TeleEvo 2006, Moscow, 25 October 2006 1
Phillippa Biggs, Economist, ITUTeleEvo 2006
Radisson SAS Slavyanskaya HotelMoscow, 25 October 2006
VoIP: Current Trends and
Future Evolution
TeleEvo 2006, Moscow, 25 October 2006 2
Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution5. Conclusions
TeleEvo 2006, Moscow, 25 October 2006 3
Agenda1. Market drivers:
- IP as a key enabler NGN- Development of the broadband market- Price reductions (operators & consumers)
2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution5. Conclusions
TeleEvo 2006, Moscow, 25 October 2006 4
1. Market drivers: IP as a key enabler
Evolution from multiple separate networks(each optimized for one service) to a
unified IP-based multi-service network
Telephony
Internet
Television
Multimedia Services
Telephony
Internet
Television
…
IP-based network
Control layer
TeleEvo 2006, Moscow, 25 October 2006 5
IP-enabled Next Generation Networks (NGN)
ITU Workshop “What Rules for IP-enabled NGN?”23-24 March 2006- Policy and regulatory implications- Market developments- Issues surrounding interconnection and universal service
http://http://www.itu.int/osg/spu/ngnwww.itu.int/osg/spu/ngn//
TeleEvo 2006, Moscow, 25 October 2006 6
The transition towards NGNOld World
(PSTN telecom)New World
(IP-based Internet)
Circuit-switched Packet-based, based on IP
Interconnection P2P peering arrangements
Capacity-based – QoS guaranteed Quality of Service (QoS) class (best effort)
Cost orientation, focus on marginal cost Bundled offers: marginal costs near zero
Calling Party Pays (CPP) Unclear… Bill and Keep? (Scott Marcus’background paper and WIK Institute’s workshop on this subject).
Key issues – asymmetric regulation (numbering, universal & emergency service)
Unlicensed bands, spectrum trading, competition policy, emergency service
Network-centric control & intelligence Edge-centric - intelligent nodes at edge
TeleEvo 2006, Moscow, 25 October 2006 7
Forces driving VoIP (cont’d)• Consumers – cheaper, single provider,
simplicity of flat-rate billing.• Operators:- Reduced costs of new & legacy networks- Tapping into growth in new markets;- Alliances with service and content providers, in
new, converged business models- Growth in broadband networks.
TeleEvo 2006, Moscow, 25 October 2006 8
Increasing availability of broadband…Number of countries with broadband
commercially available
81
113133
145
166
020406080
100120140160180
2002 2003 2004 2005 2006Source: ITU World Information Society Report.
Source: ITU
TeleEvo 2006, Moscow, 25 October 2006 9
…At faster speedsGrowth in max. broadband speed available
0
5
10
15
20
25
30
35
40
256
512
768
1024
1280
1536
1792
2048
2304
2560
2816
3072
3328
3584
Mor
e
Speed (kbps)
Num
ber o
f cou
ntrie
s
2003 2005 2006
2005
2003
2006
Source: ITU.
TeleEvo 2006, Moscow, 25 October 2006 10
Growth in broadband in subscribers & share
0
100
200
300
400
500
1995 1997 1999 2001 2003 2005
Internet subscribers worldwide, in millions
Fixed-line narrowband
Fixed-line broadband
Mobile broadband
Source: ITU
TeleEvo 2006, Moscow, 25 October 2006 11
International voice traffic (bn mins)
15.5%13.1%
11.8%7.4%
4.8%1.6%0.2%
0
25
50
75
100
125
150
175
200
1998 1999 2000 2001 2002 2003 2004
VoIP
PSTNAs % of total
Source:ITU.
TeleEvo 2006, Moscow, 25 October 2006 12
Falling price (& revenue?) in int’l voice traffic
323539
4451
5863
35
40
45
50
55
60
1998 1999 2000 2001 2002 2003 2004
Revenue (US$bn)Price per minute (US cents)
Source: ITU World Telecom. IndicatorsDatabase
TeleEvo 2006, Moscow, 25 October 2006 13
Transition to VoIP: incentives for operators
0%
20%
40%
60%
80%
100%
1995 1997 1999 2001 2003 2005
Costs
Competitors
Profits
Incentives in the Development of the Market (figurative)
Time
??
TeleEvo 2006, Moscow, 25 October 2006 14
But beware: price reductions for consumers!
$16.81
$37.44
$60.74
$34.28
$28.20
$12.94
0
10
20
30
40
50
60
70
Cos
t (U
SD)
20032005
mobile basket-12% p.a.
20 hours' Internet access-12.5% p.a.
broadband($/100 kbps)-20% p.a.
Average cost of ICTs worldwide2003-2005
TeleEvo 2006, Moscow, 25 October 2006 15
Incentives with price reductions
0%
20%
40%
60%
80%
100%
1 2 3 4 5 6 7 8 9 10 11Costs
Profits
Incentives II (Taking into account declining costs)
Time
Costs
Competitors
TeleEvo 2006, Moscow, 25 October 2006 16
Agenda1. Market drivers2. Defining VoIP
- ITU work and “working terminology”- Country definitions- Regulatory treatment
3. VoIP market4. Future Evolution5. Conclusions
TeleEvo 2006, Moscow, 25 October 2006 17
2. Defining VoIPITU Internet Report 2001IP TelephonyIP Telephony – carriage of voice over IP-based networks irrespective of ownershipVoice over Internet Protocol (VoIP) – voice traffic carried wholly or partly using IP over broadband networks competing with incumbent operators
TeleEvo 2006, Moscow, 25 October 2006 18
2. Defining VoIP: Country definitionsDefinition Selected countries
QoS, now replaced by Functionality
India, JapanHong Kong
Numbering system Japan, Taiwan-China
Netwk. Architecture Israel, Saudi Arabia
Degree over PSTN& terminals used
Israel, JordanIndia, Japan, Malaysia, Spain
Service Egypt, Barbados, Indonesia, Italy, Jordan, UK, United States.
Users Australia, Chile, Tunisia
TeleEvo 2006, Moscow, 25 October 2006 19
Regulatory status of IP Telephony, 2005
2
7 8
33
10
5
3
2
2
5
7
2
124 6
4
113
3 3 3
11
3
9
0%
20%
40%
60%
80%
100%
Africa Americas Arab States Asia-Pacific Europe/CIS
No policy forIP Telephony
Prohibited
Restricted
PartialCompetition
FullCompetition
Note: Based on responses from 149 economies. “Prohibited” = no service is possible. “Restricted” = only licensed PTOs can offer service. “Partial competition” = non-licensed PTOs may use either IP networks or public Internet. “Full competition” = anyone can use or offer service.Source: ITU World Telecommunication Regulatory Database (2005 questionnaire).
TeleEvo 2006, Moscow, 25 October 2006 20
The spectrum of regulatory treatment of VoIP, 2006
Explicitly legal(57 countries +)
Explicitly banned (at least 23 countries) Yet to be
made legal-“Twilight Zone of regulatory ambiguity”
“If in doubt, hold a Public Consultation”(22 countries
+)
“Under consideration” by gov’t/regulator (30+).
Explicitly deregulated and/or light regulatory touch (19 countries+)
License required(26 countries+)
TeleEvo 2006, Moscow, 25 October 2006 21
& Russia? “Directive on Telematic Service”
Source: http://www.minsvyaz.ru/site.shtml?id=3075
TeleEvo 2006, Moscow, 25 October 2006 22
Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market
- Subscribers & distribution- The problem of the missing millions- Revenues
4. Future Evolution5. Conclusions
TeleEvo 2006, Moscow, 25 October 2006 23
3. VoIP market - strong growthWorldwide VoIP Subscribers
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011
Mill
ions
0
2
4
6
8
10
12
14
16
18VoIP subscribers (millions)VoIP share of total mainline subscribers
Source: IDATE.
TeleEvo 2006, Moscow, 25 October 2006 24
Distribution of VoIP subscribersDistribution of VoIP subscribers, mid-2005
Japan62%
North America
16%
France11%
Germany2%
Norway0%
Neth.1%
Sweden1%Italy
5%
Korea2%
Source: Point Topic.
TeleEvo 2006, Moscow, 25 October 2006 25
But – how to measure the missing millions?Household VoIP in the UK
(1.8 million)
150,000 8%
1.35m 75%
300,000 17%
Skype/Vonage
BT
WanadooOrange
Source: OFCOM
Difficult to estimate!
TeleEvo 2006, Moscow, 25 October 2006 26
Agenda1. Market drivers2. Defining VoIP regulatory treatment3. VoIP market4. Future Evolution
- Market projections- Voice in bundles- The transition to flat-rate pricing
5. Conclusions
TeleEvo 2006, Moscow, 25 October 2006 27
4. Future Evolution: Market projectionsEstimates of international VoIP traffic
05
10152025
3035404550
1996 1999 2002 2005 2008
% o
f tot
al in
t'al m
inut
es
Yankee Gp.
Telegeography /PriMetrica
Tarifica
Delta Three WP
Delta Three White Paper
Analysys
Yankee Gp.
ITUSource: ITU et al.(ITU estimate refers to IP Telephony)
Pink lineTelegeograhy
TeleEvo 2006, Moscow, 25 October 2006 28
Voice included in bundles (UK)
TeleEvo 2006, Moscow, 25 October 2006 29
Shift towards flat-rate pricingEvolution in Pricing Strategy
133145
166
020
406080
100120140
160180
2004 2005 2006
Num
ber
of c
ount
ries
Data TimeBoth Flat-rate
75%68%
81%
Data: billed by data downloaded or time spent online or combination “both”.
Source: ITU
TeleEvo 2006, Moscow, 25 October 2006 30
• VoIP is a growing reality – for operators, consumers and regulators, with strong growth by all metrics.
• Opportunity or threat?• A bit of both!• Despite regulatory uncertainty in many countries, it
may still be best to engage:Operators – early mover advantage; Consumers – benefits in cost reductions;Governments – help shape/develop a stable market, instead of holding it back.
5. Conclusions
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