Asian IP telephony market to boom

By 2006, Internet-based communication is expected to garner revenues of up to $US91 billion worldwide, with Asia taking a 20 percent or $19 billion share, according to Frost and Sullivan, a Silicon Valley-based Internet research firm.

Three telecommunications firms -- Clarent, oCen Communications and AT&T Global Clearinghouse -- have taken steps to gain a foothold in the Asian Internet-telephony or Voice-over-IP (VoIP) market, where the adoption rate is expected to surpass the rest of the world.

"Asian adoption actually happened first because of a variety of existing factors that are different from other places around the world," said Heidi Bersin, senior vice president of Clarent, a California-based provider of IP telephony products.

"Asia was going through deregulation two years ago, just as this (IP telephony) technology started to come into the market. Whereas the US was already deregulated, and Europe was not yet deregulated," Bersin said. "So when a market gets deregulated, that's the first thing they look for, because they use the latest technology when they're starting from scratch."

Clarent, which provides IP telephony technology to telcos and Internet service providers (ISPs), teamed up in Hong Kong this week with AT&T Global Clearinghouse and California-based IP telephony service provider (ITSP) oCen Communications to unveil a joint VoIP initiative in the region. The three non-equity partners have Asia foremost on their agenda because the region is characterised by advanced technology adoption, they said.

"Starting in Asia makes sense because technology companies are more willing to adopt new technology," said Steven Eng, president and CEO of oCen., referring to the preponderance of high-tech companies in the region. "Customers will see IP telephony as their one-stop shop for unified services, (including) voice, fax, video, and unified messaging."

"There's a lot of bandwidth, a lot of Internet deployed and interest in new technology (in Asia)," Bersin added. "In fact, a lot of technology gets developed in this region, so there was a readiness technologically to go first. In many ways, Asia has led the rest of the world in terms of (IP telephony) deployment."

"Cost savings would be another factor (to explain) why Asia is attractive. The long-distance calling prices here are still relatively high, which gives us an opportunity to build a much lower-priced network. IP telephony will not only give customers one interface with new services, it also gives them from 10 to 30 percent in savings," Eng said.

AT&T Global Clearinghouse, with its worldwide headquarters in Hong Kong, acts as an intermediary in the financial settlement of Internet telephony traffic.

"Clarent provides the IP technology while AT&T acts as an enabler, which helps ISPs expand their global footprint. We see oCen as an ITSP who wants to extend this service," explained Lea King, product marketing director of AT&T Global Clearinghouse. "The commonality is that we believe in IP, and that it's going mainstream and not just an application that geeks use."

Confidence in IP telephony has also rubbed off on investors, who see the benefits of the business over time.

"Longer term, we see the integration of voice and data as the future of Voice-over-IP," said Laure Wang, principal in the Investment Area of the Hong Kong office of Goldman Sachs, which has invested in Clarent. "Everything is integrated into one pipe so to speak, which offers so much more flexibility to the user. That's something we see the convergence of happening over many industries, and Voice-over-IP is a technology which helps enable that," she explained.

Goldman Sachs has invested in a second IP telephony company called Nuera, based in the US. Wang said IP-based communications is an area the investment firm plans to target more aggressively.

"There are people tackling different segments of IP at the moment, and we will be interested in looking at all those different players," Wang said. "We believe that the opportunity is still big. We are looking at a few which we haven't yet invested in, but we've seen about six or seven other companies which are Voice-over-IP-related."

According to Frost and Sullivan, worldwide VoIP traffic is expected to grow by over 300 percent in the next two years.

"I wouldn't say it's a future industry, it's an industry that's happening now," said Wang. "Near term, people are looking at the arbitrage between normal long-distance charges and cheaper long-distance over IP. For the future, what we're looking to is the integration of voice over data. With more multimedia applications, the industry is going to keep going," she said.

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