India Telecom

March 15, 2004
An overview of VoIP trends in India

Alon Weinstein

The rising worldwide demand for packet telephony solutions testifies to the fact that today's carriers view VoIP as the best way to achieve their business goals in a competitive marketplace. India, the fifth largest telecom market in the world, is an excellent case in point.

NEW DELHI -- With 68 million telephone lines (including mobile phones), India boasts an annual growth rate of 22 percent in basic telephone service and over 100 percent for cellular and Internet services. The teledensity is likely to increase from 4 percent to 7 percent by 2005.

The deregulation of international long distance (ILD) and Internet telephony markets in India took place in April 2002. Deregulation provided new opportunities for competitive carriers who found that VoIP met their needs for rapid deployment and minimal costs. Data Access, for example, captured over 30 percent of the Indian ILD market within six months of service launch, using a VoIP backbone infrastructure.

Growing VoIP traffic
According to iLocus, the total ILD market in India is worth approximately US$1.5 billion, handling approximately 4 billion minutes of traffic in 2003. This market will likely grow at 25 percent CAGR per annum, which is almost twice the global rate. In 2003, VoIP traffic accounted for 28 percent of total ILD traffic, and will likely reach 50 percent of total ILD traffic by 2005. While national long distance (NLD) VoIP deployments are likely to be larger than ILD counterparts, most are still in the trial stages.

PC-to-phone traffic originating in India totalled 81 million minutes per year in 2003, and is likely to grow to 211 million minutes per year by 2007. These figures do not include the large, gray-market based segment, based mainly on prepaid calling cards. Nearly 90 ISPs have Internet telephony licenses (mostly PC-to-phone), of which around 20 to 30 ISPs actually provide the service.

Wireless operators are looking at VoIP solutions as well to increase the efficiency of MSC?to?MSC trunking, and facilitate interconnection between PSTN and mobile networks. These operators are beginning to evaluate a new generation of full-fledged mobile softswitches that might replace legacy mobile switching technologies.

In order to attract customers and drive additional traffic and associated revenues from network investments, carriers are beginning to offer enhanced services, such as IP-PBX, call centers, conferencing and VoIP-VPN, mainly for the burgeoning enterprise market. Enterprises can take advantage of VoIP gateways or IP PBX equipment to connect multiple offices within India or for international calling at substantially reduced costs. In coming years, the call center industry may prove to be one of the main drivers of VoIP in India. Several major call centers have deployed VoIP equipment. The IP-based call center solutions enable integration of voice, mail and data functions.

Why migrate to VoIP-based NGNs?
Major carriers in India and elsewhere have begun the process of migrating their existing legacy networks to an IP-based next-generation network (NGN) infrastructure. Carriers further realise that their current TDM networks are no longer sustainable, going forward. These networks are expensive in terms of capital and operational expenses, and inhibit competitiveness due to the cost and the long amount of time needed to implement changes. Further, legacy switch vendors are beginning to announce the end-of-life for their TDM equipment.

NGN technologies address these challenges by shifting voice onto IP networks, so that all traffic runs over one convergent infrastructure, supporting different types of access networks and end user devices. By reducing operational and capital expenditures, carriers can improve margins and shorten their RoI period. NGN enables carriers to create new revenue opportunities and get to the market quickly, with attractive and innovative multimedia services that are not possible in the TDM environment.

NGN infrastructure enables carriers to benefit from increased IP traffic coming from NLD or ILD carriers already operating VoIP networks, residential local networks, enterprises and mobile networks, all of which are migrating to IP-based voice infrastructures. Prepaid VoIP calling cards, IP Centrex and IP PBX are good examples of voice applications that are driving new IP minutes.

Immediate business case
The business case for VoIP is based on immediate, substantial operational savings and reduced capex in the short term, coupled with the potential for increased revenues and market share from multimedia, real-time IP services in the longer term. VoIP allows new and established Indian carriers to improve margins and offer attractive new services. As such, the significant growth forecasts for VoIP traffic and services in India are hardly surprisingly.

(The author is managing director, VocalTec Communications, India)