that IP telephony is legalized, it presents many potential
benefits to both service provider and consumer. ISPs
are moving quickly to take advantage of the opportunities.
by Minu Sirsalewala
long wait for legalization of Net telephony (IP Telephony)
is finally over. In the months that preceded April 2002,
ISPs were busy voice-enabling their routers and switches.
Several ISPs had applied for licenses, and to date 15
have received approval to begin services. Call it a
Second Coming if you may, but this time ISPs are proceeding
with extreme caution. So what opportunities exist for
service providers and what is the estimated market size?
A look at statistics from various research agencies
suggests that there is immense potential. According
to an industry research report, the voice market in
India is estimated to be around Rs 33,000 crore (ILD
and NLD put together), of which Internet telephony is
likely to grab a share of 2 to 3 percent. IDC expects
the IP telephony market to grow at a CAGR of 119 percent
to touch Rs 13,000 crore by 2005. With costs falling
drastically, a significant portion could also come from
the 'grey' market estimated to be more than 2 million
market potential offers new hope for local ISPs who
have been struggling to survive in recent months. ISPs
can offer Internet telephony as a value-added service
to existing subscribers and also attract new customers.
Says Amitabh Singhal, Secretary-ISPAI (Internet Service
Providers Association of India), "Enterprise networks
that were restricted to data can now integrate voice
in the same network, thus bringing down costs substantially.
That means enterprises can drastically improve their
efficiency and bottom lines and be more competitive
in the global scenario." He also added that higher
usage would boost communications and lead to infrastructure
expansion, which is of critical importance from a national
As per DoT guidelines, Internet telephony is currently
allowed on PC-to-PC, PC to telephone (abroad) and IP-based
terminals (both India and abroad).
Despite certain restrictions most ISPs seem contended
with the guidelines issued by the government for Internet
telephony. The lack of PC penetration has not deterred
ISPs from leaping on to the Net telephony bandwagon.
ISPs point out that the adoption of Internet as a medium
among all sectors of society has not really taken off
exponentially because there has been no major need among
all strata of society to adopt the Internet as a medium.
Compared to this, the Internet telephony market is going
to be driven by a 'need' which is going to be realized
Adds Rustom Irani, CTO, Sify, "Net telephony will
be embraced by the business sector, the SME/SOHO segment
or the large corporate houses, and the retail sector
(home dialup, multi-tenant unit) as the Internet is
becoming all pervasive and ubiquitous in today's market
place. Apart from this, corporates will be able to leverage
their existing IP-based wide-area infrastructure fully
by using voice and data applications. There will be
substantial cost savings as inter-office communication
over the IP data network will now be possible within
The general consensus about who will really avail of
these services, and how Net telephony will fare in India,
points in a big way towards the corporate sector.
Says Anil Laud, Managing Director, Siemens (which recently
entered into a tie-up with VocalTec), "It is the
corporates who will be major customers as they are the
ones who incur high expenses on both inter and intra
Earlier Net telephony was used in a closed user group
network but now it will be possible for enterprises
and corporates to connect with anyone, anywhere, anytime
at very low costs. "Today a majority of companies
have VPN networks using IP to transmit data. The same
equipment can now be used for voice communication too,"
For the record, about 1.5 million overseas calls are
made from India everyday.
K S Shivakumar, Head Software, HCL InfiNet says, "IP
has redefined business all over the world. Voice has
been the key driver for communication for a century.
Traditional voice has been expensive from an Indian
standpoint, and this is precisely where IP can provide
near toll quality voice at substantially lower cost
than traditional voice."
What can Internet telephony mean for India Inc then?
One, there would be substantial cost reductions resulting
in real savings in long distance telephone costs which
can be extremely important to most companies, especially
those considering global operations.
PC to PC communication will help enterprises in communicating
with their regional and corporate (HQ) offices, translating
to significant cuts in STD/ISD costs. PC to phone (abroad)
will help employees converse with partners or principals
abroad at lower ISD costs. Home users will have low-cost
voice communication to overseas locations.
from this, an integrated voice and data network simplifies
network layout and deployment, which allows more standardization
and reduces total equipment needs. Explains Kobita Desai,
Senior Telecom Analyst, Gartner-India, "An integrated
system could mean support for advanced applications
comprising a wide portfolio of services and media as
compared to the current telephone system. From the enterprise
point of view network convergence opens doors to novel
applications like interactive shopping (Web pages incorporating
a "click to talk" button), streaming audio
electronic white-boarding and CD-quality conference
calls in stereo are other exciting applications."
Apart from this, Internet telephony is expected to bring
along a host of value added services like voice &
video conferencing, fax over IP, managed voice (Centrex)
services, Internet call waiting services (ICWS), unified
messaging service (UMS) and voice mail. Call centers
can use Web links for their communications, which could
be serviced by ISPs offering Net telephony. All these
services could lead to individual revenue streams for
each ISP. Satyam Infoway has big plans to utilise its
network of cyber cafes (iWays) to introduce a host of
value added services.
important market which vendors are tapping is the non-PC
IP device market. CalTiger and Net2Phone have already
announced their intention of offering Net telephony
on IP devices. The market opinion is that there is a
visible trend to adopt IP devices, which serve the same
purpose as that of a PC for Net telephony.
Explains Joe Silva, chairman, CalTiger.com, "With
PC penetration being so low the trend will be to deploy
IP-devices that are more cost-effective and easier to
deploy. Receiving IP calls is also important and in
India this is not possible, since we do not keep our
PCs on all the time. It is the IP devices that will
drive the Net telephony market."
But the moot question to be asked here is, will the
customers go in for cheap calls and tolerate inferior
quality? Initially ISPs can offer toll quality calls
but they will be severely tested as numbers increase.
As the volume of traffic increases the quality of voice
can come down. Ultimately, customers are not going to
be lured by cheaper rates but by rates matched by near
toll quality. It remains to be seen whether Indian ISPs,
known to play the market only by price, are able to
compete on quality and services. Till then, Indian customers
are likely to wait and watch or try before they buy.
Minu Sirsalewala can be reached at firstname.lastname@example.org