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.
14 Cities in 16
Days
CHINA
1 2 3 4 5 6 7 8 9 1 11 1 1 1 1 1
0 2 3 4 5 6
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 % of Total Phone Minutes of
Us age (in Us age
Billions)
1997 1.8 0.2
1998 5.8 0.7
1999 16.8 1.7
2000 41.2 3.7
2001 83.7 6.8
2002 151.7 10.9
Source: International Data Corporation
ITXC Corp.
IP Telephony Revenue Vs. Worldwide
Telecommunications Revenue
Huge Addressable Market
Worldwide Telecommunications IP Telephony Revenue
(in trillions) (in billions)
C AGR $1.3 $10.1
10% R
$1.2
$1.1 CAG
$0.9 $1.0 9%
$0.8 17 $6.0
$3.6
$1.9
$0.1 $0.4
1998 1999 2000 2001 2002 2003 1998 1999 2000 2001 2002 2003
Source: Insight Re sea rch, IDC
ITXC Corp.
IP Telephony Voice-Enabled E-
Commerce Revenue
Another Huge Addressable Market
Voice-Enabled E-commerce
(in billions)
$6.0 $5.6
R
5.0 % CAG
255 $4.2
4.0
3.0
$2.0
2.0
1.0 $0.8
$0.0 $0.2
0.0
1999 2000 2001 2002 2003 2004
Source: IDC
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 The New Way
Converts sound into electrical Internet technology is much
signals and shoots them cheaper than traditional phone
across a copper network. It‟s gear. That‟s because its
simple and works well, but it‟s digital routers, which direct
expensive. The switches that traffic on the Net, cost tens of
thousands of dollars, not
direct traffic across the
millions. What‟s more, each
network cost million of dollars. piece of data shares a line
And each call uses an entire with data from other calls, just
circuit. That‟s like every car as cars share a highway lane.
on the highway getting its own Parts of the same
lane. The result: Switched conversation often travel
Long-distance calls cost different paths, taking
more per minute compared whatever route is available.
to IP calls per minute. 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 Monthly cost Cost per
concurrent minute used
calls
Traditional PSTN 30 $70,000 $.20
Compressed PSTN 180 $70,000 $.033
Dedicated IP 240 $70,000 $.025
Internet 180 $2,000 (NY) $.003
$5,000 (SP)
Notes:
• 2 megabits bandwidth
• yearly commitments assumed
• 27% loading
• Jan, 1999 prices ITXC Corp.
Data and Voice Traffic
6000
5000
4000
Data
3000
Voice
2000
1000
0
1997 1999 2001 2003 2005 2007
Arthur D Little Consulting 1999
ITXC Corp.
Telecommunications
Market Growing in
Africa
ITXC Corp.
1998 - International Traffic by Origin
3%
4%
2%
16%
Oceania
Africa
Europe
43% US & Canada
Asia
Latin Amer.
32%
ITXC Corp.
Traffic Growth by Region 1997-1998
Source:Telegeography
20.0%
18.0%
16.0%
14.0%
12.0%
10.0% Global Average
8.0%
6.0%
4.0%
2.0%
0.0%
Oceania
Canada
Asia
Africa
Europe
Amer.
Latin
US &
ITXC Corp.
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
13,258 Mbps
Asia/Pacific
Europe
170 Mbps
949 Mbps
69 Mbps
Latin Amer.
Africa
& Caribbean
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 ITXC.net
80,000
70,000 (000s of MOUs)
60,000
50,000
40,000
30,000
20,000
10,000
0
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 roll-
out, „leapfrogs‟ old technologies
ITXC Corp.
Opportunities for GAMTEL
- Value Added IP-based Services
• Audio-conferencing
• Application Sharing
• Device to Phone (webtalkNOW! ) TM
• Web to Phone
• 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
Affiliate Managed IP
Carrier
Facilities
Public Internet
ITXC ITXC PSTN
Affiliate CRANS
Gateways
Affiliate
Switch
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. Review and signing of Non Disclosure Agreement (NDA)
2. Review and completing a Deployment Provision Form
3. Provide IP Connectivity Address or Addresses for testing
4. Review and signing of Carrier Origination & Termination
(O&T) Agreement
5. 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
6. 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
7. ITXC does the selling, marketing and insulates affiliates
from debts and pays affiliates directly.
ITXC Corp.
ITXC Global Offices
ITXC Corp ITXC Ltd.
600 College Road East 1 Northumberland Avenue
Princeton, NJ 08540 Trafalgar Square
USA London WC2N 5BW
+1.609.419.1500 England
+1.609.419.1511 (fax) +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.