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

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

• Daryl Chambers

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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?

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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

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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!

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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

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IP PBX lines Forecasts
50 of systems by 2004
100
90
80
70
60
IP-based
50
Traditional
40
30
20
10
0
'99
'00
'01
'02
'03
'04
'05
'06
Source Gartner
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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 vendors
• BUT
• 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

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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 vs
  ISPs
• 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!

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Consumer VoIP

• Consumer VoIP equipment evolution
• Fixed
• Cordless
• Mobile
• Types of services available
• Free services
• Subscription services
• Operator offerings

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Consumer VoIP Roll-out

• Fixed Phone Calls from PCs
• USB corded phones
• Soft-phones
• Headsets
• Conference units

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Consumer VoIP Roll-out

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

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Consumer VoIP Roll-out

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

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• 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

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Consumer VoIP Roll-out

• VoIP over Mobile?
• PTT already live
• Hybrid mobile / WiFi VoIP offers
• VoIP directly over cellular
• 3G opportunity
• IPDrum type products

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VoIP Services

• Free services such as
• Skype, MSN, Firefly
• Subscription services such as
• Firefly, Engin, Vonage

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• 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
  its free its over. The world will change
  now inevitably.
• Michael Powell, Chairman, FCC, 2004

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• 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

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Skype - Good and Bad

• Good
• Free calls within P2P environment
• Low cost calls outside Skype
• Free software / easy to download and use
• Doesnt 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 dont like P2P architecture

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Subscription Services

• Starting to roll out in Australia
• Suppliers include Freshtel, engin and many others
• Still talking of 10s of 000s, 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

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• 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

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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

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Give-away tonight
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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

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Consumer VoIP from Operators

• Operators (e.g. Telstra / BT / ATT) 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

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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

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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

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VoIP Opportunities PC Users

• For those of you interested in the PC as users
• Probably already using VoIP
• Enjoy the savings!
• Expect your total comms 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

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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 vs SIP
• Government regulations

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Implications for fixed line Telcos?

• 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

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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

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Implications for ISPs?

• 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

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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.

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Where to from here?

• In the 1990s 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 10s of 000s
  of subscribers, not millions

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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

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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

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• Thank-you
• QA