IP Telephony case studies Ben Petrazzini Strategies and Policy Unit ITU.

IP TelephonyIP Telephony

case studiescase studies

Ben PetrazziniBen PetrazziniStrategies and Policy UnitStrategies and Policy Unit

ITUITU

AgendaAgenda

Introduction

Cases

1. China

2. Colombia

3. Peru

4. Thailand

“Lessons”

In depth examination of a particular market and/or policy process

Concrete experience on the regulatory response to market challenges

Countries with interesting regulatory developments related to IP Telephony

Solved similar problems in different ways

Developing countries face the hardest problems to integrate IP Tel to their tel agenda

Why case studies?Why case studies?

Why these ones?Why these ones?

Population: 1,255 million(99)

GDP per capita: US$ 734 (98)

Teledensity: 6.96 (98)

Cel subscribers: 1.90 (98)

Ownership of incumbents: Public

Competition in LD & int.: As of 1999

China’s telecom market profileChina’s telecom market profile

Internet hosts x 10,000 people: 0.14 (98)

Users x 10’000 people: 16.7 (98)

Nro. of ISPs: 200 (98)

PCs x 100 people: 0.89 (98)

Began: 1988

Int. capacity: 351 Mbps (1/00)

China’s Internet market profileChina’s Internet market profile

0

500

1000

1500

2000

2500

3000

3500

4000

Jul-97 Jul-98 Jan-99 Jul-99 Jan-2000

Internet hosts in ChinaInternet hosts in China

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1994 1995 1996 1997 1998 1999

China’s Internet subscribersChina’s Internet subscribers

Gov. cut twice in 1999 the cost of IP access

switching stations rental: from 600 to 280 yuan p/month

nat. LD digital lines: from 431,000 to 80,000 yuan p/mth.

Digital data line fees: reduced by 45%

2 Mbp/s nat. connection to an international digital line US$26,579 p/mth.Europe 99: 2 km=US$ 750; 200 km=US$ 5,000 p/mth]

US$2.5 billion investment in broadband during 2000

US$24 billion by 2005: transmission systems = US$15 billion,

access networks = US$6 billion

data communications hardware = US$3 billion.

Promoting the InternetPromoting the Internet

Chen brothers begun offering IP phone service in 1998 at half of China Telecom’s rate

China Telecom succeeded in getting them to jail

The Chen’s lost their original hearing at the court of first instance, but won on appeal.

For the judge the activity was not covered by criminal law, and was at most an administrative matter.

Local court officials found no administrative rules or regulations that prohibited IP telephony

The Chen brothersThe Chen brothers

MII licensed 3 operators in April 1999 for a 6 month trial in 26 cities

These licenses ended a de facto long distance and legal international monopoly by China Telecom

Four IP Tel licenses granted in March 2000China TelecomChina UnicomJitong CommunicationsChina Netcom

Forthcoming IP Tel license to China Mobile.

China’s IP Tel marketChina’s IP Tel market

First to launch services in April 1999

Initial roll-out 25 cities

US$ 2 million network (100 E1s - each E1 = 2.048 Mbps) [US$ 6 million if circuit-switched].

Set up time = 60 days [1.5 year if circuit].

IP Telephony cards: only one sales counter and very limited number of IP cards.

Over 500 people per day sign up after the announcement [previously about 20 telephone subscriptions per day].

China Telecom’s IP TelChina Telecom’s IP Tel

According to Unicom: US$ 241 million invested in

12 cities. Plan to expand to 90 additional cities.

Between June and November, Unicom acquired

nearly 700’000 customers for its IP Tel services.

The network reached full capacity in only 80 days,

instead of the 180 days initially.

By Nov. 99 Unicom was generating several million

minutes in monthly China/US traffic and internat.

calls accounted for 50% of its IP business.

Unicom’s experienceUnicom’s experience

More than 2,000 people lined up from 2:00 am to

buy IP telephony cards on the first day of sale.

Sold some 50,000 IP Tel cards in just five cities.

From June to August 1999 the total revenue from

sales of IP phone cards stood at US$ 35 million.

Jitong’s IP Tel businessJitong’s IP Tel business

IP telephony trials in 15 cities since October 1999

20Gbps fiber-optic network backbone

More than 6,000 miles and 15 Chinese cities

Ready for operation by late-2000.

Linking corporate and government buildings in major cities directly to the IP backbone

Providing 2-10 Mbps to the desktop – enough to download video in real time.

Become a wholesaler of broadband capacity.

Netcom’s IP Tel developmentsNetcom’s IP Tel developments

MII’s IP Telephony tariffsMII’s IP Telephony tariffs

Services Telephony (non-IP) tariffs

IP telephonytariffs

Domestic longdistance

0.9-1.1 Rmb/min 0.3 Rmb/min(US$.04)

International 12-15 Rmb/min 4.8 Rmb/min(US$.58)

MII predicts that China's IP market will reach

US$12 billion by the end of 2000

IP Tel operators predict:

international calls over the Internet

10% by 2000 - 35 % by 2003

Post trial business plans:

Unicom and Jitong to deploy 300 E1s each

China Telecom to deploy 1,000 E1s

Where is the market goingWhere is the market going

December 1999 MII mandated to China Telecom once again lower international tariffs for non-IP

services in its 16 major routes:

Rmb 4.8/minute (peak time)

the same price as IP phone tariffs

Rmb 2.9/minute (off-peak time)

40% cheaper than comparable IP calls

The three competitors are questioning the viability of the IP Telephony business

A questionable futureA questionable future

Population: 41.5 million (99)

GDP per capita: US$ 2’844 (98)




Competition in LD & int.: As of 97

(effective 99)

Colombia’s telecom marketColombia’s telecom market

Internet hosts x 10’000 people: 4.41 (98)

Users x 10’000 people: 46.3 (98)

Nro. of ISPs: 63 (1/00)

PCs x 100 people: 2.79 (98)

Began: May 1994

Int. capacity: 100 Mbit/s

80% sat. - 20%

fiber

Colombia’s Internet market profileColombia’s Internet market profile

Comision de Regulation de Telecomunicaciones

(CRT) in charge of Internet regulatory matters

Government launched “Connectivity Agenda”

Ministry’s policy: not to regulate Internet

CRT launched study on Internet prices

USO: Compartel 2 to focus on Internet services

E-commerce: Law 527 of August 1999

Internet policy & regulationInternet policy & regulation

Began December 1998 jointly with a VAS operator

Prosecuted by three state agencies

Services were stopped 9 months after launch

Celcom’s tariffs were not much cheaper than the

licensed long distanced operators.

Possible reasons for Celcom’s adventure:

increased int. traffic & no compensation

Two agencies have imposed fines and other

penalties.

Celcom’s IP Tel servicesCelcom’s IP Tel services

In the second half of 1999, more than 20 value-added services were closed down.

Charges and detention orders against Presidents, CEOs, and general managers have been issued.

These cases have not yet been resolved

Traffic to the USA reported to increase as much as 50% after the 20 VANS were closed.

ITU estimates: bypass traffic 160 million minutes

losses at 1998 settlement rates = US$ 60 million

Prosecuting other IP Tel operatorsProsecuting other IP Tel operators

0

100

200

300

400

1990 1992 1994 1996 1998

Total traffic

US outgoing

Colombia outgoingEstimated call-turnaround

Traffic on US / Colombia route (million minutes)

Estimated bypass traffic

Traffic bypass in ColombiaTraffic bypass in Colombia

Orbitel & ETB to offer LD & int. IP Tel in 2000

Telecom likely to launch similar service soon

Tvcable, start local voice service offerings that might include IP Tel

AT&T acquired Firstcom: good infrastructure in Bogota and other large cities but no IP Tel plan announced yet. Quite likely in the short run

Value added operators have capacity but are limited by the US$ 150 million license fee and the requirement of 150’000 lines in service.


Population: 25.2 million (99)

GDP per capita: US$ 2’530 (98)

Teledensity: 6.69

Cel subscribers: 3.92

Ownership of incumbent: Private

Competition in LD & int.: 1998

28 new LD & int. and 2 local licenses (7 local pending)

Peru’s telecom market profilePeru’s telecom market profile


Users x 10’000 people: 80.6 (98)

Nro. of ISPs: 54 (99)

PCs x 100 people: 1.81 (98)

Began: 1991 (94 .com)

Int. capacity: na.

Peru’s Internet market profilePeru’s Internet market profile

Is not a phone, is not a PC, it is an IP Tel devise.

Red Cientifica Peruana offers Aplio (others too)

Telefonica del Peru complains to OSIPTEL

First instance: selling Aplio is not a com. service

OSIPTEL: Appeal --> same time RCP got a license

TdP dropped the proceedings avoiding any resolution on the matter

No clear jurisdiction to resolve the matter

No definitive policy position on the matter

The Aplio challengeThe Aplio challenge

Leased lines prices in Peru (US$)Leased lines prices in Peru (US$)

Speed ofcircuit

TdP:Before

FirstCom

TdP:After

FirstCom

Variation%

(2)/(1)

FirstCom

64 Kbps 650 455 -30% 450

512 Kbps 2665 1866 -30% 1840

2048Kbps

6815 4771 -30% 4720

Rate variations fortraffic termination inPeru (US$ cents/min)

% of new

long-distancecompanies

Less than 10 40%

Between 10 and 20 20%

More than 20 40%

Accounting rates in an open marketAccounting rates in an open market

Peru’ssettlement rates:

TdP: US$ 0.31

Some others: US$ 0.06

RCP: US$60 million investment in 2000/01 on IP

network for IP Tel. Prepaid cards - 50% discount

over PSTN LD calls. National telecenters project

(US$12 million) own satellite network

Net2Phone Peru: no license (Telecom Act) largest

IP Tel provider

Firstcom/AT&T began operation in 1999

BellSouth Peru controls Tele2000 (cable TV firm)

and acquired license for local, LD, and int.


Origin ofcall

Destinationof call

Net2PhoneTariffs

Time of day

Peru USA 0.15/minPC to phone[TdP 0.66/min]

Peak(7am-7pm)

USA Peru 0.21/minPC to phone

(Lima)

Any time

USA Peru 0.31phone to phone

(Lima)

Any time

IP Tel rates: Net2Phone PeruIP Tel rates: Net2Phone Peru

Population: 60.3 (98)

GDP per capita: 2’478 US$ (97)




Competition in LD & int.: monopoly (BOT)

Thailand’s telecom market profileThailand’s telecom market profile


Users x 10’000 people: 33.1 (98)

Nro. of ISPs: 18 (1/00)

PCs x 100 people: 2.16 (98)

Began: na.

Int. capacity: na.

Thailand’s Internet market profileThailand’s Internet market profile

Telephone Authority of Thailand (TOT): monopoly in international communication

Domestic: 2 fixed line, 5 mobile, 18 ISPs, etc.

Y-Tel 1234: domestic long distance mid-2000

Competition with cellular and USO-related low price to provinces

Available from any phone (including public). No need of prepaid cards, only extra digits (1234)

QoS: no more than 100 ms delay

BOT concesionaries yet to develop IP Tel services

The TOT proposalThe TOT proposal

Communication Authority of Thailand (CAT):

monopoly in international communication

Increasing competition, declining revenue

PhoneNet: 75 countries, prepaid calling cards,

access from any phone including cellular and pub.

Tariffs are 21% to 40% lower than peak tariffs

PhoneNet no price variation with time of day

Likely customers: business users.

The CAT proposalThe CAT proposal

Time 0-50 km 101-200 km More than200 km

7am-6pm[workingdays]

2 6 8

6pm-10pm[workingdays]

1 3 4

10pm-7am[workingdays]

.75 2.25 3

TOT Y-Tel tariffs TOT Y-Tel tariffs (Bahts)

1 US$ = 38 Baht

Destination Standard(1)

Econ.(2)

PhoneNet

%discountfrom 1

%discountfrom 2

East Asia[Japan, Korea,Taiwan]

36 29 24 33.3 17.2

Europe[excl. UK] 42 34 28 33.3 17.6

USA/Canada 24 20 20 16.7 0.0

CAT Phone Net tariffs CAT Phone Net tariffs (Bahts)

1 US$ = 38 Baht

New technologies bypass regulation…(inevitable)

Pre-existing national legislation is a strong

determinant on the evolution of IP Tel

Made it clear that market evolution is strongly tied

to policy decisions and criteria

Degree of government commitment is key

In gral. positive attitude to the adoption of IP Tel

Like with privatization and competition divergent

position within each administration

Lessons from the casesLessons from the cases

Accelerates the liberalization process

Prosecution of “illegal” services chills the market

Incumbents reluctant to take up IP Tel services

Raised questions on service definition & others

“Back door” for large foreign carriers (i.e AT&T)

Effects:

Tariffs: some 30-50% lower than PSTN int.

Network deployment: shorter time / lower cost

Lessons from the casesLessons from the cases

** IP TelephonyIP Telephony: : China, Colombia, Peru, Thailand - - www.itu.int/iptelwww.itu.int/iptel

** InterconnectionInterconnection: : India, Mexico, Finland, China - - www.itu.int/osg/sec/spu/ni/www.itu.int/osg/sec/spu/ni/

** Internet diffusionInternet diffusion: : Nepal, Uganda, Egypt, Bolivia, Hungary www.itu.int/ti/casestudies/www.itu.int/ti/casestudies/

Canada, Argentina, and others coming soon...

ITU case study seriesITU case study series

IP Telephony case studies Ben Petrazzini Strategies and Policy Unit ITU.

Documents

Transcript of IP Telephony case studies Ben Petrazzini Strategies and Policy Unit ITU.