The Internet Phone Revolution All you wanted to know about consumer VoIP

Daryl Chambers

The Internet Phone Revolution

Agenda• VoIP review

–Operators and Enterprise

–Consumer VoIP activities

• VoIP Opportunities

• Main barriers to “lift-off”

• Impact for local fixed Telco operators

• Where to from here?

What is VoIP

• Voice over IP is the sending of voice information in digital form in discrete packets rather than in the traditional circuit-switched protocols of the public switched telephone network (PSTN)

• Major advantage of VoIP and Internet telephony – It avoids the tolls charged by ordinary telephone service.

– Digital format can be better controlled (compressed, routed, converted).

– Digital signals are more noise tolerant than analog

Operators and VoIP

• Fixed operators already use VoIP technologies

– Early adopters

– Most long distance calls are converted to IP

– Use to reduce transmission costs and increase profits

BUT

• Do not like consumers taking advantage of the savings

of VoIP!

Enterprise and VoIP

• IP-tel talked about for many years

• PBX vendors all now turning to IP telephony

– Most will stop support of traditional PBX within 4-5 yrs

• Major new players entering only with IP PBX • E.g. Cisco, 3Com…

• New soft switch vendors such as AsteriskTM, The Open

Source Linux PBX

IP PBX lines Forecasts

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

'99 '00 '01 '02 '03 '04 '05 '06

IP-based

Traditional

50% of systems by 2004

Source: Gartner

Enterprise VoIP - SIP• Session Initiation Protocol (SIP) is an Internet protocol to

set up peer-to-peer communication sessions • SIP provides standardized interface for VoIP telephony• SIP was to mean that any phone vendor could sell

phones to connect to any IP telephony system• In theory SIP provides interoperability of phones and

networks between vendorsBUT

• Most IP systems incorporate SIP plus proprietary software to access key PBX type features

• Phones need to come from the supplier of the network just like with PBX if more than simple voice is required

Enterprise Benefits from VoIP

• Positives– Converged network for voice and data– Easier to manage moves/adds/changes and open new offices– Savings in call costs between offices– Easier to manage QoS in private environment v’s ISP’s– Interoperability (but SIP issues)

• Negatives– Standards are evolving – Wireless voice (802.11) remains complex for larger sites – Fears of virus and denial of service attacks– Interoperability issues (SIP+)– All eggs in one basket!

Consumer VoIP

• Consumer VoIP equipment evolution– Fixed– Cordless– Mobile

• Types of services available– Free services – Subscription services– Operator offerings

Consumer VoIP Roll-out

• Fixed Phone Calls from PC’s – USB corded phones– Soft-phones– Headsets– Conference units

Consumer VoIP Roll-out

• VoIP set-up for home calls– Analogue telephone adaptors (ATA)– ADSL Routers with VoIP

Consumer VoIP Roll-out

• Phone calls from cordless connected to PC– DUALphone– DECT adaptors– Coming – router based cordless phones

• What more can we say! – The DUALphone is easy to

install and user-friendly– DUALphone gives users

access to free calls via Skype from your sofas or kitchen

– No longer are you tethered to your PC for VoIP calls

– From the same phone you can also call to and from fixed lines

Consumer VoIP Roll-out

• VoIP over Mobile?

– PTT already live

– Hybrid mobile / WiFi VoIP offers

– VoIP directly over cellular

• 3G opportunity

– IPDrum type products

VoIP Services

• Free services such as:– Skype, MSN, Firefly

• Subscription services such as:– Firefly, Engin, Vonage…

“I knew it was over when I downloaded Skype.

When the inventors of KaZaA are distributing for

free a little program that you can use to talk to

anybody else, and the quality is fantastic, and it’s

free – it’s over. The world will change now

inevitably.”

Michael Powell, Chairman, FCC, 2004

• Second largest telecom operator in the world

• The worlds fastest growing operator– Almost 1 million downloads per day

– 150 000 new users sign up

• Provides “free” calls in P2P environment

• Low cost international calls– SkypeOut Global Rate of – AUD 2.8 cents per minute to 28

countries covering approx. 1/3 of world's population!

• Roll-out of new features and hardware

Skype - Good and Bad

• Good– “Free” calls within P2P environment – Low cost calls outside Skype– Free software / easy to download and use– Doesn’t replace PSTN phone line – User selects when to use– Continuously evolving features

• Bad– Quality can be impacted during busy times– Can use a lot of bandwidth– Some people don’t like P2P architecture

Subscription Services

• Starting to roll out in Australia– Suppliers include Freshtel, engin and many others– Still talking of 10’s of ‘000’s, not millions of subscribers– Market is still in infancy– Why – if savings are so great?

• Typical fees– $10 per month for a softphone with a dedicated number– $25 per month including $25 of low cost calls– Typical charges

• 10 cent untimed calls across Australia

• Free calls within own system

• Freshtel Holdings is an Australian Internet Telephony

company developing and marketing VoIP telephony

products and services worldwide

– The Firefly softphone was developed and is sold by Freshtel

– Virbiage Pty. Ltd. manufactures and sells VoIP handsets and

other hardware

– Voicestream Networks Pty. Ltd. provides wholesale call

termination and turnkey VoIP software services

Why Freshtel

• Fully integrated VoIP solutions for wholesale/retail markets– selling integrated service not just selling minutes

• Not just integrated, but owned and managed at all steps– Hardware – phones, adaptors for traditional phones

– Software

– Network - including billing and administrative systems

• Freshtel are one of the few Companies in the world that produce the Hardware, Software, Network and Systems

• They have over 240,000 subscribers and growing fast

Give-away tonight

Subscription Services – Good and Bad

• Good– Huge savings over PSTN calls– Growing choices

• Opt in 100%

• Or just when choose to make calls

• Bad– Interoperability between services (and even if so, pricing issues)– Need a phone line for broadband (but Unwired/PBA type

services are changing even this) – Requires major change in consumer behavior

Consumer VoIP from Operators

• Operators (e.g. Telstra / BT / AT&T) must launch VoIP • All are trialing technologies• Problem - the money/profit equation

– How to charge enough for VoIP calls to compensate for loss of fixed line call revenues!

– We will see a lot of output from operators around• Security• QoS• Reliability…• To confuse users and to justify higher prices than we see today from

offers such as engin

– Ultimately they will have to accept lower revenues

Consumer VoIP Summary

• Consumer uptake of VoIP is enhanced by choice– Hardware– Services

• Users no longer “stuck” to a PC – New products allow users to make and receive calls away from

the PC

• Users can select the level of VoIP calls they access (some or all)

• VoIP could even move onto mobiles in the future– Wherever you communicate VoIP will be an option

VoIP Opportunities – PC Retailers

• Consumer VoIP is still in its infancy• Get on the bandwagon!• For PC retailers use VoIP to:

– Sell value and savings to customers– Bundle VoIP hardware and services with PC sales – Sell the right broadband plans (not entry level) – Now the PC can save money as well as all the functions we

know it can do today

• All this = Extra margin on hardware, possibility to earn income from selling VoIP services, better broadband plans…

VoIP Opportunities – PC Users

• For those of you interested in the PC as users– Probably already using VoIP– Enjoy the savings!– Expect your total comm’s bill to reduce

• Instead of bills for phone line, and ADSL/BB expect one bill for data pipe

• Wireless services will reduce need for fixed lines for broadband

• VoIP = savings to user • VoIP = easier to stay in contact with friends

– e.g. know who is online, and call for free

Main Barriers to Consumer VoIP “lift-off”

• Technology evolving• Call quality • Emergency calling issues • Operator control of home phone connection • Cost of broadband data in Australia • Competing proprietary standards v’s SIP • Government regulations

Implications for fixed line Telco’s?

• For PSTN call revenues– Do your sums!– Costs as low as 2.8 cents per minute across world /

10 cents un-timed national calls– Operator long distance revenue streams will implode– Gartner - PSTN voice market to loose $4.6B in four

years • Fixed-line voice revenues will fall from $10.6 billion in 2004 to

approximately $6 billion in 2009, a decline of 10 percent a year on average

US VoIP uptake

• USA at end of 2004– Fixed lines - 181 million– Mobile - 174 million– VoIP subscribers - less than 3 million– 5-7 million residential VoIP lines by the end of 2005.

• By 2010 - 27.0 million residential VoIP subscribers• Market is moving from early adopter to mainstream

Implications for ISP’s?

• VoIP will:– Help drive broadband sales– Drive sales of better plans (higher prices)– Creates a real value proposition to market services– Opens voice communications as a revenue stream

How will Telstra react?

• SOL TRUJILLO“Clearly we need to migrate to an all IP based network, there are cost advantages, service advantages, all kinds of customer related advantages.

However there is always a practical side in terms of how you do it, when you do it and what speed you do it.”

Where to from here?

• In the 1990’s it was the mobile phone revolution – Mobile phones became commonplace– Large share of voice traffic now carried over mobiles– Fixed networks lost out

• Consumer VoIP is the next communications revolution • In this first decade of this century, VoIP will again attack

the fixed network base – Today it is in its infancy– New operators are still talking of 10’s of ‘000’s of subscribers,

not millions

Summary

• VoIP is already becoming the next communications revolution– Operators – VoIP used already– Enterprise – rapid switch from TDM to IP over last 3 years– Consumers

• Still in infancy

• Choices are growing in hardware and services

• VoIP will impact traditional operators revenues

Conclusion• VoIP is here to stay

• VoIP is the new communications revolution– Same impact as mobiles had to fixed operators

• VoIP will be driven through the PC and broadband markets, not by fixed line operators

• We will see a dramatic increase in options for consumers

• PC retailers will benefit in increased sales and new revenue streams

• Users benefit from lower communication costs and better communications

Thank-you

Q&A