South African consumers and businesses could see their telephone bills drop by up to 30% over the next two years, but only if all the benefits of lower interconnect rates are passed on to the end-user.
The high cost of communication has often been cited as a key inhibitor to business growth and expansion of the economy. Government has repeatedly said communication costs must come down to enable growth, but so far South Africans have yet to see big gains.
According to least-cost routing company Vox Orion, telephone bills will drop by 30% over the next two years due to lower interconnect rates as fixed-to-mobile calls become cheaper. “Lower interconnect rates mean everyone is paying less for their phone calls,” says MD Jacques du Toit.
However, it is unlikely all the savings will be passed on to end-users as voice revenue is under pressure, and operators are anticipated to hold onto as much margin gain as possible, notes analyst Steven Ambrose, MD of WWW Strategy.
Cheaper calls?
Last March, cellphone operators voluntarily cut the peak interconnect rate from R1.25 to 89c per minute. In October, the Independent Communications Authority of SA regulated interconnect rates.
Peak mobile termination rates dropped to 73c, while off-peak dropped to 63c this March. Another two cuts will come into effect before rates settle at 40c for peak and off-peak in March 2013.
Fixed-line rates will also drop, and will settle at 12c for peak and off-peak for local calls, while the rate for national calls will settle at 19c in March 2013.
Du Toit explains end-users will benefit if the entire interconnect rate is passed on by large and mid-tier operators. He says the total benefit since the initial cut last March will amount to as much as 42% reduction in phone bills. However, not all the players are passing on the total reduction. According to media reports, SA's largest fixed-line operator, Telkom, will only pass on between 50% and 70% of the latest reduction. ITWeb was unable to confirm this figure, as Telkom is in a closed period.
The fixed-line operator passed on 100% of the March 2010 cut, which resulted in a net interconnect loss of R24 million on fixed-to-mobile calls.
Du Toit says consumers and businesses using a Telkom line will see lower call rates as a result of a portion of the lower interconnect fee being passed on.
Cellular operators are also not passing on lower interconnect rates directly. Consumers have yet to see any significant savings as the country's two main mobile players, Vodacom and MTN, have categorically stated they would not pass on the savings to end-users.
The real benefit from lower interconnect rates will be felt by end-users who make use of mid-tier players, argues Du Toit. He says these providers will keep their margins stable, and pass on all of the cuts to their subscribers.
Du Toit expects the drop in voice tariffs as a result of lower interconnect fees to have the same effect as the drops in broadband data prices over the past few years. “Everyone is getting much more value for their money now.
“We've gone from using maybe 2Gb of data a month, to 5Gb to 10Gb to uncapped services, all at the same price. The same will happen with voice; people will either get more minutes for their money, or take advantage of other services.”
Profit game
Ambrose notes that operators can't afford to pass on all the benefits of lower interconnect rates, because voice is a dying business. “The fixed-line business is also in terminal decline.”
He says lower interconnect rates will trim the cost of making calls from a landline to a cellphone. However, he argues the saving won't be as high as 30%, because voice revenues are declining as data starts to take over.
“It is unusual that price reductions will be passed on in a declining market.” Ambrose says the only way end-users will see the full benefit is if volumes pick up, which will maintain revenue.
However, says Ambrose, the use of voice, especially fixed-to-mobile calls, is in decline. Real growth will be seen in the use of data and related products such as voice over IP (VOIP), he adds. “The days of massive price reduction in voice are gone, and they are not coming back.”
Huge Telecoms CEO James Herbst believes aggressive retail price reductions in the corporate enterprise market will only be offered by the fledgling VOIP operators, and aren't sustainable.
Minnows are operating on a business model that isn't sustainable because it's based on the assumption Telkom will only charge capital costs for its network, and not the cost of running the backbone, says Herbst. “Such business models are not sustainable as there is no such thing as a free lunch.
“Short-term price reductions offered by the VOIP operators will be fleeting and ultimately the costs offered by the incumbents will be the fair market price.” He says, as a result, retail rates for national and local termination will remain stagnant for the next two to three years.
- IT-Web
http://www.itweb.co.za/index.php?option=com_content&view=article&id=43176:telecoms-prices-to-fall&catid=118
Friday, April 29, 2011
Monday, April 4, 2011
Taking it to the Cloud: SMB's look to remote VoIP services, but Quality of Service issues remain
For a cost-conscious small business, hosted VoIP telephony makes sense: Rather than pay for both a business line and a high-speed Internet connection, purchase just the latter and then set up a VoIP service for a fraction of the cost. But moving the VoIP connection out of the office won't immediately solve some of the common issues and pitfalls of today's IP-based voice network.
Ease of setup and inexpensive subscription rates are among the key factors driving the growth of VoIP services worldwide. This is most strongly reflected among residential consumers, who make up 69 percent of the worldwide market.
But businesses looking to expand are also looking for an IP-based voice solution that will grow with them yet remain cost-effective. That's driving growth in areas like SIP trunking--to the tune of a 143 percent increase in revenues in 2010, says Infonetics Research--but also creating a niche market of affordable business-grade options for SMBs.
That's where managed IP PBX services come in. Hosted services grew 20 percent last year as more businesses looked for ways to get expanded voice options at a lower cost.
But hidden among all the rosy news on hosted business VoIP are more than a few thorns.
Hosted PBX solves many of the problems involved in managing a VoIP connection locally, taking some of the burden off the IT department. In theory, IT guys no longer have to spend time tracking down problems with voice latency or network shutdowns, and they don't have to be as mindful of any processes eating up bandwidth needed by the local IP-based voice network. This should free up the IT department to concentrate on numerous other issues they face daily in keeping an organization's computer network up and running.
Once the IP-based phone system's management moves off-premise, however, the IT director isn't completely unburdened. Tom Adkins of Tele-Source Ind. Inc. recently pointed out weaknesses that both hosted and on-premise VoIP can experience:
Ease of setup and inexpensive subscription rates are among the key factors driving the growth of VoIP services worldwide. This is most strongly reflected among residential consumers, who make up 69 percent of the worldwide market.
But businesses looking to expand are also looking for an IP-based voice solution that will grow with them yet remain cost-effective. That's driving growth in areas like SIP trunking--to the tune of a 143 percent increase in revenues in 2010, says Infonetics Research--but also creating a niche market of affordable business-grade options for SMBs.
That's where managed IP PBX services come in. Hosted services grew 20 percent last year as more businesses looked for ways to get expanded voice options at a lower cost.
But hidden among all the rosy news on hosted business VoIP are more than a few thorns.
Hosted PBX solves many of the problems involved in managing a VoIP connection locally, taking some of the burden off the IT department. In theory, IT guys no longer have to spend time tracking down problems with voice latency or network shutdowns, and they don't have to be as mindful of any processes eating up bandwidth needed by the local IP-based voice network. This should free up the IT department to concentrate on numerous other issues they face daily in keeping an organization's computer network up and running.
Once the IP-based phone system's management moves off-premise, however, the IT director isn't completely unburdened. Tom Adkins of Tele-Source Ind. Inc. recently pointed out weaknesses that both hosted and on-premise VoIP can experience:
- Security: Maintaining the integrity of the voice system during and after migration to a managed service.
- Equipment: VoIP phones installed on-premise can and do break; power surges can take out the phones, etc.
- Outside network issues: Distortions of signal or dropped signals due to a carrier on the public Internet or along the WAN, or a broadband or SIP trunk signal outage at the carrier CO (central office).
- Colocated networks: With many businesses opting for hosted services for both their IT and voice, often colocated, there's the risk that a change made on the IT side of the network will profoundly affect quality on the voice side of the network.
- Sharing bandwidth: When voice and data share a single feed into a business office, IT has to stay on top of the network setup so that one technology does not hog all the bandwidth.
- Will the company have a designated contact with VoIP expertise to maintain quality of service and help the SMB solve problems that crop up on its side?
- Is an element management service in place that will notify either the SMB's IT department or the host that an equipment problem is occurring on premise?
- What contingency is in place should the VoIP system fail--such as a failover to a designated POTS line on premise?
A look at the skills telecom, IT departments need when transitioning to SIP trunking
Workers in telecom departments may be understandably apprehensive about switching from TDM to SIP, since it could conceivably put them out of work.
But any company that adopts SIP and promptly lays off its telecom team while shifting responsibility for voice to its IT team would be making a big mistake, according to Graham Francis, CIO of The SIP School training and certification program. That's because people working in telecom teams have several skills that IT department workers might not possess, such supporting quality of service for real-time applications such as voice calls.
PRIMER: SIP trunking
"All the telecom guys are going to have to understand how voice and data will mix on the same network," says Francis, whose training sessions focus on areas such as SIP messaging, SIP security, troubleshooting and interoperability. "People with TDM backgrounds need knowledge about data switches, firewalls and proxy servers. They need to understand that on a data network, voice just becomes another application."
While there is still definitely a place for telecom specialists in enterprises that use SIP trunks, they'll have to learn additional skills if they want to make a successful transition from TDM to SIP. In particular, they'll have to learn much more about traditional IT tools such as session border controllers and firewalls, since a SIP trunk is a broadband Internet link that utilizes SIP to connect a company's IP-based PBX to an Internet telephone service provider (ITSP). Instead of terminating the trunk directly at the IP-PBX, for security's sake companies tend to terminate the trunks at a SIP-capable session border control system that acts as a firewall.
Jim Maloff, the principal consultant for Maloff NetResults, says the biggest difference that telecom workers have to get used to when switching to SIP is thinking about phone calls in terms of bandwidth rather than available lines. This means that for large conference calls they'll need to figure out exactly how much bandwidth they'll need beforehand so they can provision it off and give it priority over other traffic on the network.
"If I know that I'm going to have 10 concurrent calls then I should know that I'm going to need 1 meg of bandwidth just for my calls," he explains. "You'll need to do packet prioritization and shaping to makes sure that voice packets get higher priority."
Like Francis, Maloff also thinks that telecom workers can bring much-needed skills and perspective to the job of managing SIP-based voice networks that IT workers will need some time to acquire. However, he also thinks telecom workers should realize that preparing themselves to manage SIP will take a lot of time and effort since there are a lot more variables in a SIP system than a traditional TDM system.
"The hardest thing for people who have been in telephony is now there's so much more they need to think about," he says. "In the past if I'm a telecom manager I never had to pay for local outgoing calls. With SIP trunking it's more like a cellphone model where 'local' has no meaning because you're on the Internet."
Brian Graves, a network engineer at the University of Washington who has a background in managing telephony, says he has had to learn much more about implementing quality of service as his department started designing a SIP core that it plans on rolling out over the entire network over the next few years. The difficulty for many people on the telecom side, he says, is understanding that voice calls no longer get automatic preference for bandwidth or even the total amount of bandwidth they'll need to successfully complete calls on an IP network.
"TDM is a circuit-switched technology, so QoS is essentially built right in because you have a dedicated amount of bandwidth on your call," he says. "An IP network is packet-switched so you don't have natively the same bandwidth guarantee. You have to implement QoS to make sure it isn't delayed by other data."
But it isn't just telecom workers who will need to learn more about QoS to successfully manage SIP trunks, as IT workers could learn more about QoS as it applies to voice. Pete Allan, a network engineer at Bandwidth.com who has a background in both IP and traditional telecom networks, says that IT workers will have to change the way they think about handling voice calls on their networks, since traditional methods of handling other applications won't cut it. Instead, he thinks IT departments have to consider voice to be more like a frequent flier reward.
"If you're a frequent flier on a particular airline then you get to go in front of everybody," he says. "If you don't treat it like that then your call quality will be really degraded ... you can't just throw more bandwidth at it."
Maloff also says that IT workers are going to get used to the idea of implementing real-time sessions without any jitter or delays that would typically be acceptable for most IP-based applications.
"IT guys need to stop thinking in terms of storing forward and need to start thinking in terms of real-time sessions," says Maloff. "Voice is an extremely time-sensitive application and as an engineer I have to make sure that I have sufficient capacity."
- Brad Reed, Network World
But any company that adopts SIP and promptly lays off its telecom team while shifting responsibility for voice to its IT team would be making a big mistake, according to Graham Francis, CIO of The SIP School training and certification program. That's because people working in telecom teams have several skills that IT department workers might not possess, such supporting quality of service for real-time applications such as voice calls.
PRIMER: SIP trunking
"All the telecom guys are going to have to understand how voice and data will mix on the same network," says Francis, whose training sessions focus on areas such as SIP messaging, SIP security, troubleshooting and interoperability. "People with TDM backgrounds need knowledge about data switches, firewalls and proxy servers. They need to understand that on a data network, voice just becomes another application."
While there is still definitely a place for telecom specialists in enterprises that use SIP trunks, they'll have to learn additional skills if they want to make a successful transition from TDM to SIP. In particular, they'll have to learn much more about traditional IT tools such as session border controllers and firewalls, since a SIP trunk is a broadband Internet link that utilizes SIP to connect a company's IP-based PBX to an Internet telephone service provider (ITSP). Instead of terminating the trunk directly at the IP-PBX, for security's sake companies tend to terminate the trunks at a SIP-capable session border control system that acts as a firewall.
Jim Maloff, the principal consultant for Maloff NetResults, says the biggest difference that telecom workers have to get used to when switching to SIP is thinking about phone calls in terms of bandwidth rather than available lines. This means that for large conference calls they'll need to figure out exactly how much bandwidth they'll need beforehand so they can provision it off and give it priority over other traffic on the network.
"If I know that I'm going to have 10 concurrent calls then I should know that I'm going to need 1 meg of bandwidth just for my calls," he explains. "You'll need to do packet prioritization and shaping to makes sure that voice packets get higher priority."
Like Francis, Maloff also thinks that telecom workers can bring much-needed skills and perspective to the job of managing SIP-based voice networks that IT workers will need some time to acquire. However, he also thinks telecom workers should realize that preparing themselves to manage SIP will take a lot of time and effort since there are a lot more variables in a SIP system than a traditional TDM system.
"The hardest thing for people who have been in telephony is now there's so much more they need to think about," he says. "In the past if I'm a telecom manager I never had to pay for local outgoing calls. With SIP trunking it's more like a cellphone model where 'local' has no meaning because you're on the Internet."
Brian Graves, a network engineer at the University of Washington who has a background in managing telephony, says he has had to learn much more about implementing quality of service as his department started designing a SIP core that it plans on rolling out over the entire network over the next few years. The difficulty for many people on the telecom side, he says, is understanding that voice calls no longer get automatic preference for bandwidth or even the total amount of bandwidth they'll need to successfully complete calls on an IP network.
"TDM is a circuit-switched technology, so QoS is essentially built right in because you have a dedicated amount of bandwidth on your call," he says. "An IP network is packet-switched so you don't have natively the same bandwidth guarantee. You have to implement QoS to make sure it isn't delayed by other data."
But it isn't just telecom workers who will need to learn more about QoS to successfully manage SIP trunks, as IT workers could learn more about QoS as it applies to voice. Pete Allan, a network engineer at Bandwidth.com who has a background in both IP and traditional telecom networks, says that IT workers will have to change the way they think about handling voice calls on their networks, since traditional methods of handling other applications won't cut it. Instead, he thinks IT departments have to consider voice to be more like a frequent flier reward.
"If you're a frequent flier on a particular airline then you get to go in front of everybody," he says. "If you don't treat it like that then your call quality will be really degraded ... you can't just throw more bandwidth at it."
Maloff also says that IT workers are going to get used to the idea of implementing real-time sessions without any jitter or delays that would typically be acceptable for most IP-based applications.
"IT guys need to stop thinking in terms of storing forward and need to start thinking in terms of real-time sessions," says Maloff. "Voice is an extremely time-sensitive application and as an engineer I have to make sure that I have sufficient capacity."
- Brad Reed, Network World
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