ip telephony case studies
TRANSCRIPT
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IP TelephonyIP Telephonycase studiescase studies
Ben Ben PetrazziniPetrazziniStrategies and Policy UnitStrategies and Policy Unit
ITUITU
AgendaAgenda
l Introduction
l Cases
1. China
2. Colombia
3. Peru
4. Thailand
l “Lessons”
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l In depth examination of a particular market and/or policy process
l Concrete experience on the regulatory response to market challenges
l Countries with interesting regulatory developments related to IP Telephony
l Solved similar problems in different ways
l 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
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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
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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
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0
1000
2000
3000
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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
l switching stations rental: from 600 to 280 yuan p/month
l nat. LD digital lines: from 431,000 to 80,000 yuan p/mth.
l Digital data line fees: reduced by 45%
l 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]
l US$2.5 billion investment in broadband during 2000
l US$24 billion by 2005: transmission systems = US$15 billion,
access networks = US$6 billion
data communications hardware = US$3 billion.
Promoting the InternetPromoting the Internet
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l Chen brothers begun offering IP phone service in 1998 at half of China Telecom’s rate
l China Telecom succeeded in getting them to jail
l The Chen’s lost their original hearing at the court of first instance, but won on appeal.
l For the judge the activity was not covered by criminal law, and was at most an administrative matter.
l Local court officials found no administrative rules or regulations that prohibited IP telephony
The Chen brothersThe Chen brothers
l MII licensed 3 operators in April 1999 for a 6 month trial in 26 cities
l These licenses ended a de facto long distance and legal international monopoly by China Telecom
l Four IP Tel licenses granted in March 2000China TelecomChina UnicomJitong CommunicationsChina Netcom
l Forthcoming IP Tel license to China Mobile.
China’s IP Tel marketChina’s IP Tel market
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l First to launch services in April 1999
l Initial roll-out 25 cities
l US$ 2 million network (100 E1s - each E1 = 2.048 Mbps) [US$ 6 million if circuit-switched].
l Set up time = 60 days [1.5 year if circuit].
l IP Telephony cards: only one sales counter and very limited number of IP cards.
l Over 500 people per day sign up after the announcement [previously about 20 telephone subscriptions per day].
ChinaChina Telecom’sTelecom’s IP TelIP Tel
l According to Unicom: US$ 241 million invested in
12 cities. Plan to expand to 90 additional cities.
l Between June and November, Unicom acquired
nearly 700’000 customers for its IP Tel services.
l The network reached full capacity in only 80 days,
instead of the 180 days initially.
l 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
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l More than 2,000 people lined up from 2:00 am to
buy IP telephony cards on the first day of sale.
l Sold some 50,000 IP Tel cards in just five cities.
l From June to August 1999 the total revenue from
sales of IP phone cards stood at US$ 35 million.
Jitong’sJitong’s IP Tel businessIP Tel business
IP telephony trials in 15 cities since October 1999
l 20Gbps fiber-optic network backbone
l More than 6,000 miles and 15 Chinese cities
l Ready for operation by late-2000.
l Linking corporate and government buildings in major cities directly to the IP backbone
l Providing 2-10 Mbps to the desktop – enough to download video in real time.
l Become a wholesaler of broadband capacity.
Netcom’s IP Tel developmentsNetcom’s IP Tel developments
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MII’s MII’s IP Telephony tariffsIP 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)
l MII predicts that China's IP market will reach
US$12 billion by the end of 2000
l IP Tel operators predict:
international calls over the Internet
10% by 2000 - 35 % by 2003
l Post trial business plans:
Unicom and Jitong to deploy 300 E1s each
China Telecom to deploy 1,000 E1s
Where is the market goingWhere is the market going
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December 1999 MII mandated to China Telecom once again lower international tariffs for non-IP
services in its 16 major routes:
l Rmb 4.8/minute (peak time)
the same price as IP phone tariffs
l Rmb 2.9/minute (off-peak time)
40% cheaper than comparable IP calls
The three competitors are questioning the viability of the IP Telephony business
A questionable futureA questionable future
Population: 41.5 million (99)
GDP per capita: US$ 2’844 (98)
Teledensity: 16.04 (98)
Cel subscribers: 7.54 (98)
Ownership of incumbents: Public
Competition in LD & int.: As of 97
(effective 99)
Colombia’s telecom marketColombia’s telecom market
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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
l Comision de Regulation de Telecomunicaciones
(CRT) in charge of Internet regulatory matters
l Government launched “Connectivity Agenda”
l Ministry’s policy: not to regulate Internet
l CRT launched study on Internet prices
l USO: Compartel 2 to focus on Internet services
l E-commerce: Law 527 of August 1999
Internet policy & regulationInternet policy & regulation
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l Began December 1998 jointly with a VAS operator
l Prosecuted by three state agencies
l Services were stopped 9 months after launch
l Celcom’s tariffs were not much cheaper than the licensed long distanced operators.
l Possible reasons for Celcom’s adventure:
increased int. traffic & no compensation
l Two agencies have imposed fines and other penalties.
Celcom’sCelcom’s IP Tel servicesIP Tel services
l In the second half of 1999, more than 20 value-added services were closed down.
l Charges and detention orders against Presidents,CEOs, and general managers have been issued.
l These cases have not yet been resolved
l Traffic to the USA reported to increase as much as 50% after the 20 VANS were closed.
l ITU estimates: bypass traffic 160 million minutes
losses at 1998 settlement rates = US$ 60 million
Prosecuting other IP Tel operatorsProsecuting other IP Tel operators
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0
Traffic bypass in ColombiaTraffic bypass in Colombia
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
l Orbitel & ETB to offer LD & int. IP Tel in 2000
l Telecom likely to launch similar service soon
l Tvcable, start local voice service offerings that might include IP Tel
l AT&T acquired Firstcom: good infrastructure inBogota and other large cities but no IP Tel plan announced yet. Quite likely in the short run
l Value added operators have capacity but are limited by the US$ 150 million license fee and the requirement of 150’000 lines in service.
Where is the market goingWhere is the market going
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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
Internet hosts x 10’000 people: 1.93 (98)
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
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l Is not a phone, is not a PC, it is an IP Tel devise.
l Red Cientifica Peruana offers Aplio (others too)
l Telefonica del Peru complains to OSIPTEL
l First instance: selling Aplio is not a com. service
l OSIPTEL: Appeal --> same time RCP got a license
l TdP dropped the proceedings avoiding any resolution on the matter
l No clear jurisdiction to resolve the matter
l No definitive policy position on the matter
The The Aplio Aplio challengechallenge
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
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Accounting rates in an open marketAccounting rates in an open market
Rate variations fortraffic termination inPeru (US$ cents/min)
% of newlong-distancecompanies
Less than 10 40%
Between 10 and 20 20%
More than 20 40%
Peru’ssettlement rates:
TdP: US$ 0.31
Some others: US$ 0.06
l 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$12 million) own satellite network
l Net2Phone Peru: no license (Telecom Act) largest
IP Tel provider
l Firstcom/AT&T began operation in 1999
l BellSouth Peru controls Tele2000 (cable TV firm)
and acquired license for local, LD, and int.
Where is the market goingWhere is the market going
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Origin ofcall
Destinationof call
Net2PhoneTariffs
Time of day
Peru USA 0.15/minPC to phone[TdP 0.66/min]
Peak(7am-7pm)
USA Peru 0.21/minPC to phone
(Lima)
Any time
USA Peru 0.31phone to phone
(Lima)
Any time
IP Tel rates: Net2Phone PeruIP Tel rates: Net2Phone Peru
Population: 60.3 (98)
GDP per capita: 2’478 US$ (97)
Teledensity: 8.35 (98)
Cel subscribers: 3.25 (98)
Ownership of incumbents: Public
Competition in LD & int.: monopoly (BOT)
Thailand’s telecom market profileThailand’s telecom market profile
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Internet hosts x 10’000 people: 3.40 (98)
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
l Telephone Authority of Thailand (TOT): monopoly in international communication
l Domestic: 2 fixed line, 5 mobile, 18 ISPs, etc.
l Y-Tel 1234: domestic long distance mid-2000
l Competition with cellular and USO-related low price to provinces
l Available from any phone (including public). No need of prepaid cards, only extra digits (1234)
l QoS: no more than 100 ms delay
l BOT concesionaries yet to develop IP Tel services
The TOT proposalThe TOT proposal
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l Communication Authority of Thailand (CAT):
monopoly in international communication
l Increasing competition, declining revenue
l PhoneNet: 75 countries, prepaid calling cards,
access from any phone including cellular and pub.
l Tariffs are 21% to 40% lower than peak tariffs
l PhoneNet no price variation with time of day
l Likely customers: business users.
The CAT proposalThe CAT proposal
TOT YTOT Y--Tel tariffs Tel tariffs (Bahts)
1 US$ = 38 Baht
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
1 US$ = 38 Baht
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
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CAT Phone Net tariffs CAT Phone Net tariffs (Bahts)
Destination
Standard (1)
Econ. (2)
Phone Net
% discount from 1
% discount from 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
1 US$ = 38 Baht
l New technologies bypass regulation…(inevitable)
l Pre-existing national legislation is a strong determinant on the evolution of IP Tel
l Made it clear that market evolution is strongly tied to policy decisions and criteria
l Degree of government commitment is key
l In gral. positive attitude to the adoption of IP Tel
l Like with privatization and competition divergent position within each administration
Lessons from the casesLessons from the cases
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l Accelerates the liberalization process
l Prosecution of “illegal” services chills the market
l Incumbents reluctant to take up IP Tel services
l Raised questions on service definition & others
l “Back door” for large foreign carriers (i.e AT&T)
l 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.www.ituitu..intint//ipteliptel
** InterconnectionInterconnection: : India, Mexico, Finland, China -- www.www.ituitu..intint//osgosg/sec//sec/spuspu//nini//
** Internet diffusionInternet diffusion: : Nepal, Uganda, Egypt, Bolivia, Hungary www.www.ituitu..intint//titi//casestudiescasestudies//
Canada, Argentina, and others coming soon...
ITU case study seriesITU case study series