VoIP finds hope in Asia as times get tough

Steep price declines that have decimated the ranks of VoIP (Voice over Internet Protocol) telephone service providers in Asia-Pacific may finally be bottoming out in some areas, but the technology still is being used primarily for inexpensive long-distance calls, according to participants at iLocus Show Asia 2001 here this week.

The thin turnout at this year's Asia event, with far fewer attendees than at the 2000 conference here, reflected an industry that has seen rapid consolidation along with the tightening high-tech capital market of the past several months. Many service providers have been squeezed by declining margins and an increasing availability of once precious bandwidth. VoIP technology allows voice calls, traditionally carried over circuits set aside on a public telephone network, to be transmitted as packets on the Internet or a private IP network. Because the calls become nothing more than data packets, they can be combined with data in new services such as unified text and voice messaging, and virtual office phone systems spread around the world. Yet inexpensive transmission of calls across data trunk lines remains the primary application of VoIP.

The weeding out of carriers in this commodity-oriented business may finally be halting a slide in call prices, according to two executives at this week's conference. VoIP call revenue is making a "rebound" in some markets in Asia-Pacific, according to Tetsuro Mikami, vice president of IP business development at NTT Communications Corp.'s Arcstar Global Network Business Division, on a panel at the show. In an interview following the discussion, he declined to name the markets where this is taking place.

Another VOIP carrier executive agreed in part. Though prices are not rebounding, the steep drop may have slowed in some places, said Diarmid Massey, managing director for Asia-Pacific at ITXC Corp., a major U.S.-based VoIP-only carrier.

"There's maybe been a stabilizing of prices. The drop in pricing has slowed down or stopped in some markets," Massey said in an interview at the conference.

Driven by growing demand for inexpensive long-distance service in China and to some extent in India, both just beginning to emerge from regulatory regimes that kept prices high, Asia is a big part of the future of VoIP, attendees said. Other countries in the process of opening up their telecommunication markets, including Vietnam, Taiwan and Indonesia, are helping to push VoIP forward, NTT's Mikami said.

"This is the region that's booming -- exploding," said Enis Erkel, vice president of VoIP products and network planning at Nortel Networks Corp., in a speech on Tuesday. He estimated that one-third of the world's VOIP traffic is Asian traffic.

As the show took place this week, Cisco Systems Inc. announced Tuesday that China United Telecommunications Corp. (China Unicom) would expand its VoIP network to more than 321 cities across China, at cost of about US$40 million. Cisco claimed in a statement that China Unicom's VoIP network is the world's largest. China Unicom is the second-largest all-purpose telecommunication carrier in China, offering both mobile and fixed-line services nationwide.

Much of the growth here has occurred in China, where VoIP and other alternative long-distance services have driven the average price of a long-distance minute down from about $0.30 three years ago to $0.05 or less today, ITXC's Massey said.

However, the apparent raging success of VoIP in Asia hasn't yet brought many of the futuristic applications of the technology into this region. Although some carriers in North America, such as Qwest, are starting to deploy advanced calling features within a VoIP network, that kind of development is several years off in Asia, participants said.

One exception to the trend was highlighted this week when Baptist University in Hong Kong announced it will replace all the conventional phones on its campus with IP phones that plug directly in to the university's Ethernet LAN. Expanding upon an initial phase in which it installed 70 Cisco IP phones, the university will install a total of more than 2,000 of the phones by the end of this year, according to a statement by Hong Kong carrier Pacific Century CyberWorks Ltd., which is helping deploy the system. The combined network will cost less to maintain and eventually will allow students and staff to communicate by video as well as voice.

Asia's openness to new technologies is likely to drive its adoption of more advanced IP telephony features, said Nortel's Erkel.

"I'm quite sure within three to four years this region will be leading the globe in new IP telephony techniques," he said.

The crucial step for adoption of VoIP and converged data-voice network services will come when VoIP reaches the millions of consumer and small-business users through data services such as broadband DSL (Digital Subscriber Line), attendees agreed.

"The real revenue and the real revolution is in the local call market," said Jahangir Raina, director of iLocus, a VoIP market research company in London. When VoIP carriers get in to the "last mile" service, they will be able to charge flat monthly fees for local calls and various services as traditional carriers do today, he said. In this area, China is far behind, Raina added.

"It has been very fast in the domestic and international long-distance market, (but) when it comes to the local call market, there really is no action at the moment," Raina said.

NTT has high hopes for DSL, which is set to be offered in Japan next month by Softbank Corp. and Yahoo Inc. amid Japanese government encouragement of the industry, Mikami said.

"Broadband (telephony) may be our future," he said.

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