status and perspective of ip telephony in...

Telephony over IP, Algeria, 19 - 20 March 2007. 1

Status and Perspective of Status and Perspective of

IP TelephonyIP Telephony

in Koreain Korea

2007. 3. 19~202007. 3. 19~20

ChoonChoon KyuKyu KimKim

(([email protected]@kt.co.kr))

BcNBcN, KT, KT


Contents

� Background

� VoIP market – Worldwide/Japan

� PSTN/VoIP Market in Korea

� VoIP impact on PSTN/Broadband in KT

� IP-PBX in SME

� Regulation

� The incumbent’s challenges


Background

� “DialpadDialpad” Service

� by Serome Technology Co. (end of 1990s)

� Free IP Telephony Service

� PC-to-PC, PC-to-Phone

� Since “Dialpad” service, IP Telephony market has grown as a differentiated niche market

� Lots of IP Telephony Service Providers(ITSPs) emerged

� ITSPs don’t make Profit enough

� Teleco Networks evolve to IP-based Networks rapidlyin Korea due to BcN(Broadband Convergence Network) Project


Background (Cont.)

� Slow Deployment of IP Telephony Service in Korea

� Unstable Voice Quality

� No E.164 Number for receiving Call from PTSN and Mobile

� Unauthorized use of other E.164 Numbers such as 030, 050, and Private Numbers

� Number Allocation for receiving Call is Fundamental Requirement to promote IP Telephony Service

� Identification Number 050 for IP Telephony in Japan

�� RegulationRegulation is required to allocate E.164 Number to IP Telephony Service


Background (Cont.)

IP NetworkPSTN PSTN

Internet

Phase 1

( ~ 2002 )

� PC to PC VoIP

− Free

− Advertising

� Toll Bypassing

− Cheap international call

IP NetworkPhase 2

( 2002~ 2010 )

� Phone to Phone VoIP

− New category of IP telephony

− Gateway necessary

� VoIP + PSTN

− By network connection

− Assign VoIP number

GW/GK GW/GKGW/GKGW/GKGW/GK

IP Network PSTN

IP NetworkPSTN

GW/GK

GW/GKGW/GKGW/GKGW/GK

IP NetworkPhase 3

( 2010 ~ )

� MoIP (Multimedia over IP)

− Mainly multimedia traffic

− BcN based ALL IP Network

− video related revenue

IP PhoneIP PhoneIP PhoneIP Phone IP PhoneIP PhoneIP PhoneIP Phone


Share of

overall

value

(in %)

Wireless

WirelineTraditional Carriers

WirelineNon-Traditional Carriers

ISPs

Cable / Satellite

0%

20%

40%

60%

80%

100%

1990 1995 2000 2005 * Source: Mercer Value Migration Database

Exponential value in-flow in Wireless, Cable/Satellite and ISP industry

More 50% value out-flow in Wireline-traditional Carriers during recent 5 years

Communications global value migration


� VoIP subscribers in Korea : 4.4% of Broadband subscribers

� Market size : 1.1% of PSTN (2005)

� Worldwide VoIP forecast : annual 40 % growth until 2008

� VoIP subscribers in Korea : 4.4% of Broadband subscribers

� Market size : 1.1% of PSTN (2005)

� Worldwide VoIP forecast : annual 40 % growth until 2008

VoIP market - Worldwide

Worldwide Broadband/VoIP market

BB Subscribers VoIP subscribers

3,000 2,000 1,000 10,000 200 400 600

USA

JAP

KOR

FR

UK

GER

3,170

1,763

1,192

570

510

450

110(3.5%)

530(30.1%)

52(4.4%)

22(3.9%)

5(1.0%)

11(2.4%)

( ITFACTS, Bitkom (2004,4Q)

Worldwide VoIP Market forecast

2004 2005 2006 2007 2008

250M$60,800M

VoIPrevinue(m$)

100,000

75,000

50,000

25,000

BB subscribers

VoIPRevenues

( IDC 2004)

130M$16,000M


VoIP market - Japan

VoIP growth after 050Broadband/VoIP growth

� Active VoIP Market

�2004 : sales $1.7 billion (7% of overall PSTN sales), subscribers 5.3 M

�2007 : sales $7.2 billion (30% of overall PSTN sales), subscribers 23 M

(IDC Japan, 2004)

� Supporting Factors �Market : VoIP bundling with Broadband

�Rate : Cheaper VoIP rate without city limit

�Policy : Early decision of the game of the rule

2002 : VoIP introduction/assigned the receiving number

2003 : VoIP-PSTN interconnection and rate

� Active VoIP Market

�2004 : sales $1.7 billion (7% of overall PSTN sales), subscribers 5.3 M

�2007 : sales $7.2 billion (30% of overall PSTN sales), subscribers 23 M

(IDC Japan, 2004)

� Supporting Factors �Market : VoIP bundling with Broadband

�Rate : Cheaper VoIP rate without city limit

�Policy : Early decision of the game of the rule

2002 : VoIP introduction/assigned the receiving number

2003 : VoIP-PSTN interconnection and rate

’02.09

1.52M

5.3M

’04.12

(Receiving number)

Subscribers (10,000)

2,000

1,500

1,000

500

2001 2002 2003 2004

BB

780

1,364

1,763

142

398530

284VoIP


PSTN market in Korea

Source : MIC (Ministry of Information and Communication) 2006.11

23,099Subscribers(unit: 1,000)

2000 2001 2002 2003 2004 2005 2006.11

Num of Subscriber CAGR (Percentage)

-2.61 -0.03

0.74

0

5,000

10,000

21,000

23,000

15,000

3.370.22

3.62

21,930

Hanaro Telecom(6.6%)

LG Dacom(0.2%)

KT(93.2%)

Source : MIC (Ministry of Information and Communication) 2006.11


Market Forecast of IP Telephony in Korea

� IP Telephony : expected to grow 60% per year and reach $767 mil. in 2008

� PSTN Market : expected to decrease 5% per year and reach $5,400 mil. in 2008

-4.9%5,3825,7446,0926,3696,595PSTN

66.3%767561349188103IP Tel.

CAGRCAGRCAGRCAGR20082008200820082007200720072007200620062006200620052005200520052004200420042004TypeTypeTypeType

(DATA: IDC, 2004)

(Unit: Million dollor)


Impact on PSTN Market in Korea

� Price Reduction followed by added competition will increase Consumer Surplus

� Substitution for existing PSTN Market

� IP Telephony Revenue is expected to take up 12.5% of the Fixed-Voice Market in 2008

98.5%98.5%98.5%98.5%

1.5%1.5%1.5%1.5%

97.1%97.1%97.1%97.1%

2.9%2.9%2.9%2.9%

94.6%94.6%94.6%94.6%

5.4%5.4%5.4%5.4%

91.1%91.1%91.1%91.1%

8.9%8.9%8.9%8.9%

87.5%87.5%87.5%87.5%

12.5%12.5%12.5%12.5%

2004200420042004 2005200520052005 2006200620062006 2007200720072007 2008200820082008

PST NPST NPST NPST N Vo IPVo IPVo IPVo IP(DATA: IDC, 2004)


VoIP Market - Korea

Samsung NetworksSamsung NetworksSamsung NetworksSamsung Networks36.5%36.5%36.5%36.5%

KTKTKTKT9.9%9.9%9.9%9.9%

Anyuser.netAnyuser.netAnyuser.netAnyuser.net11.6%11.6%11.6%11.6%

etcetcetcetc42.0%42.0%42.0%42.0%

Enterprise Enterprise Enterprise Enterprise

VoIP wholesale/retail market trendsVoIP wholesale/retail market trendsVoIP wholesale/retail market trendsVoIP wholesale/retail market trends

3333333322222222

11111111

48484848164164164164204204204204

182182182182

430430430430

250250250250

789789789789

386386386386retailretailretailretail

wholesalewholesalewholesalewholesale

326326326326

463463463463

residentialresidentialresidentialresidential

businessbusinessbusinessbusiness

(≈ \100 Million )

� Annual growth rate of 2001~2004 : 77% (Wholesale : 33%, retail: 154%)

� Wholesale market

led by Hanaro Telecom

KT and Hanaro share 1/3 each in 2004

� Retail market

major incumbents lead the market instead start-ups

enterprise : samsung networks, anyuser.net

household : Hanaro telecom

2001 2002 2003 2004


VoIP impact on PSTN in KT

� VoIP will be the major factor of PSTN sales decrease after 2006

� Share of VoIP revenue in terms of the PSTN revenue : 12% in 2008

� VoIP will be the major factor of PSTN sales decrease after 2006

� Share of VoIP revenue in terms of the PSTN revenue : 12% in 2008

PSTN revenue (KT) VoIP transitions

68

2003 2004

Residential

212156

2003 2004

Business

194224

2003 2004

Total

408

2002(E) 2003(E)

58,881

2004(E)

55.604

50,177

3,053224

5,021408

� VoIP

■ Others

Major business customer11

� Enterprises with heavy telephone traffic

� VoIP ARPU > PSTN ARPU (Business part)

\ 31,000 \ 28,459

Bundling service by HanaroTelecom22

� Hanaro takes most residential subscribers

� Prepaid cards

� In this case, ARPU� \\\\ 10,836 (VoIP) vs. \\\\ 18,319 (PSTN)

(≈ \100 Million )


VoIP impact on Broadband in KT

Without VoIP

34%4.03Hanaro

51%6.08KT

-

7%

Market

share

-

0.86

Subscriber

s

LGP

SO

2004

28%3.6Hanaro

52%6.7KT

6%

14%

Market

share

0.7

1.75

Subscribers

LGP

SO

2008

With VoIP

26~28%3.3~3.5Hanaro

48~50%6.1~6.3KT

7~9%

15~17%

Market

share

0.95~1.15

2~2.2

Subscribers

LGP

SO

2008

� Assume 1 million new

broadband subscribers until

2008

� New subscribers transition to

cheaper VoIP bundle market

� Subscribers transition : 0.5M

� Transition rate : 7 ~ 8 %

Assumptions / Impact

(Million subscribers)

� Broadband market share forecast in 2008 is 46~48 %

26%3.6Hanaro

45.5%6.3KT

7.4%

16%

Market

share

0.7

2.2

Subscribers

LGP

SO

2006.10


IP-PBX in SME� PBX replacement forecast

4%

18%

12%

8%

1%

58%

Within 6 months

Within 6~12 months

Within1-2 years

Within 2-3 years

After 3 years

No plan

� Legacy PBX replacement : 10 ~ 20% / year� Coexist IP enabled PBX � Expect rapid IP-PBX market transition

( Cisco Analysis, 2003)


IP-PBX in SME

?

PBXsales

Year

PBX sales drop from 2004

( 2002년 Ovum )

100%

2001

2002

2003

2004

2005

2007

2006

2010

� IP-PBX sales decrease revenue by 30%

� PBX/IP-PBX sales cross in 2005

� Need new application services

100%PBXsales

2001

2002

2003

2004

2005

2007

Year

PBX/IP-PBX sales cross in 2005

2006

( 2002년 Ovum )

IP-PBXsales

70%

200%

new revenue

2010

?


IP-PBX in SME

Centrex

Tie

Line

IP

Centrex

IP-PBXPBX

Hosted

IPCC

Toll Bypass

VPN

Key System

IP Key System

ACD IPCC

Added services

Carrie

rs contro

l

lowhigh

high ASP

Managed

IP-PBX

2006 ~(IP-PBX)2003~2005(IP enabled PBX)~ 2002(PBX)

� IP-PBX Market trends


Regulation

� Purpose of the Regulation

� Prepare IP Telephony Regulation for Smooth Transition to IP-based Networks

� Avoid ambiguous interpretations

� Create New Opportunities for the Telecommunications Industry

� Encouraging Incumbents to provide Innovative Services and Upgrade Networks

� Induce Fair Competition and provision of Enhanced Services(QoS, Innovation)

� Prepare Pro-Competitive Environment by improving related Regulations (e.g. Entry regulation, Number allocation, Minimum QoS, etc.)

� Create Positive Effects on related Industries

� e.g. Equipment, S/W, Digital contents, etc.


Regulation – Definition & Licensing

� Clarify Legal DefinitionLegal Definition of IP Telephony

� a Telecommunication Service which transmits (send or receive) Voice through IP Networks using Telecommunications Equipment, without dividing Call Areas (Local, Long distance)

� Except for PC-to-PC Call

� Classified as a Value-Added Service

� Entry Regulation (Licensing ConditionsLicensing Conditions)

� A FacilityFacility--based ITSPbased ITSP needs to obtain License

� Required to own IP Network (National Backbone Network, Subscriber Line) and Equipment (Server, G/W, G/K, etc.)

� A ServiceService--based ITSPbased ITSP dose not need a License

� Registration required


Status of ITSP Licensing

�� 9 9 FacilityFacility--based based ITSPsITSPs (nationwide) (nationwide) Licensed (12. 2006)

� KT

� Hanaro Telecom.

� LG DACOM …

�� 8 8 ServiceService--based based ITSPsITSPs (nationwide) registered(nationwide) registered

� More than 100 service-based IPSPs (reginalproviders)


Regulation – Number Allocation

� Allocate 070 Prefix070 Prefix and Eight-digit numbers for IP Telephony� 070-XXXX-YYYY

�� Minimum Minimum QoSQoS RequirementsRequirements for 070 Number� R-Value ≥70 (ITU-T E.107 E-model)� End-to-end delay ≤150ms� Call success ratio ≥95%

� Different numbers � Facility-based ITSP : ABxxABxx--yyyyyyyy� Service-based ITSP : ABCxABCx--yyyyyyyy

� Service-based ITSP who owns VoIP Network Equipments such as G/W and G/K, has two options� Numbers from MIC (ABCx-yyyy) / Own POIs (Point of

Interconnections) � Request connection to Facility-based ITSP and resell numbers (ABxx-

yyyy)


Regulation – Interconnection

� Direct Interconnection Principle

� Facility-based ITSP should directly interconnect with PSTN and Mobile Networks

�� Construction of POI(Point of Interconnection)Construction of POI(Point of Interconnection)

� Min. Number of POI with PSTN and Mobile Networks are required

� Facility-based ITSP

� 40-60 POIs with PSTN & Mobile Networks

� Service-based ITSP who received 070 Numbers directly from MIC

� 12 POIs with PSTN and 1 POI with Mobile Networks

� Service-based ITSP who received 070 Numbers from Facility-based ITSP

� No POI is required


Regulation – Interconnection (Cont.)

�� Payment Settlement for Call InterconnectionPayment Settlement for Call Interconnection between Facility-based Service Providers� IP Phone-to-PSTN (or Mobile)

� ITSP pays for the Interconnection Charge to the Called Network Operator

� ≒￠1.7/min for PSTN and ￠3.9/min for Mobile

� X-to-IP Phone

� The Caller (PSTN, Mobile) pays for the IP Telephony Equipment Interconnection Charge to the called ITSP

� ≒ ￠0.44/min for G/K and ￠0.08/min for G/W

�� Interconnection Charge for IP Telephony EquipmentInterconnection Charge for IP Telephony Equipment(Between Facility-based Service Providers)� G/K≒ US ￠0.44/min (\4.65/min)

� 80% of local switch interconnection charge� G/W≒ US ￠0.08/min (\0.84/min)

� 80% of toll switch interconnection charge


Regulation – Interconnection (Cont.)

�� Payment Settlement for Internet Access Payment Settlement for Internet Access between Facility-based Service Providers

�� IPIP--Network Access FeeNetwork Access Fee

� An ITSP who does not own IP-network has to pay Access Fee for the use of Subscriber Line and Backbone Network to the IP-Network Owner

� ≒ US $1.42/Month (\1,500/Month)

� ≒ 5% of Average Broadband Internet Service Charge

�� Interconnection Charge for ServiceInterconnection Charge for Service--based ITSPbased ITSP is determined by Private Agreement between Telecommunications Service Providers

� No Regulation on Retail Charge

� ITSPs determine their Retail Charges


Status in summary

� KT participated in market transition aggressively

� Wholesale / enterprise mainly

� Major in residential market

� Secondary many (Hanaro, Dacom)

� Expand wire line market with bundling

� Cable TV Service Providers are preparing 070 IP Telephony Service – Cable Phone

� TPS : Cable TV, Internet, IP Telephony

� Major Portal Sites based Messenger Service

� Daum Communications Corp. : Skype Messenger

� NHN Corp. : Naver Phone (with DACOM)

� Yahoo Korea : Yahoo Voice Messenger 7.0


The incumbent’s challenges

� retaining of subscribers

maintaining profitability and retaining customer loyalty

Voice applications

VoIP enabled IT applications

Integrated service of voice and the internet (web)

�making rich services for ARPU increase

Segmentation, Branding, & service bundles



A Killer App. Of VoIP

VoIP over Wireless Ethernet

Wireless VoIP for Local Area : Residential, Enterprise, Hot Spot

A Key Technology for Voice/Data/Wired/Wireless convergence (QPS)

�WiFi + VoIP = Powerful Wireless VoIP Solution



ManagedManaged

FunctionFunction

/Platform/Platform

QoSQoSPersonalizationPersonalization BroadBroad

BWBWSecuritySecurity

MangedManged

NetworkNetwork FTTHFTTH WiBroWiBro BcNBcNHomeNetworkHomeNetwork

RGWRGW

Personalized &Personalized &

DifferentiatedDifferentiated

ServicesServices

Convergence services with multiConvergence services with multi--WindowsWindows


Work in progress

� NGN as the next generation IT infrastructure (BcN)� Enable converged multimedia services at any time, any places.� Aim 50 ~ 100 Mbps broadband access to 20 m. subscribers by

2010� Replace PSTN voice Telephone with S/W and access gateway� Decided to adapt IMS in parallel� Accommodate both PSTN and IP Subscribers� Provide voice /video telephony as default and other application

services� Standdard-based terminal equipment� Business model for BcN� Enhancement of the platform to fulfill the service requirement


Thank you for your attention

[email protected]

82-2-526-5760

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