India Telecom

February 24, 2005
Adoption of IP telephony on express lane to growth

Geetanjali Wadhwa & Pradeep Chakraborty

MUMBAI, NEW DELHI AND UNITED STATES -- IP-PBX vendors were reportedly very positive about the Indian market during 2004, as they believed that IP-based telephony had helped businesses achieve an improved bottom line. As a solution, many managers were looking at IP telephony as a way to help them reduce rising administrative expenses, extend business reach, boost productivity, and realize measurable returns on their infrastructure investments. The government regulation was likely to be the only restraint to check market growth as it prevented users from employing IP telephony beyond the closed user group.

According to Amit Aggarwal, research analyst, technology practice, Frost & Sullivan, IP-based solutions are likely to enable companies to deploy key services such as videoconferencing, collaboration, and other value-added options such as directory and XML integration, application that prioritises incoming calls, caller identification, call details, extension mobility in easy-to-program and easy-to-use platform at the touch of a button. IP-PBX is an open-standards solution, which means that enterprises need not depend on one vendor for application integration to the solution.

VoIP/IP telephony in India
Aggarwal added that the government's policy on the closed user group-public switch telephone network (CUG-PSTN) connectivity was currently stifling the growth of the IP telephony market in India. The intended idea behind regulation was to ensure fair play between different segments of the market economy. "However, the downside of this egalitarian notion has been the stickiness that regulators sometimes exhibit in moving forward from technologies and market models whose time has lapsed. 'Creative destruction' of the older market models and technologies is more of a norm than an exception and regulatory regime that dithers over this aspect fails to play fairly," he added.

How do vendors perceive the growth of VoIP/IP telephony in India? Amit Chawla, executive vice president of global marketing, Veraz Networks, said that the adoption of IP telephony in India was on the express lane to prosperity and growth. This was the consequence of a chain of events. The recent withdrawal of the TRAI regulation, which imposed restrictions on using IP telephony by enterprises; which lead these enterprises to look positively at IP telephone deployments; which caused the service provider market to evolve. "Today, like any global service provider, service providers in India, realised that they have to meet customer demands by providing enhanced, value-added communication service, rather than focus on merely selling bandwidth," he said.

Chaim Shachar, vice president, sales, India, AudioCodes Ltd., added that VoIP was still evolving in India. "The market is just starting to ramp up as the broadband connections accelerate. Enterprises and telcos are starting to realise the vast advantages of VoIP and are beginning to intensively deploy VoIP solutions," he said.

Current size of market
Commenting on the market size, Aggarwal said that past investments in enterprise voice equipment had been in the time-division multiplexing-private branch exchange (TDM-PBX). "While India is a fairly mature market when it comes to PBX systems, the IP-PBX market is in its infancy," he added. The IP-PBX market was estimated to be worth US $43.1 million in 2004. It stood at US $30 million in 2003, increasing by 198 percent from 2002. Frost & Sullivan expects this market to touch US $250.1 million in 2010, thus growing at a CAGR of 35.4 percent from 2003.

Aggarwal added that the major business drivers behind IP-PBX and current IP telephony deployments by enterprises and businesses today included lower cost of ownership and predictable expenses; flexible and central management of a growing distributed organisation; improved administration; ownership and control; scalability; and access to new business applications.

Shachar assumed the Indian market size to be around US $40-50 million per year, while Chawla said that according to the industry analysts, the IP telephony market in India was likely to grow at a CAGR of 119 percent - translating to Rs. 13,000 crore or US $3.25 billion by 2005.

Regarding market trends, Shachar said that leading VoIP products included IP-PBXs, analog gateways, and low-to-medium density (1 to 8E1) digital gateways. Chawla added that PBX vendors such as Nortel, Avaya and Cisco, had begun to make inroads in the enterprise space. In the service provider space, large-scale deployments were likely to start in 2005. Veraz has one of the largest shares in the service provider space, having successful deployments with a number of leading service providers. Both declined to comment on market share numbers.

As for the major vendors in IP-PBXs, Frost & Sullivan's Aggarwal said that 2003 had established a clear wedge between the market leaders and followers, with Avaya followed by the other participants. Courtesy Avaya and Cisco, IP-Centric PBX contributed 80 percent of the entire IP-PBX market. Some of the other major participants in IP-PBX market include Alcatel, Cisco, Ericsson, NEC, Nortel, Panasonic, and Siemens. He said: "Frost & Sullivan understands that IP telephony may not be for everyone, particularly, organizations that have basic phone systems and need only a phone to dial out and receive calls. It may also not make sense for an organisation that does not have a LAN."

Migrating to all-IP networks
VoIP is said to be the key to convergence for many telecom providers. Migrating to an all-IP network allows them to converge different services at a much lower cost. How much of this is actually happening?

Shachar said that it had just started from last year. "I expect this year will be a milestone year, following large tenders issued by BSNL and MTNL," he added.

Chawla noted that this was happening at different rates in different parts of the network. He said: "As in most countries, international traffic is the first to convert to VoIP. This process is well underway in India and elsewhere. Subsequently, national long-distance (NLD) networks are modernized with VoIP [major deployments in this part of the network will likely occur in 2005 in India]. As for the end user VoIP, this goes hand in hand with broadband deployment. This typically begins at the enterprise level and then to the end user. This will be a process over the next few years."

Telcos were also beginning to carry V2IP (voice, video over IP) and offer triple-play services, a point vouched for by both Chawla and Shachar. Chawla further added that multiple service providers were touting both voice and video over IP as part of their broadband deployments. "Whether these are moving from pilot to large-scale deployments is an open question."

However, telcos are not said to be overhauling their networks from a hybrid circuit-switch/IP network to an all-IP network? Shachar said, "To my knowledge, telcos in India are continuing to use hybrid configuration and are not deploying all IP networks." Chawla added that due to the higher priority of meeting additional demands, most service providers would proceed with a cap and grow strategy with a migration to an all-IP network taking some time as the existing switches get decommissioned.

Telcos did not sufficiently migrate to packet during the telecom meltdown. Has the packetization rate gone up since? Chawla noted: "Globally, investments of all types had slowed during the telecom meltdown. Now that investments have returned, one shift that has occurred is the end of new circuit switch investments in all but the most critical circumstances. Instead, investments are now focused on packetization.

Another trend has been the fact that Ethernet private lines were beginning to replace traditional TDM private lines. Shachar said it was starting to happen. Chawla added that with increasing data traffic, more and more leased lines were being utilized for data. Over time, the lines would begin to be replaced.

Unresolved issues with VoIP
Despite the fact that adoption of VoIP has gone up, there still remain a few unresolved issues. Veraz's Chawla said: "There are a few typical challenges that the industry has faced over the years. Vendors that offer solutions overcoming these challenges are the vendors most likely to achieve major success." He cited three major challenges that need to be addressed. These are

• Voice quality or (QoS) is a determining factor for keeping a VoIP subscriber. Several VoIP network impairments that contribute to the overall call quality are the delay of packets arrival, lost data, and jitter.
• Security is another obstacle. VoIP networks are based on computers and it operated on data networks. Hence, VoIP networks inherited all security problems encountered in data networks.
• Lack of interoperability with other vendors' equipment is another technical difficulty. Usually, vendors' equipment has proprietary characteristics, which it makes difficult for a network containing several vendors' equipment to run efficiently due to the lack of interoperability.

According to him, IP telephony was 'geography agnostic.' This led to another technical obstacle to the widespread adoption of VoIP - the inability of the current 911 emergency system to handle VoIP calls. When callers dialed 911 from a standard phone, their location was automatically included to speed the dispatching of emergency personnel. As VoIP calls can be routed anywhere, location information does not exist.

He elaborated: "Traditional phones are powered by a phone circuit, and work when the power is out. That is not the case when you use a broadband phone connection, though most service providers can offer battery backup as part of their broadband connection. To overcome security, carriers are committed to do a proper planning and attention to security details. This allows operators and enterprises to prevent, detect and react to security problems efficiently. With enhancements made on codecs and other compression technologies, these are enabling vendors to achieve carrier-grade QoS. Leading vendors and service providers are delivering solutions that overcome these challenges."

Shachar believed that there were no unresolved issues in VoIP provided open standards are used in the networks. "It appears that there are some vendors using proprietary protocols that bring interoperability issues in VoIP. Generally speaking, VoIP is a mature technology and highly reliable, with vast advantages over TDM," he noted.

Opportunities in SIP apps and services
There has been a lot of discussion surrounding the session initiation protocol (SIP), an emerging standard that supports converged voice, data, and video applications. Aggarwal said that most enterprises and other communication platforms were based on the H.323 protocol and were likely to remain so for the foreseeable future. "Sooner or later, SIP is likely to penetrate enough deployments that companies will have to take it into account when making a contact center purchase or service provider decision. Being easier to integrate vendor technology, SIP promises to deliver greater levels of connectivity than existing standards," he added.

Veraz's Chawla said that leading application vendors were utilising SIP for connectivity to the application. In addition, SIP lent itself to voice-data integration applications such as instant messaging. Any typical voice application could be obtained from a SIP application server.

SIP clients are said to be getting common on multiband phones and terminals. In that case, how far are we from having VoIP/SIP clients on end devices? According to Shachar, H.323 was still the leading control protocol, though SIP was getting more common. "As SIP phone prices drop, we will see a bigger market share taken by SIP," he added. Chawla said this trend would begin from 2005, while 2006 would be a breakout year. Leading service providers were starting switch migration projects. The softswitch was the core element of this migration strategy.

Finally, VoIP is evolving, and we have not begun to address the potential of wireless IP, or peer-to-peer offerings such as Skype or Free World Dialup. Chawla said that communication networks had always succeeded with ubiquity and any-to-any connection. Peer-to-peer communications would expand over time, though it would also interconnect with each other and with the rest of the world. Wireless IP would be the next step. It allowed networked communications, even while a user was on the move. "More advanced and new protocols have been developed to enable multifunction in telecom and data communications. In future, we will communicate in a totally different, in a more ubiquitous way," he estimated. Shachar agreed that telcos were starting to realise the advantages of VoIP and deploy IP-based wireless pilots. "Once they are successful, we will see a huge penetration of VoIP in wireless. In addition, we will see deployments of VoIP along with Wi-Fi deployments, he noted.

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Deploying QoS in the enterprise
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