|Issue:||Latin America 2006|
|Topic:||VoIP and the wholesale equilibrium|
|Organisation:||Belgacom International Carrier Services|
Daniel Kurgan is currently the COO of Belgacom International Carrier Services, the eighth largest carrier worldwide. At Belgacom, he worked his way up through the organization serving in such posts as VP Commercial of Belgacom International Carrier Services SA/NV, VP International Wholesale, Sales Director for domestic and international wholesale, Head of International Relations & Sales, and International Account Manager. Prior to Belgacom, he worked as the Contracts Manager at SABCA, a Belgian aerospace subsidiary of the French Dassault group. Mr Kurgan graduated from the Solvay Business School of The University of Brussels.
Regulators throughout Latin America have been trying to increase competition in voice since the privatization of the telecommunication sector in the region. They have not been notably successful. Voice over Internet Protocol, VoIP, provides a viable way for competitive service providers to compete with incumbent operators by substituting a broadband connection for traditional last mile access. The quality of VoIP over public Internet circuits is not yet consistently equal to traditional telephony but, given the lower cost, is quite acceptable.
In Latin America, telecommunication services and especially voice are an integral part of the economy, encompassing a significant part of the GDP in the region. Despite the tempting size, this market is highly concentrated in the hands of a handful of foreign investors that dominate the local and long-distance markets. Since the privatization of the telecommunication sector in the region, regulators have been trying to increase the competition in the voice market, setting rules and ceiling prices for unbundling and interconnection agreements. These initiatives, however, have proven fruitless as new entrants have either gone bankrupt or become a niche-competitor with a small share of the market. The likelihood of grabbing a larger share of this multi-billion-dollar market has increased tremendously with the advent of the Voice over Internet Protocol, VoIP, technology. Leveraging on Internet broadband access, a VoIP provider can go around the impenetrability of the incumbent’s last mile networks, and directly offer voice and other telecommunication services to business and residential Internet broadband subscribers. This year is expected to be the starting point of a sustained growth path. While current VoIP providers are increasing their investments in networks and marketing, new companies are likely to launch VoIP access services, heating up the competition and widening the services awareness among customers. In addition to that, regulatory changes as well as pricing trends are expected to help push this market to the next level. According to the Latin Business Chronicle Report, VoIP penetration over broadband will reach 25.5 per cent by 2011, compared to the current figure of 1.5 per cent, with an estimated market value of over US$1 billion. It is estimated that Brazil would make up 49 per cent of the projected market, with Chile, Mexico and Argentina following but with smaller market shares. The most advanced VoIP market in the region, however, is currently Chile, which at 2.3 per cent has the largest penetration of VoIP over broadband in Latin America. With the market having effectively begun in 2005 in these countries, there is much groundwork to do and plenty of progress to be made. However, the adoption of these new technologies brings increased concerns about the potential massive loss of profits by both governments and operators as IP lowers the entry barriers into the market, and hence increases the number of players aiming at securing a share of the $15 billion, predominantly voice, international wholesale market. Challenges The industry still expresses reservations when it comes to this technology. Following a recent study conducted by Keynote, consumer VoIP offerings do not measure up to legacy POTS, Plain Old Telephony Service. Given that the differentiator is cost effectiveness, the gap in quality between VoIP and TDM, Time Division Multiplexing, voice is still significant. VoIP providers have not yet gotten to the level of quality provided by the PSTN, public switched telephone network, and thus still have some work to do in this area. However, not everything affecting VoIP service quality is under the control of the provider. The quality of the underlying back-end network carrier also makes a dramatic difference in both service reliability and audio clarity. Another big challenge VoIP providers will face in the coming years is security. Not limited to IP security or control layer security, authentication, authorisation, fraud and abuse prevention are also important aspects in this area. In the VoIP world, interconnections take place over the Internet rather then on dedicated links. IP security – such as protection against hacking, denial of service and spamming – must be enforced within the carrier IP network domain as well as the IP peering points with other IP players. Control layer security concerns the protection of the entire VoIP system. The VoIP system includes the server farm, the IMS, IP Multimedia Subsystem, core, the SIP, Session Initiation Protocol, server, the media gateways (devices that convert data from one network’s format to that of another), and the like. The security must also extend to the OSS and BSS, operational and business support systems, to which the VoIP server farm is connected. Today, this is addressed through the deployment of Session Border Controllers, which perform important functions, such as screening of IP-to-IP sessions, network topology hiding and generating important accounting information. In the TDM-only world, we were accustomed to open networks, where any destination was available at an agreed upon price. In the heterogeneous world of IP/TDM co-existence, each traffic stream (origin to destination and vice versa) may be associated with a different, specific, settlement model (cascading, flat model, transit fee model …), and thus the principle of a closed network applies. Therefore, a robust carrier VoIP service needs a strong authentication of the IP end-point, as well as a minimum of service management capability to handle the authorisation of individual VoIP traffic streams. Finally, VoIP providers need more comprehensive fraud and abuse prevention systems to deal with the ever-evolving business scenarios as well as keeping business risk under control. Current tendencies are showing that VoIP providers are not developing these systems in-house but are rather partnering with other parties who are offering this sort of carrier VoIP solution. We can, therefore, state that although several carriers in the market fear the arrival and growth of VoIP, they should instead be embracing it. A transit partner will have its place in this new market to help VoIP providers address the aforementioned challenges through delivery of smart intermediary functions. These functions serve on a multitude of layers. They should provide the quality levels consumers are expecting and accommodate an environment to bill conversations for any sort of time-dependant, session-based or prepaid payment model. Additionally, they need to encompass inter-domain presence and number discovery functionalities to determine if a given domain number is an IP address, a fixed line, a mobile number or even an email address; solve the interoperability issues among different business models; and finally, supply a secure environment. Wholesale carriers should thus start focusing on entering the 21st century telecommunications business. Some market consolidators and global players have already begun to undertake this process by deploying multi-vendor NGN, next generation network, architectures. This will allow them to achieve quick times to market, preserve carrier grade availability, and reduce the duplication of hardware at ports level. In addition, this IMS capable network facilitates the development of a roadmap for the introduction of IP-based carrier services, letting users choose the best available applications on the market whilst providing for their easy integration and use. The deployment of an NGN architecture enables carriers to accommodate the wholesale services of the future. Direct VoIP interconnection to global voice networks for the exchange of international voice minutes, hosted VoIP and simplified, one-stop VoIP availability (VoIP in a box) are basic service needs in this new IP-based environment. These services give carriers quick time-to-market solutions that address the needs of wireline operators, services providers of all sorts (xSPs), MVNOs, mobile virtual network operators, and IPXs, IP Packet Exchanges, to address the complexity of interoperability and clearing in a fully converged world. It is important to note that although the use of VoIP is growing and new players are coming along and entering this market, carriers still have an important role to play. As long as carriers are willing to address the changing market place, and prepare themselves for the future, they will help the sector reach a new wholesale equilibrium by serving the development of a pervasive VoIP inter-working fabric!