IP Telephony case studies

Transcription

1 IP Telephony case studies Ben Petrazzini Strategies and Policy Unit ITU Agenda Introduction Cases 1. China 2. Colombia 3. Peru 4. Thailand Lessons 1

2 Why case studies? In depth examination of a particular market and/or policy process Concrete experience on the regulatory response to market challenges Why these ones? 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 China s telecom market profile 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

3 China s Internet market profile Internet hosts x 10,000 people: 0.14 (98) Users x people: 16.7 (98) Nro. of ISPs: 200 (98) PCs x 100 people: 0.89 (98) Began: 1988 Int. capacity: 351 Mbps (1/00) Internet hosts in China 0 Jul-97 Jul-98 Jan-99 Jul-99 Jan

4 10000 China s Internet subscribers Promoting the Internet 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. 4

5 The Chen brothers 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 China s IP Tel market 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 2000 China Telecom China Unicom Jitong Communications China Netcom Forthcoming IP Tel license to China Mobile. 5

6 China Telecom s IP Tel First to launch services in April 1999 Initial roll-out 25 cities US$ 2 million network (100 E1s - each E1 = 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]. Unicom s experience According to Unicom: US$ 241 million invested in 12 cities. Plan to expand to 90 additional cities. Between June and November, Unicom acquired nearly 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. 6

7 Jitong s IP Tel business 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. Netcom s IP Tel developments IP telephony trials in 15 cities since October Gbps fiber-optic network backbone More than 6,000 miles and 15 Chinese cities Ready for operation by late 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. 7

8 MII s IP Telephony tariffs Services Telephony (non- IP) tariffs IP telephony tariffs Domestic long distance Rmb/min 0.3 Rmb/min (US$.04) International Rmb/min 4.8 Rmb/min (US$.58) Where is the market going 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 % by 2003 Post trial business plans: Unicom and Jitong to deploy 300 E1s each China Telecom to deploy 1,000 E1s 8

9 A questionable future 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 Colombia s telecom market Population: 41.5 million (99) GDP per capita: US$ (98) Teledensity: (98) Cel subscribers: 7.54 (98) Ownership of incumbents: Public Competition in LD & int.: As of 97 (effective 99) 9

10 Colombia s Internet market profile Internet hosts x people: 4.41 (98) Users x 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 Internet policy & regulation 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

11 Celcom s IP Tel services 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. Prosecuting other IP Tel operators In the second half of 1999, more than 20 valueadded 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 11

12 Traffic bypass in Colombia Traffic on US / Colombia route (million minutes) Estimated bypass traffic Total traffic US outgoing Estimated call-turnaround Colombia outgoing Where is the market going 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 lines in service. 12

13 Peru s telecom market profile Population: 25.2 million (99) GDP per capita: US$ (98) Teledensity: 6.69 Cel subscribers: 3.92 Ownership of incumbent: Private Competition in LD & int.: new LD & int. and 2 local licenses (7 local pending) Peru s Internet market profile Internet hosts x people: 1.93 (98) Users x people: 80.6 (98) Nro. of ISPs: 54 (99) PCs x 100 people: 1.81 (98) Began: Int. capacity: 1991 (94.com) na. 13

14 The Aplio challenge 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 Leased lines prices in Peru (US$) Speed of circuit TdP: Before FirstCom TdP: After FirstCom Variation % (2)/(1) FirstCom 64 Kbps % Kbps % Kbps %

15 Accounting rates in an open market Rate variations for traffic termination in Peru (US$ cents/min) % of new long-distance companies Less than 10 40% Between 10 and 20 20% More than 20 40% Peru s settlement rates: TdP: US$ 0.31 Some others: US$ 0.06 Where is the market going 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. 15

16 IP Tel rates: Net2Phone Peru Origin of call Destination of call Net2Phone Tariffs Time of day Peru USA 0.15/min PC to phone [TdP 0.66/min] USA Peru 0.21/min PC to phone (Lima) USA Peru 0.31 phone to phone (Lima) Peak (7am-7pm) Any time Any time Thailand s telecom market profile Population: 60.3 (98) GDP per capita: US$ (97) Teledensity: 8.35 (98) Cel subscribers: 3.25 (98) Ownership of incumbents: Competition in LD & int.: Public monopoly (BOT) 16

17 Thailand s Internet market profile Internet hosts x people: 3.40 (98) Users x people: 33.1 (98) Nro. of ISPs: 18 (1/00) PCs x 100 people: 2.16 (98) Began: Int. capacity: na. na. The TOT proposal 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 17

18 The CAT 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. TOT Y-Tel Y tariffs (Bahts) Time 0-50 km km More than 200 km 7am-6pm [working days] 6pm-10pm [working days] 10pm-7am [working days] US$ = 38 Baht 18

19 CAT Phone Net tariffs (Bahts) Destination Standard (1) East Asia [Japan, Korea, Taiwan] Econ. (2) Phone Net % discount from 1 % discount from Europe [excl. UK] USA/Canada US$ = 38 Baht Lessons from the cases 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 19

20 Lessons 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 ITU case study series * IP Telephony: China, Colombia, Peru, Thailand - itu.int/ipteliptel * Interconnection China - itu.int/osg/sec/ /sec/spu/ni/ Interconnection: India, Mexico, Finland, * Internet diffusion: Nepal, Uganda, Egypt, Bolivia, Hungary itu.int/ti/casestudies/ Canada, Argentina, and others coming soon... 20