According to a recent International Telecommunications Union (ITU) report there are two main areas of IP telephony. Firstly, there is Internet telephony which is the transmission of voice over the internet or World Wide Web. Secondly, there is Voice over IP (VoIP) or Voice over Internet Protocol to use the full title, involving the transmission of voice over networks employing IP (Internet Protocol). In short IP telephony is simply a means of making telephone calls over a data network instead of over the traditional analogue public switched telephone network (PSTN).
From a business and consumer standpoint, IP telephony brings the potential for lower price voice calls as well as new services which merge voice and other data services that cannot be delivered over the PSTN. However, due to the distributed nature of the Internet and its 'best efforts' only delivery approach, quality of service (QoS) can often suffer. The QoS on the internet is affected because the nature of the internet is such that carriers, such as Etisalat, don't know whose infrastructure its traffic is going to cross or the different capacity levels between various networks. So although a carrier may have data speed of 10Gbps, the network that its traffic lands up on could only have 2.5Gbps. For this reason to date, the majority of IP telephony travels over private networks as VoIP and not as Internet telephony over the internet. This QoS issue is, however, rapidly disappearing as the quality of networks around the globe improves with the consequence that the take up of Internet telephony is growing exponentially. With the existence of IP telephony services providers such as Skype and Vonage. IP telephony has now has hit the mainstream consumer and business markets. Skype has over 30 million signed up users and its own web site indicates over 85 million downloads of its free software.
Market Phenomenon
As IP technology becomes a widespread phenomenon, today's telephone networks will be completely restructured. VoIP providers such as Vonage and Skype who have no need to invest in building significant infrastructure have become serious competitors to the traditional PSTN voice services provided by incumbent operators such as Etisalat. This phenomenon has disrupted existing operator business models and operators are being forced to adapt. In the mean time, some incumbents, including most of those in the Middle Eastern countries are resisting early adoption of IP telephony - even over their own networks - because of the cannibalization this causes to traditional PSTN revenues, which are largely time based tariffs. On the other hand however, although new innovative providers such as Skype and Vonage are pushing the market, in the long run it may be the established players (including incumbents) with their own (largely paid for) networks who continue to dominate the market due to their reputation, reliability, as well as their established customer base and ancillary services such as billing systems, etc. They can bundle broadband access with broadband data connectivity and/or IP telephony services. In this way they can leverage their market position from the access component to other parts of the value chain, namely, IP telephony.
The Regulatory Role
Whilst the potential end result of this paradigm shift in the provision voice services is significantly cheaper, more diverse and more innovative services to businesses and consumers in the market, the speed and extent of that potential rests largely in the hands of national governments and, where they exist, industry regulators. Bahrain, Kuwait, Oman, UAE, Qatar, Saudi Arabia, Jordan, Egypt and Lebanon have all within the last 3 - 5 years established regulators responsible for opening and facilitating competition in their respective telecommunications markets. At present, however, the majority of these countries have adopted restrictive (some would say protective) policies on IP telephony, restricting the provision of such services only to operators licensed to provide traditional PSTN services. In these countries it is illegal to offer such services.
However, as anyone who has recently visited any internet caf, in Dubai, Doha, or Muscat will know, the use of such services is widespread. This is because whilst the incumbent operators remain dominant their markets the bulk of Internet traffic is carried over their network, and so there is certain level of tolerance. This tolerance however is likely to be strained as competing operators enter the market and as the volume of traditional PSTN voice traffic plateau's and eventually declines. How existing ME incumbent operators such as Etisalat will respond remains to be seen. In contrast, the United States has the most advanced and unregulated IP telephony market, permitting unconditional access of IP telephony providers to the PSTN operator's networks. In Europe the European Regulators Group (ERG), which brings together the 25 national regulatory authorities across Europe responsible for electronic communication markets met in February this year in Brussels and adopted (following a public consultation on VoIP in June 2004, which sought to clarify the regulatory issues related to VoIP services) a Common Statement on Voice over Internet Protocol (VoIP)services in order to facilitate the roll out and widespread use of Internet telephony in Europe. The European Commission itself favours an EU-wide "light touch" approach to Internet telephony as the best way to encourage competition between internet carriers of telephone traffic and traditional PSTN operators. At the release of the ERG's Common Statement, Commissioner Viviane Reding for the European Commission said "...I intend to strongly promote an open, procompetitive approach to Voice over IP in all 25 Member States of the European Union ...I expect Voice over IP to lead to more diverse and innovative services in the market which may well have an even bigger impact on consumers and businesses than email. And Voice over IP is just the tip of the iceberg. IP-based networks and services will be the basis for a whole new range of communications services, not only benefiting consumers directly, but feeding through directly to the whole economy. I am convinced that, as the market develops, the European Commission and national regulators will jointly ensure that throughout the EU, the roll-out of new IP-based services will not be hindered by regulatory hurdles."
Conclusion
Many commentators believe that IP telephony and VoIP can deliver services that are equivalent or even superior to those that you get on a traditional voice network but at substantially lower prices (if not free). The technology still has to mature, although significant applications are now starting to appear both for consumers and businesses alike. It may be impossible at this stage to predict what will happen in this increasingly volatile market. However the regulatory challenge is to ensure that it is the market place that will ultimately determine which services are finally successful. The author hopes in the light of the demonstrated demand for Internet telephony services and the relaxation of regulation in other regions and individual countries that ME governments and telecommunications regulators will as a matter of urgency revisit their current policies and regulations to open more fully the IP telephony markets so as to ensure that the ME region is able to maintain the same levels of innovation in information and technology services as the rest of the world and at internationally competitive prices. Such innovation and cost competitiveness remains a significant draw card for new businesses and further investment in ME markets.
The Author
Phil is an Australian National and British Citizen. He has over 15 years international experience in the telecommunications industry. He is an acknowledged expert telecommunications lawyer and regulatory and public policy professional. Phil's work assignments have been in Australasia, Europe and the Middle East covering all industry sectors including mobile and fixed, within both competing and incumbent operators. In recent years he held permanent Executive Director level posts in the UK at One2One (now TMobile), Worldcom (now MCI) and Global Crossing. Previously, in his native country, Australia, he held Director level positions with both the telecommunications and competition regulatory agencies. Most recently he has held interim executive management positions in the Middle East as Head of Corporate Legal and Regulatory Affairs at Batelco in Bahrain and Interim General Counsel and Head of Regulatory Affairs at Nawras Telecom in Oman.
Phil will be providing regular contributions on telecommunications and technology law developments to the Law Update.
By Phil Reynolds
© Al Tamimi & Company 2005
