Voice over IP

Voice over IP: Reconciling Internet Peering with a Settlements Environment Dr Tim Kelly Head, Strategy and Policy Unit International Telecommunication Union (ITU) IIR “Optimising Interconnection Accounting and Settlement Strategies”, Nice 7-8 December 2004 The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of ITU or its Membership. The author can contacted by e-mail at tim.kelly@itu.int. International Telecommunication Union Agenda: Internet peering and settlement Why settlements in a peering environment? Mix of PSTN and Internet Protocol traffic Mix of fixed, mobile and hybrid traffic “Third coming” of Voice over IP (Skype, Vonage) VoIP around the world Where it’s legal, where it’s tolerated Regulatory conundrums Technology trends Where will we be in 5 years’ time? Mini case study: Japan 2 International Telecommunication Union International voice traffic (in billions of minutes) 180 160 140 120 100 80 60 40 20 Source: ITU / TeleGeography VoIP PSTN As % of total 11.8% 7.4% 4.8% 0.01% 1997 1998 0.2% 1.6% 1999 2000 2001 2002 2003 13.1% 0 3 International Telecommunication Union Changing mix of int’l circuits Rise of international private lines 8 7 6 5 4 3 2 Source: ITU, adapted from FCC Circuit Status Report. Availability and status of international circuits from the United States (64 kbit/s equivalents, in millions) Other Idle circuits 2002, total = 6.7m circuits of which IPL = 29.4% 1 0 International Private Lines PSTN circuits 1995, total = 0.26m circuits of which IPL = 10.6% 4 2002 1995 International Telecommunication Union International voice traffic trends Revenue (US$bn) and price per min ( cents) 70 60 50 40 30 20 10 Source: ITU World Telecom Indicators Database. 68 63 58 51 44 39 33 Revenue (US$bn) Price per minute (US cents) 0 1997 1998 1999 2000 2001 2002 2003 5 International Telecommunication Union Sources of telecom revenue Worldwide, in US$ billions 1'200 1'000 Data and other 800 600 400 200 Source: ITU World Telecom Indicators Database. Mobile International fixed telephone Domestic fixed telephone 0 1993 95 97 99 01 2003 6 International Telecommunication Union Selected rates for call termination In Euro cents per minute 0.150 Mexico 0.08 0.08 0.140 China Note: Mobile and fixed rates are for SkypeOut. Settlement is from US and Reference Interconnect Offer is for double tandem. Source: Skype, FCC, Analysys. Settlement/RIO Skype, Mobile Skype, Fixed 0.022 0.022 0.180 0.138 0.151 0.019 India Germany 0.017 0.016 France 0.017 0.164 0.251 7 International Telecommunication Union The “third coming” of IP Telephony 1995-1999: “Internet phone”, offered primarily over the public Internet (e.g. FreeWorld Dial-up, DialPad) 2000-2002 “VoIP”, offered as discounted telephony over IP-based networks (e.g. Net2Phone, iBasis) Collapse of dot.com bubble left many VoIP companies struggling as incumbent PTOs also offered VoIP services or acquired VoIP operators (e.g. China Telecom, Teleglobe) 2003-present “Voice over broadband”, offered as free or flat-rate chat plus discounted calls to PSTN/mobile users (e.g. Vonage, Skype) “Corporate IP”, as users shift both data and voice to a unified IP platform 8 International Telecommunication Union Annual growth rates International voice traffic, in % 10’000% 1’000% VoIP 100% 10% Note: Vertical scale is logarithmic. Source: ITU / TeleGeography PSTN 1% 1998 1999 2000 2001 2002 2003 9 Regulatory status of IP Telephony By region, 2003 100% 6 80% 3 6 60% 8 40% 6 5 6 0% Africa Americas Arab States Asia-Pacific Europe/CIS 5 7 Restricted 4 Prohibited 20% 14 1 2 4 8 9 4 29 2 1 2 No policy for IP Telephony Full Competition Partial Competition Note: Based on responses from 132 economies. “Prohibited” means no service is possible. “Restricted” means only licensed PTOs can offer the service. “Partial competition” means non-licensed PTOs may use either IP networks or the public Internet. “Full competition” means anyone can use or offer service. Source: ITU (2005, forthcoming): General Trends in Telecom Reform” Regulatory dilemmas Examples of regulatory confusion or inconsistency in regulation of IP Telephony Non-licensed Users are able to PTOs may offer IP mak e IP phone calls, Telephony, but not but no company is licensed PTOs licensed to provide it Brazil Barbados Sri Lanka Suriname TYFR Macedonia Licensed PTOs are All PTOs are allowed to allowed to offer IP offer IP Telephony, but Telephony, but users users are not allowed are not allowed to use it to use it Aghanistan Bhutan Algeria Congo DR Antigua & Barbuda Kyrgyzstan Indonesia Togo Malawi Mali Morocco Oman Pakistan Paraguay Rwanda Uganda Note: Based on responses to 2003/04 questionnaire from 132 economies. Only selected responses are shown. “PTO” = Public Telecommunications Operator. Source: ITU World Telecommunication Regulatory Database. International Telecommunication Union IP Telephony in five year’s time Major technological and regulatory trends IP-based traffic indistinguishable from PSTN Around 100 bn minutes of IP-based international traffic in 2008, or >50% of total Many carriers will have all IP-networks A majority of voice traffic will originate on wireless networks and much of it will be IP-based Numbering convergence ENUM will allow calls to and from IP voice on multiple different devices Numbering plan will allow for non-geographic and deviceindendent VoIP numbers Voice over IP over mobile 12 Voice will increasingly travel over data channel in mobile networks to provide discounted calling prices International Telecommunication Union Mini case study: IP Telephony in Japan In 2000, Japanese Ministry (now MIC) introduced new rules on unbundling local loop and co-location Rapid rise of DSL connections Very low prices (7m VoIP numbers allocated to ISPs VoIP development consortium worked with MIC to establish standards for QoS, interconnection, tariffs, number allocation etc. 13 International Telecommunication Union Japanese broadband prices are among the lowest in the world Broadband monthly0 500 1000 1500July 2004 sub. prices, US$, 2000 2500 China 1 Lithuania 2 Jordan 3 Slovak Republic 4 Japan 5 Belarus 6 Macao, China 7 Taiwan, China 8 Croatia 9 Australia 10 Sri Lanka 11 Israel 12 Korea (Rep.) 13 Czech Republic 14 Cyprus 15 Ukraine 16 Greece 17 Hong Kong, China 18 Malaysia 19 Brazil 20 Estonia 21 Senegal 22 Netherlands 23 Germany 24 Slovenia 25 French Guiana 26 Mexico 27 New Zealand 28 Barbados 29 Morocco 30 0 512 256 512 256 1024 512 1500 256 384 256 512 256 2048 512 256 512 256 640 512 300 512 256 512 1000 1024 512 256 400 256 256 Source: ITU Internet Reports 2004: The Portable Internet. 9.66 13.64 Overall 14.08 14.77 subscription 16.78 17.43 charges are 18.68 important 19.39 21.01 21.13 21.71 23.58 23.93 24.77 25.00 25.00 25.30 25.38 26.05 26.07 26.64 26.92 27.71 27.71 29.57 30.12 30.61 31.21 31.50 32.97 10 20 30 40 14 Cost 100 kbit/s as % of monthly income Japan 1 0.00 Sweden 2 0.01 Korea (Rep.) 3 0.02 But factoring in Taiwan, China 4 0.04 the speed of the Hong Kong, China 0.04 0.06 United States 6 connection and 0.06 Canada 7 income is the 0.07 Belgium 8 more telling story 0.09 Singapore 9 0.10 Switzerland 10 Germany 11 0.13 Denmark 12 0.15 Norway 13 0.17 Netherlands 14 0.17 Finland 15 0.18 0.18 Australia 16 0.18 Italy 17 0.20 France 18 0.24 Israel 19 0.26 United Kingdom 20 Luxembourg 21 0.28 Slovenia 22 0.29 Austria 23 0.31 Iceland 24 0.38 Ireland 25 0.42 0.43 Bahamas 26 0.55 New Zealand 27 0.86 Czech Republic 28 0.86 Greece 29 0.92 Estonia 30 International Telecommunication Union Conclusions Inter-operator settlements remain important (and become more complex) in an environment dominated by IP Per-minute settlement remains preferred choice for voice, even for VoIP carriers Major new issues: VoIP over broadband and over mobile Regulators face tough challenges to maintain stance of technological neutrality and to remain one step ahead of the market 15