology & Innovation|
Vivek Badrinath joined Orange in 2004 as Chief Technology Officer and, within a year, his role was expanded to Executive Vice President, Products, Technology and Innovation. Prior to Orange, Mr Badrinath spent four years with the consumer electronics firm Thomson. As Chairman and CEO of its Indian subsidiary, Vivek Badrinath was in charge of both manufacturing and sales. Vivek also spent four years in the France Telecom group. He originally joined France Telecom in 1996, just as France was opening up its telecommunications market to competition. Vivek began his career at the French Ministry of Industry, where he was in charge of the country’s innovation-related policies and investments. He has a Degree in Engineering from Ecole Polytechnique, a Degree in Statistics from the University of Paris, and has also studied at Telecom Paris.
Here comes IP telephony. Whether operators like it or not, telephony, the world over, is moving towards voice over IP, VoIP. So far, fixed VoIP has been the rule and wireless IP the exception, but given the advent of dual phones – standard mobile handsets that also receive VoIP at public WiFi hotspots and home networks – wireless VoIP will grow rapidly. Carriers have begun to offer ‘managed VoIP services’ to businesses that include WiFi and cellular wireless voice and data.
At a recent conference in Berlin, a wireless network operator tried to downplay the threat of IP telephony to incumbent operators. Quoting from consulting studies focused on Western Europe, he said that 70 per cent of consumers did not know about voice over IP, VOIP, last year, and that about ten per cent of wireline voice traffic, and one per cent of wireless voice traffic, would be IP by 2010. This year, he expected about one fifth of all mobile handsets sold to be smart phones with a thin minority equipped with VoIP, and less than two per cent to be ‘dual phones’. Dual phones are mobile handsets capable of placing both regular circuit-switched calls over GSM networks and VoIP calls across WiFi public hotspots and home networks. Dual phones were expected to reach nine per cent of mobile handset sales in 2009, not such a small figure anymore! Obviously, the importance of VoIP in both the consumer and business markets is nothing to be downplayed. The year 2005 marked the true take-off of VoIP services; they now account for close to 25 million lines worldwide, with forecasts of 250 million in 2011. No one will deny we are currently engaged in a large-scale migration from PSTN, the public switched telephone network, to VoIP. Although consumer VoIP still prevails, 2006 is the year when the technology is likely to be massively adopted by businesses. Increasingly, corporate adoption is justified by the productive and creative impact it has on business lines rather than cost-savings. Hence, the strong interest of carriers in selling ‘managed VoIP services’ to businesses, including wireless voice and data applications that can be seamlessly accessed by employees from their home WiFi network, from their enterprise wireless LAN, as well as from public cellular networks while on the move. For instance, in July 2005, just one integration, operation and maintenance contract covered 40,000 telephone extensions – one of the largest managed IP telephony deployments ever in the global IP communications services market. True, the VoIP market shows wide regional disparities. Within Western Europe, France is undoubtedly the country where IP telephony has made the biggest inroads. The Financial Times estimated that eight per cent of French households are using VoIP compared to three per cent in the US, and below one per cent in the UK. Indeed, the number of French households that have subscribed to the ADSL-based VoIP service of their Internet Access Provider rose steadily from 750,000 in January 2005 to 2.7 million in January 2006! Ten per cent of the French households equipped with a fixed line currently use VoIP, and it accounts for 14 per cent of all outgoing wireline calls. VoIP services emerged a decade ago when North American start-ups rolled out discounted calling card services, and wholesale carriers peddled cheap voice transport over their IP backbones. Paradoxically, while VoIP has since thrived in several European and Asian markets, it has met with marginal adoption in its homeland. Perhaps not for long, however, since North American cable companies are now pushing VoIP in their fight with incumbent telcos for consumer ownership. They are poised to lead the VoIP market and eclipse the forerunners. The VoIP expansion is causing a profound transformation of the telephony market and its underlying business models. Two kinds of challengers to incumbent telephony operators have emerged: Internet service providers that control their own network facilities; and network-less Internet service providers, including a number of the leading portals. ISPs have made VoIP a key component of their ADSL multiplay bundles, while portals have added VoIP to their search, messaging and content suites. PC-to-PC VoIP calls are generally free of charge, and calls to domestic PSTN numbers and, at times, to certain countries as well, are now billed at a flat rate by ISPs. Network-less VoIP providers include dedicated start-up companies (e.g. Vonage and Skype) and several major Internet portals that have recently added VoIP to their offerings. Although, since they do not control the infrastructures they use, the VoIP providers are unable to guarantee consistent quality of service. Nevertheless, they have designed catchy user interfaces and well-integrated service suites. Their services are presence-enabled – users can tell which of their contacts are available on-line – and they include advanced features such as unified voice mail, ring-tones, Webcam video and virtual phone numbers. Network-less VoIP players are actively seeking alliances with manufacturers to integrate their soft-phone software directly into user devices. A software-enabled device could be a USB, universal serial bus, phone, a WiFi single mode handset, a dual mode mobile handset, a laptop, or even a plain USB key. It is worth remembering that while the VoIP pioneers’ business model mirrors the carriers’, portals derive the bulk of their revenues from advertising, e-commerce and affiliation programmes; they mainly use communications applications as audience-farming tools. It is true that the migration of traditional PSTN traffic to VoIP is influencing the voice revenues of the incumbent wireline carriers. Not only are they charging less for telephony services, but they stand to lose customers to the multiplay offerings of their broadband competitors which take advantage of local loop unbundling, LLU. Cost-effective VoIP-enabled multiplay packages, offered by both the incumbents and their broadband challengers, have enjoyed strong commercial momentum. To complicate the matter, the network-less VoIP players, start-ups and portals alike, have come up with their own competitive offerings. Wireline operators are not the only ones affected by VoIP. Wireless carriers are concerned since cheap fixed VoIP, and the future adoption of dual phones by consumers and professionals, could drive them to change the business models that led them to charge a premium for outgoing mobile calls. Voice is still the bread and butter of mobile operators with 80 per cent of their revenues derived from voice. Nomadic VoIP services over WiFi hot-spots, when ready for mass-market adoption in a few years after significant technical and commercial barriers are lifted, will compete for the calls placed at home over mobile handsets (40-60 per cent of mobile calls are made from home) and for intra-campus business calls. The FT Group has proactively addressed these challenges as an opportunity to expand its customer-centric offering and is already the leading hot spot provider in some of its major markets. Naturally, IP communications will keep improving. High-fidelity 3D voice (a stereo-like technology that lets one distinguish between speakers in an audio conference via audible clues) is technically feasible today. Dual phones and intelligent USB keys (pen drives) will give access to IP voice and data applications over any public and private WiFi hotspot. Video-enabled eyeglasses and car windshields could allow travellers to read messages, watch video content and place video calls. Today users already transfer VoIP calls from their laptop to their sound systems and could, likewise, deflect video calls to their TV sets in the future. All Internet service and social networking sites will be endowed with communications applications. Pervasive presence-based networks will alert you should friends stroll nearby. Rather than a stand-alone application, telephony will become just another feature of a personal service suite, a ‘widget’ in a personal home page. Leading-edge communications services will be accessible over any device since they will be delivered across unified Internet Protocol Multimedia Subsystem/Session Initiation Protocol, IMS/SIP, network architectures. Today, many service providers are implementing, or at least considering, advanced IMS/SIP network architectures to support fully convergent multimedia applications. They are investigating technology advancements (including high-fidelity spatial sound), and integrating their services with those of Internet partners’ to create comprehensive offerings for consumers. The offer of a wide range of managed voice and data services to businesses, including dual phone and multi-access network laptop cards, will become increasingly common. At the end of the day, VoIP poses serious regulatory challenges. Now that their traditional business models are attacked by network-less providers, what new business models should they embrace to be able to keep operating their infrastructures and investing for the future (e.g. IMS/SIP, wireless broadband, fibre to the home)? Therefore, as VoIP scales beyond a niche offering to become a mainstay carrier grade replacement for the PSTN, an essential question is how regulators can keep fostering the service innovations, which will be the key to the customers’ best interests.