Now 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

The 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 minutes.

OPPORTUNITY BECKONS
This 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 perspective.

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 by all.

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 organization."

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 (office) communications."

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," says Laud.

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.

Value-added services
Apart 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.

Non-PC devices
Another 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 minus@networkmagazineindia.com