The African Internet & Telecom Summit
(Banjul, The Gambia, June 5-9, 2000)
Topic: Internet Telephony Opportunities in Africa & Gambia Telecom Presented by:
Yaw Osei Amoako, Ph.D. ITXC Corporation Regional Director - Africa
Thursday, August 20, 2009
ITXC Corp.
Agenda
• Overview of Internet telephony
– What, Why & How (Phone to Phone)? – History of Internet Telephony – Internet Telephony Revenue Growth Vs. Switched Telephony Revenue Growth – Birth of New Communications Network
• • • • • •
Telecommunications Market in Africa ITXC Corporation – The Story Behind GAMTEL & Internet Telephony Opportunities ISPs & Internet Telephony Opportunities Show me the Money (US$) Next Step – Where do packets come from & How to become an Affiliate of ITXC
ITXC Corp.
Big What?
Mistakes
• “No Corporate MIS Manager will allow his/her company‟s email to go over the Internet.” – AT&T Executive, 1994 • “People will never give their credit card numbers on the Internet.” – Common Wisdom, 1996 • “Voice over the Internet will never work” – Press Coverage in 1998
ITXC Corp.
What is Internet Telephony or VoIP?
• Point to Point use of IP to carry and route two-way voice communications over data network.
• VoIP uses the real-time protocol (RTP) to help ensure that packets get delivered in a timely way - thus avoiding delay, the biggest single concern for network managers trying to maintain good voice quality.
ITXC Corp.
Why Internet Telephony?
• IP uses the available capacity in a more technically efficient manner.
– – – PSTN call occupies a duplex (2-way) circuit for the entire duration of the call, including the pauses between words or between replies. PSTN is optimized for voice transmission sampled in 8 bit bytes, 8,000 times a second, for an aggregate rate of 64 kbit/s. IP call could theoretically be routed over different circuits, each of which would be occupied for a few thousandths of a second at a time, as packets are routed across the network to be reassembled at the distant end.
•
Technically efficient network provides greater capacity utilization for IP calls.
– – IP is engineered to meet average loads, and the typical utilization over an extended time period is around 60-70% of network capacity and with built in redundancy, calls do not fail. PSTN is engineered to meet the business peak hour and thus network components are in use for, perhaps, less than 20% of time. Overloaded PSTN cause call attempts to fail.
•
Internet Telephony has the potential to significantly reduce the cost of long distance voice communication
ITXC Corp.
Implications of IP Telephony for African Countries
• Originating Calls:
– African countries customers are much more price sensitive. – African Telcos‟ are not responsive to new technology. – Low-cost IP telephony will kick-start the growing Internet market – Traffic generated is likely to be incremental, i.e., it would not necessarily substitute for calls that would otherwise have been made directly on the PSTN, because they would have been too expensive. – If substitution occurs, it is likely to be discounted services, such call-back or prepaid services, not necessarily the Telcos‟ core business. – Reduction of Telcos‟ commitments to making international settlements payments to foreign Telcos‟.
ITXC Corp.
Why is Voice Over the Internet Better?
• Infrastructure costs much less
– No need for $500,000 switches – One network for both voice/fax and data – One network management team
• • • • •
Compression is 6 times better than PSTN Allows for speed to market Allows for better margins Has no single points of failure Requires no long term commitments
ITXC Corp.
CHINA
14 Cities in 16 Days
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1 0
11
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ITXC Corp.
ITXC Corp.
Short History of Internet Telephony: Grandma To Grandma
Nerd to Nerd (computer to computer) – Since 1994
Nerd to Grandma (computer to phone) – Since 1996
Grandma to Grandma (phone to phone) – Since 1997
GATEWAYS
ITXC Corp.
Projected Size of Internet or IP Telephony Industry The Increase in IP-Based Voice Communications Worldwide:
Minutes of Us age (in Billions) 1.8 5.8 16.8 41.2 83.7 151.7 % of Total Phone Minutes of Us age 0.2 0.7 1.7 3.7 6.8 10.9
1997 1998 1999 2000 2001 2002
Source: International Data Corporation
ITXC Corp.
IP Telephony Revenue Vs. Worldwide Telecommunications Revenue
Huge Addressable Market
Worldwide Telecommunications (in trillions)
C 10%
$0.8
IP Telephony Revenue (in billions)
R AG
$6.0 $3.6 $1.9 $0.1 $0.4 $10.1
AGR
$1.1 $1.2
$1.3
$0.9 $1.0
9% 17
C
1998 1999 2000 2001 2002 2003
Source: Insight Re sea rch, IDC
1998 1999 2000 2001 2002 2003
ITXC Corp.
IP Telephony Voice-Enabled ECommerce Revenue
Another Huge Addressable Market
Voice-Enabled E-commerce
(in billions) $6.0 5.0 4.0 3.0 2.0 1.0 $0.0 0.0 1999
Source: IDC
$5.6
255
R CAG %
$4.2
$2.0 $0.8 $0.2 2000 2001 2002 2003 2004
ITXC Corp.
Current State of IP Telephony Market
• Reseller market today
– Phone-to-Phone market for international calls – PC-to-phone - free, flat rate, charged – 400 million min./ month and growing by 25% a month
• Enhanced services
– – – – Unified messaging International toll-free Calls to call center from web site Calling from Portal
• Many countries are deregulating or planning to deregulate their communications industries
ITXC Corp.
Birth Of A New Communications Network
The Old Way
Converts sound into electrical signals and shoots them across a copper network. It‟s simple and works well, but it‟s expensive. The switches that direct traffic across the network cost million of dollars. And each call uses an entire circuit. That‟s like every car on the highway getting its own lane. The result: Switched Long-distance calls cost more per minute compared to IP calls per minute.
The New Way
Internet technology is much cheaper than traditional phone gear. That‟s because its digital routers, which direct traffic on the Net, cost tens of thousands of dollars, not millions. What‟s more, each piece of data shares a line with data from other calls, just as cars share a highway lane. Parts of the same conversation often travel different paths, taking whatever route is available. The result: Long-distance IP calls cost less compared to switched calls.
ITXC Corp.
Circuit Switch Vs. Packet Switch
• Circuit switched networks, the modern telephone network, allocate a full end-to-end circuit for the duration of a call regardless of whether the parties are speaking or silent using a 64K dedicated circuit. Since the bandwidth remains constant, the cost of a phone call on the PSTN is based on distance and time The Future is Digital, and the next step in digital telephony is packet voice. Packetized data moves independently as on a multi-lane highway – Packets take up less room, but do not necessarily arrive together Packet switch is more efficient mode of transport
– Less expensive, facilitates one network not two
•
• •
Packets allow for enhanced services, melding of Web info, data, voice and video
ITXC Corp.
The Economics of Convergence
Example: New York - Sao Paulo, Brazil
Maximum concurrent calls 30 180 240 180 Monthly cost Cost per minute used $.20 $.033 $.025 $.003
Traditional PSTN Compressed PSTN Dedicated IP Internet
$70,000 $70,000 $70,000 $2,000 (NY) $5,000 (SP)
Notes: • 2 megabits bandwidth • yearly commitments assumed • 27% loading • Jan, 1999 prices
ITXC Corp.
Data and Voice Traffic
6000 5000 4000 3000 2000 1000 0 1997 1999 2001 2003 2005 2007 Data Voice
Arthur D Little Consulting 1999
ITXC Corp.
Telecommunications Market Growing in Africa
ITXC Corp.
1998 - International Traffic by Origin
3% 4% 16% Oceania Africa Europe US & Canada Asia Latin Amer. 2%
43%
32%
ITXC Corp.
Traffic Growth by Region 1997-1998
Source:Telegeography
Oceania
US & Canada
Asia
Europe
Africa
Latin Amer.
ITXC Corp.
20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Global Average
Largest Telecommunications Routes From Africa (Anglophone Countries)
Canada Germany Lebanon Italy U.S. United Kingdom 0% 5% 10% 15% 20%
ITXC Corp.
1999 - Inter-Regional Internet Bandwidth (Source: TeleGeography)
USA & Canada 5,916 Mbps Asia/Pacific 170 Mbps 949 Mbps 13,258 Mbps Europe
69 Mbps
Latin Amer. & Caribbean Africa
ITXC Corp.
Major Infrastructure Being Built to Handle the Projected Load
• Qwest and Level 3 - burying fiber - U.S. • AT&T, Carrier 1, GTS and Deutsche Telecomm - burying fiber along tracks, canals, electric lines - Europe • Teledesic and Iridium - low orbit satellite network • Teligent and WinStar - microwave high speed local loop
• Global Crossing, Marubeni -transoceanic cables - Europe, Africa, Pacific
ITXC Corp.
ITXC – The Story Behind
ITXC Corp.
ITXC Background
– Internet Telephony eXchange Carrier – Founded 1997 – Financing from Intel, Chase, VC, VocalTec, AT&T – NASDAQ: ITXC (IPO – Sept 27, 99) – International Subsidiary in UK and Singapore. Sales office in Beijing. – Largest Wholesale Internet Telephony carrier by footprint, volume
• Tom Evslin: Founder, Chairman and CEO
– Founder and VP of AT&T WorldNetsm
ITXC Corp.
ITXC.Net History
• Focused exclusively on wholesale VoIP industry • Deployed 1000+ VOIP gateways on 4 vendor platforms • 10 network wide gateway upgrades in 24 months • Three supported platforms, Vocaltec, Cisco and Clarent • ITXC.net carries more traffic than any other IP telephony network or Clearing House
ITXC Corp.
ITXC Customers & Affiliates • Facilities-based Telcos, PTTs – Bell Atlantic, Ameritech, China Telecom, Korea Telecom, GTS, Japan Telecom, Telstra, C&W Optus, IDT... • Telephony resellers • Newly formed ITSPs • International ISPs (for termination) • Pure wholesale - Not business or residential end users
ITXC Corp.
Building at Internet Speed:
After 24 months:
• 220+ PoPs • 135 Cities • 60 Countries • 130 Affiliates
ITXC Corp.
Is there proof that this works?
140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
ITXC.net
(000s of MOUs)
3Q98
4Q98
1Q99
2Q99
3Q99
4Q99
1Q00
ITXC Corp.
GAMTEL – Gambia Telecom & Internet Telephony
ITXC Corp.
The First Stage Winners in Africa Will Be...
• Those who enable transitions • Those who know their place in a layered industry • Those who move quickly • Those who buy gateways • Those who depreciate their gateways (and soft-switches) quickly • Those who look to new markets
ITXC Corp.
Big Picture of How GAMTEL Will Make Money in This New Industry
• Test technology today by terminating and getting paid for it • Sell IP calls to keep your costs down - high margins • Both • Build a domestic Internet Telephone Network with ITXC Intellectual Expertise • Start writing enhanced services applications • Use a voice ASP for enhanced services • Carefully define your market in this new world
ITXC Corp.
Network Economy
• Operate one network
– one set of cables – one support team
• • • •
More efficient use of bandwidth Less expensive components No IRUs No long term bandwidth commitments
ITXC Corp.
Opportunities for GAMTEL
• • • • • •
Arbitrage Revenue defense Political Value-added IP based services Unified messaging Internet economics
ITXC Corp.
Opportunities for GAMTEL - Arbitrage
• Primarily International outbound • Diminishing opportunity with increasing competition and lower margins • Regulated vs.Deregulated • Need to use a Internet telephony carrier for cost and quality • High volumes possible
ITXC Corp.
Opportunities for GAMTEL
- Revenue Defense
• Protect your customers by offering competitive IP based telephony to cost-sensitive user base • Open up new destinations using Internet Telephony instead of existing PSTN carrier relationships • Lower cost base over Internet
ITXC Corp.
Opportunities for GAMTEL - Political
• Lower outbound costs increase usage amongst lower incomes • IP telephony and competitive telecoms industry go „hand-in-hand‟ with the Internet economy • Lower prices always increase volumes, lower imbalance of traffic • Internet/IP telephony infrastructure rollout, „leapfrogs‟ old technologies
ITXC Corp.
Opportunities for GAMTEL
- Value Added IP-based Services
• Audio-conferencing • Application Sharing
• Device to Phone (webtalkNOW! ) • Web to Phone
TM
• International 800 (Borderless800 )
TM
• Home Country Direct (BDirect )
T)M
ITXC Corp.
Opportunities for GAMTEL - Unified Messaging • • • • • Voice, e-mail and fax mailbox Text to speech and vice-versa Roaming services Mailbox out-dial over VoIP “Virtual” PBX
ITXC Corp.
Opportunities for GAMTEL - Internet Economics
• • • •
One network for Voice and Data Common bandwidth Common equipment Common staff
ITXC Corp.
OPPORTUNITIES FOR ISPs
ITXC Corp.
Opportunities for ISPs - New Revenue from Voice/Fax services
• PC/Web to Phone • Phone/Fax to Phone/Fax • Value added services
ITXC Corp.
Opportunities for ISPs - PC/Web to Phone
• Work with ITXC or a similar company • Sell or give away a PC client or Web browser page • Build your own brand • Advertising or subscription based model
ITXC Corp.
Opportunities for ISPs - Phone/Fax - Phone/Fax
• Only when: – You have experience with telephony minutes – You have real-time billing and call control facilities (switch , pre-paid platform) – You understand the pricing dynamics – You have legal approval – You have a distribution mechanism and/or a strong telephony focussed partner
ITXC Corp.
SHOW ME THE MONEY (US$)
ITXC Corp.
International Termination Traffic Per Bandwidth
384Kbps (30 Ports) = 400,000 Minutes/Month 512Kbps (48 Ports) = 600,000 Minutes/Month 764 Kbps (60 Ports) = 800,000 Minutes/Month 1Mbps (96 Ports) = 1,000,000 Minutes/Month Multiply by Agreed Termination Rate ($0.00) = Gross Maximum Income/Month ($00,000.00) Less Cost of Bandwidth/Month ($00,000.00) = Net Maximum Income/Month ($00,000.00)
ITXC Corp.
Cost of Terminating Calls
• Fixed Costs
Termination Gateway(s)
Cost of 30 Lines or E1 Connection • Monthly Costs – To Be Incurred by Telco
Internet Connectivity Bandwidth $7000 - $20,000
(Minimum of 384Kbps – Prices vary from country to country
Local Termination Charges (Prices vary from country to country)
ITXC Corp.
Hypothetical Example of Income To Be Generated From Terminating Calls
(Actual #’s may vary)
• • • • • • •
512Kbps = 48 Lines = 600,000 minutes Multiply By Terminating Rate of $0.15 Total Gross Income $90,000 Subtract Monthly Cost of Bandwidth $10,000 Subtract Cost of 48 PSTN Lines $ Subtract Cost of Gateways $ Total Net Income $80,000
GROSS MARGIN PER MINUTE: $0.01 - $0.35
ITXC Corp.
WHERE DO THE PACKETS COME FROM?
ITXC Corp.
Who is Originating Minutes & Who Is Terminating IP Calls Today?
• Incumbent Telcos
– Ameritech (USA) – Bell Atlantic (USA) – Japan Telecom – Korea Telecom – China Telecom – GAMTEL (Gambia Telecom)
• • • •
New Competitive Carriers Internet Service Providers (ISPs) Cable Companies Wireless Companies
• Internet Telephony Service Providers
ITXC Corp.
CRANS Network Topology
Affiliate Facility
ITXC Carrier Facilities
Affiliate Managed IP
Public Internet
ITXC Affiliate Gateways
ITXC CRANS Affiliate Switch
PSTN
ITXC SNARCs
ITXC Corp.
How a Telco can originate call to the world
ITXC Corp.
How does a Telco become an ITXC Termination Affiliate?
1. 2. 3. 4. 5. Review and signing of Non Disclosure Agreement (NDA) Review and completing a Deployment Provision Form Provide IP Connectivity Address or Addresses for testing Review and signing of Carrier Origination & Termination (O&T) Agreement Intense testing and deployment period - DP team works with the affiliate to test its Internet connections, and PSTN lines and the installation of the CRANS If the affiliate passes all of the tests and the quality of its termination meets the ITXC Standards, a certificate is awarded and ITXC Sales force will begin to sell minutes to the new destination to origination affiliates ITXC does the selling, marketing and insulates affiliates from debts and pays affiliates directly.
6.
7.
ITXC Corp.
ITXC Global Offices
ITXC Corp 600 College Road East Princeton, NJ 08540 USA +1.609.419.1500 +1.609.419.1511 (fax) ITXC Ltd. 1 Northumberland Avenue Trafalgar Square London WC2N 5BW England +44.171.872.5623 +44.171.753.2789 (fax)
ITXC Asia Pte Ltd 391A Orchard Rd. #13-08 Ngee Ann City Tower A Singapore 238873 +65.838.4035 +65.235.0349 (fax)
ITXC Corp.