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TechnologyDaily Mobile
Developing Nations Reap Benefits Of Telephony
Make a phone call via a computer, and it's immediately evident how the advent of the Internet is affecting consumers' everyday lives.
The United States has enjoyed the benefit of deregulated phone service that makes phoning long-distance and internationally inexpensive compared to the rest of the world's telecommunications rates. But thanks to new technologies that facilitate phone calls over the Internet, inhabitants of developing countries are beginning to enjoy the luxury of a lengthy phone conversation.
But Internet telephony is forcing a lot of countries to rewrite the rules on the legality of voice communications via the Web.
According to the definition by the International Telecommunications Union, the telecom branch of the United Nations, Internet protocol telephony, or IP telephony, enables transferring and transmitting voice and data transmissions over a means other than the public switched telephone networks. This includes Internet telephony, which is simply transmitting voice through the public Internet, and Voice over Internet protocol (VoIP), which is made up of voice transmissions that occur over networks that are based on Internet protocol. However, the debate rages over the use of the Internet for placing voice calls both internationally and within a country.
Bypassing Traditional Services
Companies began actively marketing Internet telephony technologies in 1997. That's when firms like ITXC emerged, offering the software and equipment to transmit voice calls over the Internet through packet switching. But the ability to bypass traditional telecommunication services in regions where the telephone lines are often controlled by state-owned monopolies — and the cost of a phone call is expensive — is creating an explosion of growth in the Internet telephony market.
The total global traffic generated through IP telephony reached 2.7 billion minutes in 1999 and will expand to 135 billion by 2004, generating roughly $19 billion in sales, according to a recent study by International Data Corp.
In most developing regions of the world, the government runs residents' telecommunications services, often hiking up the price due to a lack of competition. With the ability to transmit voice and data communication through the Internet or Internet protocols, Internet service providers (ISPs) can offer PC-to-PC, or PC-to-phone communications services for a mere fraction of the price.
In Egypt, for example, Tim Kelly, an analyst with the International Telecommunication Union, estimated that the price of a phone call to the United States costs $1.23 per minute over a traditional public switched network versus 23 cents over the Internet.
The Economics Of Access
With many Internet telephony firms offering free services, the only requirement to using telephony services is Internet access, which is often freely available through cyber cafes. In addition to the loss of per-minute calling charges, these telecom firms also stand to lose the settlement rates that are paid by outside carriers for telephone call imbalance.
According to statistics from the ITU, in 1998, Mexico registered 1, 307 minutes of outgoing calls, while Mexico's government-controlled telecom, Telmex, connected approximately 3,060 minutes from the United States. At a rate of 35 cents a minute, the estimated price of U.S. settlement charges paid to Mexico was nearly $620 million in 1998. When consumers place calls via the Internet to it is difficult to collect settlement fees because no call is actually connected.
Given the probability of losing revenue to Internet telephony, it's not a surprise that some countries are balking at the idea. For example, telephony is illegal in India, and Minister of Communication Ram Vilas Paswan recently said that the country’s long-distance carrier, VSNL, would lose too much money if the ban on Internet telephony was lifted, despite the recommendation of the country’s state planning commission to legalize it.
Regulation And Policy
Internet telephony also suffers from the vague and undefined policy structure surrounding IP telephony. Countries generally do not have the proper infrastructure to command the efficient use of IP telephony or the desire to permit it to compete with state-owned telecommunications services.
According to a 1999 survey by ITU, a majority of ITU's 80 member countries prohibit IP telephony. These critics include Thailand, Vietnam, Cuba, Jordan, Mexico, Turkey and Pakistan.
Officials at the U.S. Federal Communications Commission’s International Bureau and the Commerce Department's International Trade Administration have noted that most countries do not have a formal telephony policy, except to say that any form of the service circumventing the states official telecommunications carrier is prohibited.
In Latin America, for example, one FCC analyst noted that most countries are in transition to abolish or reform those rules. "Columbia and Ecuador are still very wrapped up in [Internet telephony]. To those governments, "anything that bypasses the system is potentially devastating, and they are aggressively seeking to root it out," said the official.
But Internet telephony has been a key factor in adding to the deregulation pressures facing developing nations.
"The United States and Western Europe are totally deregulated. So are Australia, Singapore and Hong Kong. Most of the rest of the world is not," said Mary Evslin, vice president of marketing for ITXC. Countries that are not deregulating "don’t want competition of any kind, whatsoever."
Evslin notes however that those countries making strides at basic telecommunication deregulation are pressuring other developing nations to keep pace.
One FCC analyst observed that there's "a kind of a patchwork of policies and regulations arising. It embodies tension between the Old World and the New World."
The Ecuadorean government, which has banned Internet telephony, has cracked down on ISPs by conducting spot checks to investigate — and possibly confiscate — any equipment that would enable IP telephony services, according to an FCC official. Similarly, Ghana's telecom regulatory body, the National Communication Authority, recently shut down ISP InterCom Data Network for deploying VoIP services. It is the third ISP shut down there since June.
Heidi Brimis of IP telephony supplier Clarent works with telecommunications companies and ISPs around the globe. There are "cases where there is a regulatory gray area — countries are evolving their definitions of who can offer what services and where there should be access charges," she said. "We basically tell [ISPs] to look at the rules in any given countries and decide on their own if they can operate.
Companies wishing to offer services are finding they must establish personal relationships with dominant telecommunications companies, or with government officials to convince them of market benefits of the communication service.
"We have spent our time building relationships in places where calls are most expensive," Evslin said. "We have been focusing on placing [Internet telephony services] where traditional phone service has been expensive. And we’ve done a lot of educating over the last few years."
Telphony In The United States
Many U.S. companies operate such services in countries with ambiguous rules on Internet telephony. "It is more common for companies to have to operate in a legally gray area where they do not have the assurances that they want, explained one FCC analyst, who declined to be named. But the market "is too lucrative and people want to be the first to operate" rather than not operate at all.
According to Piper Jaffney, an analyst at U.S. Bancorp, in 1999, Internet telephony accounted for less than 1 percent of the global telecom traffic. Over the next five years, this number is excepted to rise to 30 percent. And the world’s top 20 telephone carriers, responsible for transmitting 70 percent of global phone traffic, have all built or are in the process of building Internet protocol networks to enable VoIP and Internet telephony.
But despite the push toward deregulation, the vast majority of countries worldwide, including the United States, are likely to revisit the issues of regulating telephony.
"In the countries that have liberalized telecom markets — countries like Australia, Canada, European Union members — these countries have a hands-off policy (regarding Internet telephony)," noted one Commerce Department trade analyst. "But the regulators haven’t taken an oath saying they’re never going get involved in it."
- by Maureen Sirhal
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