Voice over IP - ITU: Committed to connecting the world¾Where will we be in 5 years’ time? ¾Mini...

Voice over IP:Reconciling Internet Peering

with a Settlements EnvironmentDr Tim Kelly

Head, Strategy and Policy UnitInternational

Telecommunication Union (ITU)IIR “Optimising Interconnection

Accounting and Settlement Strategies”, Nice 7-8 December 2004

The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of ITU or its Membership. The author can contacted by e-mail at [email protected].

International Telecommunication Union

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Agenda: Internet peering and settlement

Why settlements in a peering environment?Mix of PSTN and Internet Protocol trafficMix of fixed, mobile and hybrid traffic“Third coming” of Voice over IP (Skype, Vonage)

VoIP around the worldWhere it’s legal, where it’s toleratedRegulatory conundrums

Technology trendsWhere will we be in 5 years’ time?Mini case study: Japan


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International voice traffic (in billions of minutes)

0.01% 0.2% 1.6%

4.8%7.4%

11.8% 13.1%

020406080

100120140160180

1997 1998 1999 2000 2001 2002 2003

VoIP

PSTN

As % of total

Source: ITU / TeleGeography


4

Changing mix of int’l circuitsRise of international private lines

0

1

2

3

4

5

6

7

8

2002 1995

Availability and status of international circuits from the United States (64 kbit/s equivalents, in millions)

Idle circuits

Other

International Private Lines

PSTN circuits

2002, total = 6.7m circuits of which IPL = 29.4%

1995, total = 0.26m circuits of which IPL = 10.6%

Source: ITU, adapted from FCC Circuit Status Report.


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International voice traffic trendsRevenue (US$bn) and price per min ( cents)

3339

4451

586368

0

10

20

30

40

50

60

70

1997 1998 1999 2000 2001 2002 2003

Revenue (US$bn)

Price per minute (US cents)Source: ITU World Telecom

Indicators Database.


6

Sources of telecom revenueWorldwide, in US$ billions

0

200

400

600

800

1'000

1'200

1993 95 97 99 01 2003

Domestic fixed telephone

International fixed telephone

Mobile

Data and other

Source: ITU World Telecom

Indicators Database.


7

Selected rates for call terminationIn Euro cents per minute

0.017

0.017

0.151

0.022

0.08

0.164

0.251

0.138

0.022

0.08

0.016

0.019

0.180

0.140

0.150

France

Germany

India

China

Mexico Settlement/RIOSkype, MobileSkype, Fixed

Note: Mobile and fixed rates are for SkypeOut.Settlement is from US and Reference Interconnect Offer is for double tandem.

Source: Skype, FCC, Analysys.


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The “third coming” of IP Telephony

1995-1999: “Internet phone”, offered primarily over the public Internet (e.g. FreeWorld Dial-up, DialPad)

2000-2002“VoIP”, offered as discounted telephony over IP-based networks (e.g. Net2Phone, iBasis)Collapse of dot.com bubble left many VoIP companies struggling as incumbent PTOs also offered VoIP services or acquired VoIP operators (e.g. China Telecom, Teleglobe)

2003-present“Voice over broadband”, offered as free or flat-rate chat plus discounted calls to PSTN/mobile users (e.g. Vonage, Skype)“Corporate IP”, as users shift both data and voice to a unified IP platform


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Annual growth ratesInternational voice traffic, in %

1%

10%

100%

1’000%

10’000%

1998 1999 2000 2001 2002 2003

VoIP

PSTNNote: Vertical scale is logarithmic.Source: ITU / TeleGeography

Regulatory status of IP Telephony By region, 2003

146

5

57

8

6

4

4

2

64

1

3 8

9

29

6 21 2

0%

20%

40%

60%

80%

100%

Africa Americas Arab States Asia-Pacific Europe/CIS

No policy forIP Telephony

FullCompetition

PartialCompetition

Prohibited

Restricted

Note: Based on responses from 132 economies. “Prohibited” means no service is possible. “Restricted” means only licensed PTOs can offer the service. “Partial competition” means non-licensed PTOs may use either IP networks or the public Internet. “Full competition” means anyone can use or offer service.Source: ITU (2005, forthcoming): General Trends in Telecom Reform”

Regulatory dilemmasExamples of regulatory confusion or inconsistency in regulation of IP Telephony

Non-licensed PTOs may offer IP Telephony, but not

licensed PTOs

Users are able to make IP phone calls,

but no company is licensed to provide it

Licensed PTOs are allowed to offer IP

Telephony, but users are not allowed to use it

All PTOs are allowed to offer IP Telephony, but users are not allowed

to use itBrazil Barbados Aghanistan Bhutan

Sri Lanka Algeria Congo DRSuriname Antigua & Barbuda Kyrgyzstan

TYFR Macedonia Indonesia TogoMalawi

MaliMoroccoOman

PakistanParaguayRwandaUganda

Note: Based on responses to 2003/04 questionnaire from 132 economies. Only selected responses are shown. “PTO” = Public Telecommunications Operator. Source: ITU World Telecommunication Regulatory Database.


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IP Telephony in five year’s timeMajor technological and regulatory trends

IP-based traffic indistinguishable from PSTNAround 100 bn minutes of IP-based international traffic in 2008, or >50% of totalMany carriers will have all IP-networksA majority of voice traffic will originate on wireless networks and much of it will be IP-based

Numbering convergenceENUM will allow calls to and from IP voice on multiple different devicesNumbering plan will allow for non-geographic and device-indendent VoIP numbers

Voice over IP over mobileVoice will increasingly travel over data channel in mobile networks to provide discounted calling prices


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Mini case study: IP Telephony in Japan

In 2000, Japanese Ministry (now MIC) introduced new rules on unbundling local loop and co-location

Rapid rise of DSL connectionsVery low prices (<US$20 per month)Service speeds in excess of 26 Mbit/s

Yahoo BB! Entered marked in September 2001 with bundled DSL and VoIP

MIC defined numbering plan (prefix 050) for VoIP, allowing calls to be received on PCsNovember 2002, >7m VoIP numbers allocated to ISPsVoIP development consortium worked with MIC to establish standards for QoS, interconnection, tariffs, number allocation etc.


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Japanese broadband prices are among the lowest in the world

32.9731.5031.2130.6130.1229.57

27.7127.7126.9226.6426.0726.0525.3825.3025.0025.0024.7723.9323.58

21.7121.1321.01

19.3918.68

17.4316.78

14.7714.0813.64

9.66

25625640025651210241000512256512300512640256512256512204825651225638425615005121024256512256512

0 10 20 30 40

Morocco 30Barbados 29

New Zealand 28Mexico 27

French Guiana 26Slovenia 25Germany 24

Netherlands 23Senegal 22Estonia 21

Brazil 20Malaysia 19

Hong Kong, China 18Greece 17Ukraine 16Cyprus 15

Czech Republic 14Korea (Rep.) 13

Israel 12Sri Lanka 11Australia 10

Croatia 9Taiwan, China 8Macao, China 7

Belarus 6Japan 5

Slovak Republic 4Jordan 3

Lithuania 2China 1

0 500 1000 1500 2000 2500Broadband monthly sub. prices, US$, July 2004

Overall subscription charges are important

0.920.860.86

0.550.430.42

0.380.310.290.280.260.24

0.200.180.180.180.170.170.150.13

0.100.090.070.060.060.040.040.020.010.00

Estonia 30Greece 29

Czech Republic 28New Zealand 27

Bahamas 26Ireland 25Iceland 24Austria 23

Slovenia 22Luxembourg 21

United Kingdom 20Israel 19

France 18Italy 17

Australia 16Finland 15

Netherlands 14Norway 13Denmark 12Germany 11

Switzerland 10Singapore 9

Belgium 8Canada 7

United States 6Hong Kong, China

Taiwan, China 4Korea (Rep.) 3

Sweden 2Japan 1

Cost 100 kbit/s as % of monthly income

But factoring in the speed of the connection and income is the more telling story

Source: ITU Internet Reports 2004: The Portable Internet.


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Conclusions

Inter-operator settlements remain important (and become more complex) in an environment dominated by IPPer-minute settlement remains preferred choice for voice, even for VoIP carriersMajor new issues: VoIP over broadband and over mobileRegulators face tough challenges to maintain stance of technological neutrality and to remain one step ahead of the market

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