 | Issue: | EMEA 2006 |
| Article no.: | 4 | |
| Topic: | The growing rush to VoIP | |
| Author: | Rupert Galliers-Pratt | |
| Title: | Founder and Executive Chairman | |
| Organisation: | Vistula Communications | |
| PDF size: | 320KB |
About author
Rupert Galliers-Pratt is the Founder and Executive Chairman of Vistula Communications. Rupert Galliers-Pratt has served on the board of several publicly traded companies in the UK and the US. He currently serves as Chairman of both Cardlink Holdings Limited and Vistula Limited. He also served as Chairman and Chief Executive Officer of Petersburg Long Distance Inc. (NASDAQ). During that time, he was responsible for establishing ZAO PeterStar, the dominant Competitive Local Exchange Carrier (CLEC) in St Petersburg, and Altel, which was the first cellular operator in Kazakhstan. He received his degree (general disciplines) from Eton College, Berkshire, UK.
Article abstract
Voice over IP, VoIP, is transforming voice communications and the telecommunications industry itself. The flexibility, functionality and lower cost of VoIP communications have redefined what users, especially businesses, expect from telephony and started an industry-wide, worldwide, migration to VoIP telephony. Competition is forcing partnerships and mergers among the players and many, unable to compete, will be squeezed from the market. Market growth depends upon broadband access and the widespread availability of wireless broadband will revolutionise and re-structure the mobile industry.
Full Article
The economic and social value of Information and Communications Technology, ICT, investment and infrastructure is well understood and documented. Voice over Internet Protocol, VoIP, is the next phase in the development of ICT, with the bringing together, or convergence, of both voice and data communications onto a single infrastructure. The key benefits that derive from VoIP are: 1. The use of defined ‘open source’ protocols opens the previously closed world of voice telecommunications services to a veritable army of entrepreneurial individuals and businesses; 2. The increased levels of competitive service creation deliver low cost services to the market, whilst optimising the use of capital resources across the economy; 3. Increased value from the data infrastructure investment, both wireline and wireless, redefining the business model for the deployment of infrastructure into formerly uneconomic markets; 4. High levels of service innovation that increases the flexibility and functionality of communications, allowing the integration of the previously discrete data and voice domains into new and value-creating services; 5. The ‘globalisation of place’ facilitates the allocation of work based on economic principles, bringing work to new communities, improving their economic activity and growth, and raising millions out of poverty; and 6. The redefining of traditional industries and economies. Market evolution VoIP has been implemented in closed corporate settings for some considerable time, the core benefits of which have been: 4 A 45 per cent reduction in operating costs derived from running voice and data on a converged platform, with user managed moves, adds and changes, MACs; 4 A 20 per cent reduction in network costs obtained by operating a single data infrastructure; and 4 A five per cent productivity improvement across the workforce due to communications that can meet the needs of the modern workplace. This migration is evidenced by the growth of IP PBX, private branch exchange – a private internal telephone network – sales and is illustrated in Figure 1. The evolution of VoIP in the public market is illustrated in Figure 2. Different markets within EMEA are at different evolutionary points upon the path, with the key driver being the availability of broadband, wireline or wireless. The evolution begins in the public markets with the arbitrage of telco pricing. This rapidly extends into a broader ‘hosted’, or Centrex product portfolio, that is offered to the market that enables users of the public infrastructure to access the benefits of VoIP previously only available to the corporate market. Subsequent development will focus upon delivering end-user interfaces to applications that simplify the management of communications and enhance the functionality to support the changes in working practices that are becoming apparent with the growth of the services sector in all economies. Unique value of VoIP and the changing market dynamics VoIP delivers considerable value to both users and service providers. For users, it offers a lower total cost of ownership, TCO, whilst increasing business flexibility, both in functionality and scalability. For service providers it offers a new market opportunity to provide added value applications, such as hosted VoIP PBX services, that have the potential to re-engineer radically the service provider business model and reduce customer churn, as the core broadband products become commodities. This is illustrated in Figure 3. Coupled to the typical user benefits of lower cost and greater flexibility and functionality, there are a number of trends in the market that will drive further radical change to the current business models for providing business telephony and VoIP services. These are: 1. The creation of VoIP ‘walled gardens’ by the Internet access providers in an attempt to regain revenues from voice services by blocking access to Internet applications providers; 2. Major Internet access providers, such as Yahoo! and Google, will develop partnerships/mergers with other Internet access providers to secure access and enhance services with VoIP; 3. ‘Pure play’ VoIP Internet applications providers will be squeezed from the market or acquired; 4. Wireless will continue to grow and 3G, WiFi and UMA, Unlicensed Mobile Access technology, rollout will be the catalyst for mobile operators to embrace VoIP services, as the technology to bring mobility to the business workplace; and 5. SIP will become the standard for VoIP, threatening the position of traditional PBX manufacturers, as this provides Internet access providers a standard upon which to offer cost effective, highly featured services. Hosted VoIP solutions The hosted VoIP market broadly divides between solutions that arbitrage fixed line call charges and solutions that add value to the broadband proposition with a hosted VoIP PBX solution. With an environment that offers an Internet service provider, ISP, or application service provider, ASP, the opportunity to offer low cost calling, relative to the telco rates for fixed line calling, the market is dominated by consumer VoIP solutions, with ‘no touch’ (automated applications downloads) order and customer service portals. The creation and deployment of consumer based VoIP services is not complex or expensive and requires little or no integration with current systems or processes. The business model that supports the creation of these services is the voice minute arbitrage (the trading in minutes of voice transmission on electronic exchanges) capacity, which is, ultimately, not sustainable. As such, the ASP needs to migrate to being a provider of services to the ISP, who ‘owns’ the customer. Solutions for the business market require the development of complex OSS, operational support system, and BSS, business support system, capabilities and are more in evidence in markets that have been liberalised, and where the focus is no longer upon arbitrage but upon solutions that add value to the commodity broadband infrastructure. An overview of complexity involved in deploying service for the business market is illustrated in Figure 4 Within the EMEA region, one encounters a complete array of regulatory environments from monopoly and uncompetitive to highly competitive, liberalised markets. As such, in some geographies VoIP does not exist, is suppressed and illegal, in others it is a regulatory ‘grey area’ and in some a competitive ‘free for all’. What is clear across EMEA is that liberalisation will continue and the introduction of consumer VoIP services will go ‘hand in glove’ with that liberalisation. However, the lesson from regions with a history of liberalisation is not ineffectiveness of defensive strategies in the battle between the PSTN and IP, that battle is already lost. The lesson is to embrace aggressively strategies that enhance the value of the IP infrastructure, especially the hosted VoIP PBX and the evolution of the current OSS and BSS infrastructures. A new global industrial revolution VoIP is forcing the pace of globalisation, bringing people, communities and economic activity into a single global market place, in which all can compete and benefit. It is a vital ingredient of the new global economic revolution. The advent of hosted VoIP applications lets services offered in India and hosted in the UK – for example – create global communities for the family and business. As with all revolutions, there will be winners and losers. The losers will be the entrenched groups using legacy technologies that have traditionally derived their value from closed proprietary applications and monopoly access to communications. The winners will be innovators who can give customers what they want when they want it, facilitating new business opportunities and creating wealth across the economy, enabling governments to invest in the education and health of their people as never before. VoIP is a key component of the ICT revolution and a force that is creating new business models for both vendors and users.
