5/6/2010 12:51 a5/p5




COURSE OVERVIEW AND INTRODUCTION....................................................................
5/6/2010 12:51 a5/p5


         5.121 better bandwidth utilization;(An important issue for consideration given the more li...
5/6/2010 12:51 a5/p5


       10.25 Acknowledge Enforcement Limitations......................................................
5/6/2010 12:51 a5/p5


       12.252 If so, what are the penalties for providing VoIP service? (e.g., fines, license revoc...
5/6/2010 12:51 a5/p5


COURSE OVERVIEW AND INTRODUCTION

I. VOIP – TECHNICAL ASPECTS OF IP TELEPHONY
1. Introduction -- Wh...
5/6/2010 12:51 a5/p5



      IP Telephony offers many advantages over the regular Public Switched Telephone
      Network...
5/6/2010 12:51 a5/p5



       1.1 Definitions: Introduce relevant terms for the discussion & short history introduction
 ...
5/6/2010 12:51 a5/p5



1.2 How does an IP network function?
The LO is for the student to understand what an IP Network is...
5/6/2010 12:51 a5/p5



2. Packet switching versus Circuit switching and PSTN vs. IP networks. How IP
networks differ from...
5/6/2010 12:51 a5/p5


Three main focal points here are:

System architecture
              PSTN: inflexible, zero sum use...
5/6/2010 12:51 a5/p5


       The Main Difference Between VoIP And IP Networks, And Circuit-Switched Networks Is The
     ...
5/6/2010 12:51 a5/p5



         .2
    http://icwww.epfl.ch/publications/documents/IC_TECH_REPORT_199834.pdf

http://www....
5/6/2010 12:51 a5/p5




3. How is VoIP being adopted and used?

LO here is for students to understand different uses of V...
5/6/2010 12:51 a5/p5




3.2 Why does everyone want it? (e.g., can carry voice and data on the same IP network, etc.) KW
 ...
5/6/2010 12:51 a5/p5

5.111 Equipment is standards based, not proprietary – and therefore costs less.

5.112 Need only a V...
5/6/2010 12:51 a5/p5


7. How the conditions described in Section 6 create economic incentives for VoIP and
other forms of...
5/6/2010 12:51 a5/p5




10. Overview of Effective Regulation / General Principles of Internet Regulation

Internet-based ...
5/6/2010 12:51 a5/p5


spurs infrastructure development and modernization.5 Competition among service providers also
impro...
5/6/2010 12:51 a5/p5

10.21 Understand Differences Between the Internet and Other Modes of Communication, Such as Telephon...
5/6/2010 12:51 a5/p5



Regulated parties should not be subject to any rules that are not published.



10.25 Acknowledge ...
5/6/2010 12:51 a5/p5


11.2 What is IP Telephony?


11.21 Definition

As of yet, there is no standard definition of Intern...
5/6/2010 12:51 a5/p5


physical path. In other words, multiple conversations and/or data can be sent over the same channel...
5/6/2010 12:51 a5/p5




11.2231 PC-to-PC

The first generation of IP Telephony, computer-to-computer calling, was introdu...
5/6/2010 12:51 a5/p5


Although these calls begin and end on the PSTN, at some point during the transmission, they are
con...
5/6/2010 12:51 a5/p5


The U.S. has adopted a complex regulatory framework that generally distinguishes
“telecommunication...
5/6/2010 12:51 a5/p5

11.3112 Applying the Voice/Data Classification to IP Telephony

The FCC initially applied this voice...
5/6/2010 12:51 a5/p5



The FCC’s analysis in this instance, however, was non-binding and did not impose regulations on
ph...
5/6/2010 12:51 a5/p5


address the trend towards convergence of telecommunications and computer services. The shape and
co...
5/6/2010 12:51 a5/p5


No form of IP Telephony currently meets all four of the E.U. criteria. As a result, the EU does not...
5/6/2010 12:51 a5/p5


                      If not, eliminates even slight delay services.

If the answer to these quest...
5/6/2010 12:51 a5/p5




11.3221 Regulatory Restrictions Often Seek to Preserve Monopoly Control of Voice Services

      ...
5/6/2010 12:51 a5/p5


Regulators also prohibit IP Telephony in an effort to protect revenues earned from international
se...
5/6/2010 12:51 a5/p5


international settlement payments. Jordanian regulators observed, in fact, that international settl...
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
COURSE OVERVIEW AND INTRODUCTION
Upcoming SlideShare
Loading in …5
×

COURSE OVERVIEW AND INTRODUCTION

1,027 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,027
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
25
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

COURSE OVERVIEW AND INTRODUCTION

  1. 1. 5/6/2010 12:51 a5/p5 COURSE OVERVIEW AND INTRODUCTION....................................................................................5 I. VOIP – TECHNICAL ASPECTS OF IP TELEPHONY......................................................................5 1. Introduction -- What is VoIP KW ? .............................................................................................5 1.1Definitions: Introduce relevant terms for the discussion & short history introduction..........7 1.2 How does an IP network function?..............................................................................................8 1.3 Explain various types or classifications of IP Telephony.........................................................8 1.31 VoIP vs. Internet Telephony.................................................................................................8 1.32 PC to PC ..............................................................................................................................8 1.33 PC to phone..........................................................................................................................8 1.34 phone to phone.....................................................................................................................8 IP Telephony.....................................................................................................................................8 http://www.point-topic.com/content/bmm/profiles/IP+Telephony.htm..........................................8 1 Overview .......................................................................................................................................8 2. Packet switching versus Circuit switching and PSTN vs. IP networks. How IP networks differ from the PSTN? KW and Karl...............................................................................................9 System architecture .......................................................................................................................10 Pricing.............................................................................................................................................11 Numbering, Quality of Service, Reliability, ...................................................................................11 3. How is VoIP being adopted and used? .......................................................................................13 3.1 Current and potential applications. KW...................................................................................13 3.2 Why does everyone want it? (e.g., can carry voice and data on the same IP network, etc.) KW .........................................................................................................................................................14 II. ECONOMIC AND FINANCIAL ASPECTS OF IP TELEPHONY.................................................14 4. Introduction – What is the current and future market for VoIP?...........................................14 4.1.Players & Providers ..................................................................................................................14 4.11 Equipment providers, i.e. Cisco, Lucent, Juniper, Ericsson and Alcatel............................14 4.12 Wholesale carriers (e.g., iBasis, ITXC)...............................................................................14 4.13 New service providers (e.g. Vonage, Net2Phone) .............................................................14 4.14 Telcos..................................................................................................................................14 4.15 Pirates..................................................................................................................................14 4.2 Users .........................................................................................................................................14 4.21 End-users (e.g., large consumers of international and national long distance voice traffic, such as big business, small business, governments and consumers.)..........................................14 4.22 Telcos .................................................................................................................................14 5. Advantages – Cost Savings: The increasing popularity of IP Telephony is driven largely by two types of economic and financial advantages............................................................................14 5.1 Infrastructure related cost savings. ...........................................................................................14 5.11Cheaper equipment...............................................................................................................14 5.111 Equipment is standards based, not proprietary – and therefore costs less.........................15 5.112 Need only a VoIP gateway and an IP router (can get equipment on eBay for a few thousand dollars).........................................................................................................................15 5.12 Cheaper transport costs, etc. ...............................................................................................15 1
  2. 2. 5/6/2010 12:51 a5/p5 5.121 better bandwidth utilization;(An important issue for consideration given the more limited availability and higher cost of international bandwidth in Africa.).............................................15 5.2 Savings in Regulatory Fees and Costs. ...................................................................................15 5.21 Termination Rates ( See http://www.ipcb.net/sales/az.php3).............................................15 5.22 Universal Service obligations .............................................................................................15 5.23 Special numbers emergency and information.....................................................................15 5.24 Offshore accounts, money laundering.................................................................................15 6. Overview of the current telecommunications markets in Africa and how these markets compare to, and differ from, other parts of the developed and developing world......................15 6.1 Historical context – [Telecom in Africa?].................................................................................15 6.3 Subsidy and Business Models for Traditional telephony –Pricing/etc.:...................................15 6.31 Traditional local and long distance – The need for tariff rebalancing creates opportunities for arbitrage.................................................................................................................................15 6.32 Termination and origination rates.......................................................................................15 6.33 International call revenues / Settlement rates – High international tariffs create the opportunity for arbitrage..............................................................................................................15 7. How the conditions described in Section 6 create economic incentives for VoIP and other forms of Bypass and undermine traditional business models for telecom...................................16 7.1 What is bypass? .......................................................................................................................16 7.2 Who benefits from telco bypass and why?................................................................................16 7.3 Development of VoIP “pirates” who provide illegal or grey market VoIP..............................16 8. Economic Risks of VoIP- Impact of IP Telephony on Incumbent Telecommunications Operators...........................................................................................................................................16 8.1 What effect does VoIP have on incumbent telcos and how are they responding?....................16 8.2 Many telcos are responding by adopting VoIP to lower costs and recapture traffic lost to the “pirates.” ........................................................................................................................................16 8.3 How do you beat the “pirates”?.................................................................................................16 8.31 Technical Responses...........................................................................................................16 8.32 Legal & Regulatory Responses...........................................................................................16 8.33 Competition.........................................................................................................................16 9. Other Economic Benefits of VoIP- Additional potential economic and social benefits of VoIP that may be relevant to policymakers?..................................................................................16 9.1 Providing cheaper and more accessible telephone service to rural areas. ...............................16 9.2 Other examples..........................................................................................................................16 III REGULATORY ASPECTS OF IP TELEPHONY............................................................................16 10. Overview of Effective Regulation / General Principles of Internet Regulation...................17 10.1 Market Reforms .....................................................................................................................17 10.11 Encourage competition and liberalization in the provision of services............................17 10.12 Establish an independent regulatory body. .....................................................................18 10.2 Regulatory Approaches and Techniques ..............................................................................18 10.21 Understand Differences Between the Internet and Other Modes of Communication, Such as Telephony................................................................................................................................19 10.22 Consider a “Light” Regulatory Touch or Non-Regulation for Internet Applications. ....19 10.23 Where Regulations are Desired, They Must Be Purposefully Drafted. ..........................19 10.24 Transparency....................................................................................................................19 2
  3. 3. 5/6/2010 12:51 a5/p5 10.25 Acknowledge Enforcement Limitations...........................................................................20 11. Regulatory Treatment of IP Telephony...................................................................................20 11.1 Overview.................................................................................................................................20 11.2 What is IP Telephony? ..........................................................................................................21 11.21 Definition...........................................................................................................................21 11.22 Technical Issues ...............................................................................................................21 11.3 Regulatory Frameworks for IP Telephony.............................................................................24 11.31 Which regulatory and legal classification applies to IP Telephony – voice telephony or data?.............................................................................................................................................24 11.32 How are regulatory frameworks applied to IP Telephony services? ..............................30 11.4 Policy Issues for IP Telephony...............................................................................................35 11.41 Market Entry Requirements.............................................................................................35 11.42 Universal Service..............................................................................................................37 11.43 Numbering........................................................................................................................39 11.44 Security / Surveillance......................................................................................................40 12. CASE STUDIES..............................................................................................................................41 How is VoIP being regulated in different parts of the world? Provide a brief comparative review of market conditions and VoIP related regulations in the following countries:..............................41 12.1 CASE STUDY – United States................................................................................................41 12.11 Who is using IP Telephony ?...............................................................................................41 12.111 Telephone Carriers.........................................................................................................41 12.112 Consumers......................................................................................................................41 12.113 Businesses.......................................................................................................................41 12.12 Who is providing IP Telephony services? ..........................................................................42 12.13 Which government entities are responsible for establishing regulatory policies on IP Telephony?......................................................................................................................................43 12.14 Does the government have an ownership interest in any telecommunications service provider?..........................................................................................................................................45 12.15 What is the current regulatory status of IP Telephony? Is there an explicit policy?...........46 12.152 What are the FCC’s policy goals in adopting rules for IP Telephony?..........................46 12.153 What has been the regulatory framework for IP Telephony to date? ............................47 12.154 The FCC has been actively reevaluating its policy on VoIP since the fall of 2003. What has the FCC accomplished on VoIP since that time?........................................................48 12.155 PC-to-PC Telephony Communications:.........................................................................48 12.156 VoIP and Access Charges: ..........................................................................................50 12.157 Broad Rulemaking Proceedings:....................................................................................52 12.158 Are there penalties for providing IP Telephony service? (e.g., fines, license revocation, jail)...............................................................................................................................................53 12.16 What have been the costs and benefits of IP Telephony within the country?......................53 12.2 Morocco (closed regulatory regime) Karl.............................................................................55 12.21 Who are the current VoIP users (e.g., cyber cafes? Universities? Businesses? Etc)...........55 12.22. Who are the current VoIP providers ....................................................................................55 12.23. Which government entity is responsible for making regulatory policies on VoIP?............55 12.25 What is the current status of VoIP regulation? ...................................................................55 12.251 Is there an explicit policy?.............................................................................................55 3
  4. 4. 5/6/2010 12:51 a5/p5 12.252 If so, what are the penalties for providing VoIP service? (e.g., fines, license revocation, jail)...............................................................................................................................................55 12.26. What have been the costs and benefits of VoIP services within the country?.....................55 12.3 Rwanda Albert...........................................................................................................................55 12.31 Who are the current VoIP users (e.g., cyber cafes? Universities? Businesses? Etc)...........55 12.32. Who are the current VoIP providers ....................................................................................55 12.33. Which government entity is responsible for making regulatory policies on VoIP?............55 12.35 What is the current status of VoIP regulation? ...................................................................56 12.351 Is there an explicit policy?.............................................................................................56 12.352 If so, what are the penalties for providing VoIP service? (e.g., fines, license revocation, jail)...............................................................................................................................................56 12.36. What have been the costs and benefits of VoIP services within the country?.....................56 4
  5. 5. 5/6/2010 12:51 a5/p5 COURSE OVERVIEW AND INTRODUCTION I. VOIP – TECHNICAL ASPECTS OF IP TELEPHONY 1. Introduction -- What is VoIP KW ? What VOIP is VoIP Voice over Internet Protocol, is another way of saying IP Telephony. It involves the transmission of telephone calls over a data network like the Internet. In other words, VoIP can send voice, fax and other information over the Internet, rather than through the (PSTN) or regular telephone network. PSTN stands for Public Switched Telephone Network, or basically what we all call the telephone network. When you pick up your telephone handset and dial a number, the call is routed through the telephone switch of your telephone company, and a connection established with the person you called The US FCC writes that http://www.fcc.gov/voip/ VoIP allows you to make telephone calls using a computer network, over a data network like the Internet. VoIP converts the voice signal from your telephone into a digital signal that travels over the internet then converts it back at the other end so you can speak to anyone with a regular phone number. When placing a VoIP call using a phone with an adapter, you'll hear a dial tone and dial just as you always have. VoIP may also allow you to make a call directly from a computer using a conventional telephone or a microphone. VoIP crash course Voice Over IP is the process of transmitting voice communications, like phone conversations, over an IP based network like the Internet. It uses IP addresses instead of phone numbers, and Ethernet cable in place of phone wire. VoIP can performed by an application like Skype, or a device like an IP phone. The major difference between IP based voice communication and the telephone network we are all accustomed to using is the method of sending data. Both methods convert sound to electrical signals (data) and send it over a network to the recipient, where it is converted back. The networks they are sending data over are vastly different, however. A Public Switched Telephone Network (PSTN), our standard phone system, forms a circuit between the caller and the callee which stays connected for the duration of the call. IP calling uses the Internet, a packet-based network. This means that data is transferred in discrete packets which are sent from source to destination independently and assembled when they get there. This is more efficient and much less subject to distance issues than a PSTN. This is half the reason why VoIP calls are so much cheaper than PSTN calls. The other half is the fact that the Internet is more or less globally maintained, whereas phone systems are implemented and maintained by individual governments and corporations. So while you and your phone company need to pay for the right to use a remote phone system to connect, there is no such need on the Internet. Once you are on it, you can send data without restriction or cost. http://www.pcstats.com/articleview.cfm?articleID=1563 5
  6. 6. 5/6/2010 12:51 a5/p5 IP Telephony offers many advantages over the regular Public Switched Telephone Network (PSTN), including new advanced services, lower costs, efficient resource utilization, and ease of management through consolidation of network resources. Despite these benefits and rapid advances in development of standard protocols and interfaces for IP Telephony, there remain significant challenges in supporting toll quality voice over a converged PSTN and IP network. These challenges stem from the inherent differences between the PSTN and the IP network. The latter is still primarily a best effort network and hence, unlike the PSTN, provides no guarantees on the Quality of Service (QoS). http://networks.cs.ucdavis.edu/~ghosal/Research/ip-telephony.html Figure 11 depicts the a range of VOIP 1 http://www.fcc.gov/voip/ 6
  7. 7. 5/6/2010 12:51 a5/p5 1.1 Definitions: Introduce relevant terms for the discussion & short history introduction The Learning Objecitve (LO) is to review basic terms used in this course and to provide a brief overview of the history of Internet and VoIP. Terms: IP Network Internet Protocol http://www.btglobalservices.com/en/products/uk/voip/index_print.html Internet Protocol (IP) Is The Method Or Protocol By Which Data Is Sent From One Computer To Another On The Internet. Each Computer (Known As A Host) On The Internet Has At Least One IP Address That Uniquely Identifies It From All Other Computers On The Internet. When You Send Or Receive Data (For Example, An E-Mail Note Or A Web Page), The Message Gets Divided Into Little Chunks Called Packet. Each Of These Packets Contains Both The Sender'S Internet Address And The Receiver'S Address. Any Packet Is Sent First To A Gateway Computer That Understands A Small Part Of The Internet. The Gateway Computer Reads The Destination Address And Forwards The Packet To An Adjacent Gateway That In Turn Reads The Destination Address And So Forth Across The Internet Until One Gateway Recognises The Packet As Belonging To A Computer Within Its Immediate Neighbourhood Or Domain. That Gateway Then Forwards The Packet Directly To The Computer Whose Address Is Specified. Because A Message Is Divided Into A Number Of Packets, Each Packet Can, If Necessary, Be Sent By A Different Route Across The Internet. Packets Can Arrive In A Different Order Than The Order They Were Sent In. The Internet Protocol Just Delivers Them. It'S Up To Another Protocol, The Transmission Control Protocol (Transmission Control Protocol) To Put Them Back In The Right Order. IP Is A Connectionless Protocol, Which Means That There Is No Established Connection Between The End Points That Are Communicating. Each Packet That Travels Through The Internet Is Treated As An Independent Unit Of Data Without Any Relation To Any Other Unit Of Data. 7
  8. 8. 5/6/2010 12:51 a5/p5 1.2 How does an IP network function? The LO is for the student to understand what an IP Network is and how it is different form other networks 1.3 Explain various types or classifications of IP Telephony. The LO is for studetns to understant that there are different types of IP telephony, the difference among them, and why the difference may be inportant for reulatory . 1.31 VoIP vs. Internet Telephony 1.32 PC to PC 1.33 PC to phone 1.34 phone to phone IP Telephony http://www.point-topic.com/content/bmm/profiles/IP+Telephony.htm 12 January 2004 1 Overview Point Topic defines IP Telephony as a service which emulates the voice service provided by the ordinary telephone network as fully as possible over Internet protocol (IP) connections. This means that voice traffic is carried over IP networks (including the public Internet on occasion) rather than the circuit switched public switched telephone network (PSTN). Thus there is no dedicated one-to-one connection between the two callers. Instead, each voice call is split into small packets of data that are transported using IP and reassembled at their destination. The main selling point of IP Telephony at present is that it can be cheaper than conventional telephone services, especially for peak time or long distance calls, when provided as part of a bundle that also includes high-speed Internet. Long distance or international calls from IP Telephony customers to conventional phones can be charged at approximately local rates. Competition will reduce the cost advantage for calls in the longer term, but IP Telephony services will still be able to offer other benefits, such as being able to provide multiple telephone lines for little or no extra cost. IP Telephony is one of a whole range of services which use Voice-over-IP (VoIP) technology in some form. Basic voice over Internet technology has been available since the late 1990s. 'Internet Voice' software supports voice calls between Internet users, usually by pre-arrangement, and with only the best-efforts quality of service offered by the public Internet. On the other hand, Corporate VoIP offers high quality service for business customers, using IP to optimise the use of broadband connections and virtual private networks (VPNs). IP Telephony is primarily a consumer service which aims to provide customers with access to all types of telephones worldwide and with service quality and features close to that offered by the PSTN. Point Topic distinguishes IP Telephony from 'Internet Voice', which is covered in a separate profile, and which is concerned with providing essentially peer-to-peer service between Internet users. But the boundaries between the two types of service are not clear-cut. The differences between them, and the variety of other voice services, are set out in more detail in another paper, 'The Voice Services Maze' which is in the 'Overviews' area of Broadband Money Makers. 8 By early 2003, there were small scale deployments of IP Telephony in North America, including initial deployments by cable companies. By the end of 2003, major telcos were announcing plans and products for the IP Telephony market. BT was the first major European telco to announce an IP service. But these lagged behind
  9. 9. 5/6/2010 12:51 a5/p5 2. Packet switching versus Circuit switching and PSTN vs. IP networks. How IP networks differ from the PSTN? KW and Karl The LO is for students to understand the difference between Circuit and Packet switching, PSTN vs IP (also LO in 1.2). PSTN http://www.nortelnetworks.com/products/01/signaling/collateral/pstnip.pdf Highly modernized ‘cans and string’ Circuit switching is the modern-day equivalent of the 19th century ‘cans and strings’ solution. The Public Switched Telephone Network (PSTN) carries on the hard-wired, landline-based tradition of providing constant bandwidth streams of information flow between users. These media streams flow over dedicated connections, typically between two telephones. The circuit switched network was originally designed and optimized for voice traffic and calling patterns, but today a considerable amount of fax traffic is also carried over these same voice-quality conections. With the emergence of the Internet, a steadily growing volume of modem data traffic now occupies a significant portion of the circuit switched network as it makes its way to IP-based data networks. One of the more wasteful characteristics of the circuit switched network is that connections occupy bandwidth even when no real information is flowing. Think of the pauses that occur between thewords in normal human conversation; bandwidth is consumed at the same rate throughout the connection,even when no words or sounds are being communicated. On the other hand, it’s evenmore wasteful to clog up the circuit switched network with data streams. Voice-quality connectionssimply aren’t necessary to move data traffic. One of the first and most important incentives forfinding alternative network technologies is the need to eliminate the inefficiencies that result fromusing the PSTN as a be-all, end-all solution. Network elements in the PSTN tend to have a large degree of centralized functionality. They are highly reliable and statically configured. Circuit switched network topology is rigidly engineered, and, as a result, significant coordination is required to add or modify network elements. Because the PSTN is considered essential to economic and national defense infrastructures, it is regulated by governmental bodies. These regulatory agencies, not the network operators, set the industry’s rate structures and mandate its reliability standards. Another side effect is that, generally speaking, the rate of change in regulated industries is slower than in unregulated businesses. The telecommunications industry demonstrates a history of innovation, but inherent rules and procedures inevitably slow the process for testing, certification and implementation. 9
  10. 10. 5/6/2010 12:51 a5/p5 Three main focal points here are: System architecture PSTN: inflexible, zero sum use: a single cuircut can onoy be used by a single user IP: flexible, multiple users can use the same cuicut PSTN: inflexible, can only serve on use at a time—data or voice IP: flexible, can serve more than one use at the saem time—data and voice Fig XXX PSTN vs IP Network architecture PSTN 64kbps line IP Network 64k kbps line or eight sub-lines 8k lines infinite number of sub-lines 10
  11. 11. 5/6/2010 12:51 a5/p5 The Main Difference Between VoIP And IP Networks, And Circuit-Switched Networks Is The Method Of Getting Information From One Device To Another. With The Familiar Public Switched Telephone Network (PSTN), When You Make A Call A Connection Is Formed Between The Two Devices To Create A Physical Circuit. With VoIP, There Is No Such Dedicated Connection Between Devices. Instead, The Information Is Encoded (Analogue Speech Is Converted To A Digital Signal) And Divided Into Packets. It Then Uses A 'Connectionless' Packet-Switched Network To Get Information From One Device To Another Via The Fastest Of Many Possible Routes Through The Network. This Is The Same Method Used In Most Packet Data Networks, Including The Internet, To Transport Information. Data Of All Kinds Is Divided Into Packets And Sent Across The Network. As Packets Arrive At Their Destination They Are Reunited And Reassembled As The Complete Original http://www.btglobalservices.com/en/products/uk/voip/index_print.html See diagrams at http://www.btglobalservices.com/en/products/uk/voip/ Pricing PSTN: inflexible tarriff structure as a result of less flexibility of service offfereings IP: flexible tarriff structure as a result of more flexibility of service offfereings Numbering, Quality of Service, Reliability, Internet/PSTN Integration: Eventually, the Internet and the Public Switched Telephone Network (PSTN) must be integrated—people making telephone calls can't be bothered with the nuances of the underlying network technologies. The problem, however, is that the Internet and the PSTN rely on very different infrastructures. For example, there are: • Significant differences between national and international versions of the "same" protocol. • Conceptual and procedural differences between circuit switching and packet switching. • Addressing and numbering differences between the PSTN and the Internet. • Operational differences between control structures—the PSTN's centralized, the Internet's distributed. These differences will be resolved at the gateways and gatekeepers of the Internet and service platforms of the PSTN. Eventually, these various pieces will combine into single elements, providing a unified service architecture that supports integrated Internet and telephony services. As the standards for interworking between H.323 and SS7 are defined, "true" Internet- to-PSTN solutions will evolve. In the meantime, proprietary solutions that map the procedures and messages between H.323 and SS7 have emerged. These solutions are very dependent on the interpretation of the equipment manufacturers, service providers and carriers. Again, resolution of the protocol issues will occur in the IETF and ITU, but as always this will take time. 11 http://www.bcr.com/bcrmag/1999/05/p24.asp
  12. 12. 5/6/2010 12:51 a5/p5 .2 http://icwww.epfl.ch/publications/documents/IC_TECH_REPORT_199834.pdf http://www.cs.columbia.edu/~coms6181/slides/10/voip.pdf 2 12
  13. 13. 5/6/2010 12:51 a5/p5 3. How is VoIP being adopted and used? LO here is for students to understand different uses of VoIP 3.1 Current and potential applications. KW CURRENT private network: inter and intro office (banks, MNCs) two party traffic: person to person three party traffic: call centers telecenters pirates http://biz.yahoo.com/prnews/040127/lntu005_1.html DENVER, Jan. 27 /PRNewswire-FirstCall/ -- IP telephony is steadily replacing legacy PSTN systems in medium-to-large companies, but the split between the two is still fairly even. Call quality, management, and applications that merge voice and data are also important factors in migrating to IPT from a legacy system. These are just some of the findings of a recent global survey conducted by PROGNOSIS systems and network management software developer Integrated Research. The survey polled over 2800 senior IT and telecoms managers, evenly distributed across medium to large enterprises. Approximately 80% of respondents were from North America, with the remainder distributed evenly between Europe and Asia. IR's director of IP telephony products Graham Jones says that call quality is the key challenge in convincing companies to switch from their old analogue and digital systems to IP handsets. "End users are accustomed to PSTN quality and will not settle for less, even with added functionality," says Jones. "For an end-user, picking up a phone implies getting an instant dial tone, and continued cut-offs or audio quality problems will have users running back to their old phones." The survey suggests that most organizations are moving to IP telephony. With 56% of respondents already using an IP telephony system, 26% indicated a trial within 12 months, with a further 18% pointing to a two-year trial date. Key external factors driving IP telephony sales in the next two years appear to be stronger IT spending (strengthening economy), and a perception that IP telephony has come of age (and is now a lower risk). The survey responses indicated the highest priority business driver for IP telephony is increased value through IP applications (66% response), followed by lower infrastructure costs (64%) and open standards (50%). As expected, Cisco was named the most popular IP telephony platform, with over 52% of respondents currently using -- or intending to invest in -- a Cisco-based solution. Avaya and Nortel follow suit with 10% and 9% respectively. Time for real-time The vast majority (83%) of respondents see real-time management as a critical component of an IP telephony implementation. "As enterprises deploy IP telephony and integrate voice and data traffic, the new real-time nature of the network infrastructure requires management that is more active," says Jones. "From initial network readiness assessment through to the first days of testing IP telephony in the lab and on to full deployment to thousands of users, effective real-time management needs to be at the forefront of the evaluation and deployment cycles." 13
  14. 14. 5/6/2010 12:51 a5/p5 3.2 Why does everyone want it? (e.g., can carry voice and data on the same IP network, etc.) KW cost saving II. ECONOMIC AND FINANCIAL ASPECTS OF IP TELEPHONY 4. Introduction – What is the current and future market for VoIP? 4.1.Players & Providers 4.11 Equipment providers, i.e. Cisco, Lucent, Juniper, Ericsson and Alcatel. 4.12 Wholesale carriers (e.g., iBasis, ITXC) 4.13 New service providers (e.g. Vonage, Net2Phone) 4.14 Telcos 4.15 Pirates 4.2 Users 4.21 End-users (e.g., large consumers of international and national long distance voice traffic, such as big business, small business, governments and consumers.) 4.22 Telcos 5. Advantages – Cost Savings: The increasing popularity of IP Telephony is driven largely by two types of economic and financial advantages. 5.1 Infrastructure related cost savings. How do infrastructure-related components of IP networks create cost savings and incentives to service providers and various classes of users? Lower infrastructure costs leads to fewer financial barriers of entry for VoIP service providers. 5.11Cheaper equipment 14
  15. 15. 5/6/2010 12:51 a5/p5 5.111 Equipment is standards based, not proprietary – and therefore costs less. 5.112 Need only a VoIP gateway and an IP router (can get equipment on eBay for a few thousand dollars). 5.12 Cheaper transport costs, etc. 5.121 better bandwidth utilization;(An important issue for consideration given the more limited availability and higher cost of international bandwidth in Africa.) 5.2 Savings in Regulatory Fees and Costs. Fees and taxes imposed on traditional telephony carriers are avoided by IP providers. (e.g., IP carriers can avoid accounting rates/international settlements on international calls.) This section examines the economic incentives for VoIP and other forms of bypass. 5.21 Termination Rates ( See http://www.ipcb.net/sales/az.php3) 5.22 Universal Service obligations 5.23 Special numbers emergency and information 5.24 Offshore accounts, money laundering 6. Overview of the current telecommunications markets in Africa and how these markets compare to, and differ from, other parts of the developed and developing world. 6.1 Historical context – [Telecom in Africa?] 6.2 Technology – VoIP in Africa 6.3 Subsidy and Business Models for Traditional telephony –Pricing/etc.: 6.31 Traditional local and long distance – The need for tariff rebalancing creates opportunities for arbitrage. 6.32 Termination and origination rates 6.33 International call revenues / Settlement rates – High international tariffs create the opportunity for arbitrage. 15
  16. 16. 5/6/2010 12:51 a5/p5 7. How the conditions described in Section 6 create economic incentives for VoIP and other forms of Bypass and undermine traditional business models for telecom. 7.1 What is bypass? Telephone calls that are transported over the Internet can avoid the international accounting rate system that is imposed on circuit switched networks. 7.2 Who benefits from telco bypass and why? 7.3 Development of VoIP “pirates” who provide illegal or grey market VoIP. 8. Economic Risks of VoIP- Impact of IP Telephony on Incumbent Telecommunications Operators 8.1 What effect does VoIP have on incumbent telcos and how are they responding? 8.2 Many telcos are responding by adopting VoIP to lower costs and recapture traffic lost to the “pirates.” (See e.g., agreements that ITXC and iBasis have announced with numerous PTOs in Africa.) 8.3 How do you beat the “pirates”? 8.31 Technical Responses 8.32 Legal & Regulatory Responses 8.33 Competition 9. Other Economic Benefits of VoIP- Additional potential economic and social benefits of VoIP that may be relevant to policymakers? 9.1 Providing cheaper and more accessible telephone service to rural areas. (e.g., South Africa is using IP telephony increase the availability of telephone service. Reports indicate that the government intends to license small, medium and micro enterprises to offer VoIP services for local access in under-serviced areas of under 5% teledensity.) [Can Albert/NUR provide further details on this project?] 9.2 Other examples. III REGULATORY ASPECTS OF IP TELEPHONY 16
  17. 17. 5/6/2010 12:51 a5/p5 10. Overview of Effective Regulation / General Principles of Internet Regulation Internet-based applications, such as IP Telephony, offer a variety of new communications capabilities. These emerging technologies and applications may facilitate creative solutions to some of the unique developmental challenges facing developing countries. For example, innovative policy makers in a variety of countries are already beginning to explore ways to use IP Telephony to increase rural telephone access. The Internet and related communications technologies present a range of new technical resources for developing nations. Policy makers seeking to harness these new resources must be cognizant, however, that the Internet and IP-based applications, do not proliferate randomly. They are most likely to flourish in policy environments that encourage their growth. Numerous commentators have suggested that Internet penetration in African is as low as it is, in part, because of policy environments that discourage investment and flexible growth of new technologies.3 Accordingly, before delving into the specifics of regulating IP telephony, it is important to establish a few general principles and best practices both for Internet development, and for regulatory proceedings. This section briefly seeks to identify the elements of a regulatory environment that are most effective in fostering the overall growth of Internet applications within a market. These recommended reforms, concepts and procedural practices provide a basic foundation for Internet development and effective regulation, and should be carefully considered by regulators. 10.1 Market Reforms The first recommendations focus on market reforms. Commentators have identified a variety of desirable market reforms. Two of the key principles are discussed below.4 10.11 Encourage competition and liberalization in the provision of services. Liberalizing the telecommunications sector to permit competition is important because the Internet rides upon the telecommunications infrastructure. As these underlying telecommunications services become more available, more affordable and more accessible, Internet services should also. Competition at all levels of telecommunications service (local, long distance and international) and for all technologies (wireline and wireless) should be encouraged as it tends to attract investment that 3 A recent ITU sponsored article states that one person in two goes online in North America and Europe. By contrast, in most parts of Africa, “it is more like one person in 400.” See Sarah Parkes, Internet In Africa: Time for Action, ITU On- line News Service (October 30, 2003), available at:http://itudaily.com/onlinenews/printarticle.asp?articleid=3103002. 4 See, for example, the ITU article mentioned in note 1 for a discussion of other relevant market barriers. 17
  18. 18. 5/6/2010 12:51 a5/p5 spurs infrastructure development and modernization.5 Competition among service providers also improves service quality and innovation, and tends to drive prices down, making communications services more affordable and available. 10.12 Establish an independent regulatory body. A great deal of literature already has been written extolling the virtues of independent regulators. Many countries have heeded this advice. Ten years ago, few developed or developing countries had telecommunications regulatory authorities. In 1990, for example, there were only thirteen such regulatory entities. By 2003, the FCC staff reported that no less than 119 regulatory agencies had been established worldwide. The issue of which government entity will create and enforce policies on new communications services is a crucial one. Assigning this authority to the wrong entity can undermine the quality, effectiveness and uniformity of any policies that are ultimately adopted. Policy decisions that are made within a ministry, for example, may be heavily influenced by short-term political and financial considerations. The practical effect may be decision-making that unduly favors incumbent service providers. This outcome is especially likely if the state maintains an ownership interest in the incumbent. Resolving policy disputes within courts creates a significant risk that judges with a very limited understanding of the technology and its application will be tasked with decision making. Furthermore, court procedures can be extremely time consuming, and judicial decisions seek only to resolve specific disputes, rather than creating long-term strategies to build infrastructure and encourage the use of innovative technologies. A balanced evaluation of the facts and policy implications is more likely if decision making is assigned to a trained and independent staff that has an understanding of the relevant technical, economic and regulatory policy issues raised by a new service or application. An independent agency that reports to a national congress or a similar elected body is most likely to have the higher level of independence needed to develop policies designed to satisfy long-term national goals. 10.2 Regulatory Approaches and Techniques It is also important to recognize several regulatory approaches, and procedural standards and practices that are relevant for efficient and effective rulemaking. The recommendations described below are designed to refine and improve decision-making, the enforcement of rules and the protection of consumers and licensees. 5 Liberalization can foster the growth of a variety of technical platforms that can be developed and used for Internet applications. This may include: cable, 3G wireless, WiFi, satellites, broadband over power lines and other new technologies. 18
  19. 19. 5/6/2010 12:51 a5/p5 10.21 Understand Differences Between the Internet and Other Modes of Communication, Such as Telephony. Development of Internet services requires a mixture of regulatory and non-regulatory policies. In countries where the Internet has flourished the most, the Internet has been a relatively unregulated medium that operates over a regulated medium – the telephone network. Effective regulations must recognize important technical differences between these two networks. 10.22 Consider a “Light” Regulatory Touch or Non-Regulation for Internet Applications. Regulators can and should limit the extent to which their actions interfere with the functioning of the market for Internet services. Whenever possible, market forces should be allowed to take the place of direct regulatory intervention. Governments should encourage competitive markets that allow companies and users to be innovative. Regulations should be imposed on Internet applications only where necessary. There should be an affirmative reason to impose a regulation. Telephony regulations have traditionally been justified by the need to control monopoly firms in a market, to encourage competition, and to achieve important public interest goals. Due to the unique nature of the Internet, these needs do not arise in the Internet world as often as they do in the world of traditional telephony. Regulators should bear these differences in mind and ensure that Internet-related regulations are adopted only to address specific social needs or market failures. 10.23 Where Regulations are Desired, They Must Be Purposefully Drafted. Regulations should not be imposed unless the desired purpose and effect of the proposed rule have been clearly identified. Once the purpose and effect of the rule have been clearly articulated, regulators should be able to demonstrate that the proposed rule actually furthers the specified policy goals. 10.24 Transparency The regulatory and legislative processes should be transparent and open. Written drafts of proposed rules should be made available to the public. Drafts also can be posted on the Internet. The public should be able to review and provide comment upon any proposed rules or laws.6 Members of the public, including regulated entities, must have access to all laws, judicial rulings, decrees and regulations. 6 For example, the Federal Communications Commission is currently considering policy options for regulating IP-based services, such as IP Telephony. The written policy proposal was announced and made available in February of 2004. The public was invited to submit written and oral comments. The FCC, by law, must consider these public and industry comments when determining its final policy. 19
  20. 20. 5/6/2010 12:51 a5/p5 Regulated parties should not be subject to any rules that are not published. 10.25 Acknowledge Enforcement Limitations. Before adopting a rule or a prohibition, regulators should carefully consider their ability to enforce any such rule. The FCC has noted that some countries have sought to tightly regulate certain services, such as callback and Internet telephony, only to discover that enforcement of their prohibitions was difficult, or impossible, and would require enormous amounts of time from an already limited number of available staff people.7 Regulation of IP Telephony could require regulators, for example, to make decisions regarding the types of software that can and cannot be used, which Internet content is permissible, etc. Regulators should bear in mind that it may not always be feasible or desirable to enforce such regulations. 11. Regulatory Treatment of IP Telephony 11.1 Overview The possibility of transmitting voice over IP-based networks reflects a convergence of two network types that have emerged under very different policy and regulatory regimes. Traditional telephony, which is based on circuit-switched networks, has been heavily regulated by most countries. By contrast, data networks, which are based on packet-switched technology, have developed, in many countries, free of most regulations. The blurring of the traditional distinction between these two networks has created regulatory and legal questions that regulators in various countries of the world are now attempting to resolve. These policy inquiries are often complicated by the fact that the regulatory regimes in most countries were adopted before the advent of the Internet and the various developing IP-based applications. As regulators wrestle with these issues, they are not choosing a single approach to deal with this complex Internet application. Instead, a variety of regulatory options are emerging. This paper will seek to introduce some of the most significant trends and issues facing policymakers who wish to “regulate” IP Telephony. 7 Irene Wu, Roxanne McElvane, Anita Dey, Kiran Duwadi, Current International Issues in Communications Regulation: Refining Regulatory Techniques, Impact of Wireless Popularity on Regulation, and the Growing Significance of Cable Television, prepared for Policy Research Conference on Communication, Information and Internet Policy, September 19-21, 2003, Arlington, Virginia, at 7. 20
  21. 21. 5/6/2010 12:51 a5/p5 11.2 What is IP Telephony? 11.21 Definition As of yet, there is no standard definition of Internet Protocol Telephony. The ITU generally defines Internet Protocol Telephony, or “IP Telephony”, as the transmission of voice, fax and related services over packet-switched IP-based networks. IP telephony enables real-time voice transmission over a network that uses Internet protocols (“IP”). 11.22 Technical Issues 11.221 Packet-Switching versus Circuit Switching Networks based on the Internet Protocol (“IP”) are both technically and administratively different from the public switched telephone network (“PSTN”).8 Traditional telephony delivers voice calls via the PSTN, which is a circuit switched network. The PSTN was developed for one primary purpose – the transmission of voice telephony. Placing a call on the PSTN establishes a temporary “circuit”, which is dedicated to that particular phone call for the duration of the conversation. No other traffic can pass over that channel until the call has been terminated. The network transmits all information associated with the call, including silences and pauses in speech, and therefore consumes a fixed amount of bandwidth for the duration of the call. Since a PSTN circuit is temporarily dedicated during the entire duration of any particular call, there is a limit on the total number of users who can use the system at any one time. IP networks, by contrast, transmit information in the form of data “packets” that contain a portion of the user’s data, as well as information needed to guide the delivery of the data packet (e.g., addressing and source information). IP Telephony applications digitize voice communication into data packets that are routed over managed IP networks and/or over the public Internet to the desired location using IP addressing. IP networks offer important technical advantages. Unlike circuit switched networks, which were designed solely to transmit voice communications, IP networks can be used to digitize and deliver any kind of content, including voice, data and video. The networks therefore can be used to provide a range of applications for data (e.g., e-mail, file transfer, database searching) and telephony, as well as integrated voice/data (messaging) and integrated voice/video applications, and merged World Wide Web and voice services. Furthermore, data packets can be transmitted over a variety of platforms, including copper wires, cable, fiber and wireless networks. IP-based networks also are more efficient than circuit switched networks because they do not use dedicated circuits. Instead, these networks multiplex, or combine multiple sets of data, over the same 8 The PSTN includes local exchange networks and long distance, or inter-exchange, networks within a country. The various national PSTNs are then connected to each other by wire, undersea cable, or other means. 21
  22. 22. 5/6/2010 12:51 a5/p5 physical path. In other words, multiple conversations and/or data can be sent over the same channel in separate streams of data packets. This feature conserves bandwidth, which can be a valuable and expensive commodity within developing countries. IP networks also offer important cost benefits, as they require fewer capital expenditures for infrastructure than circuit-switched networks. The ITU reports that several studies have found that IP networks are significantly less expensive to build and use than circuit-switched networks. These various benefits and features account, at least in part, for the increasing shift within the industry from circuit-switched to IP-based networks. These technological characteristics also offer significant opportunities to developing nations. Therefore, before adopting prohibitions or restrictive policies on IP Telephony or other IP-based applications, policymakers should become familiar with the myriad of economic and technological advantages presented by IP-networks, and how these applications can be incorporated into national development strategies.9 [10] 11.222 Modes of Internet Transmission Internet Telephony and Voice over IP (VoIP) are specific subsets of IP Telephony. The terms are distinguished by the type of IP networks used for transmission. Internet Telephony: IP Telephony in which the principal transmission network is the public Internet. Voice-over-Internet Protocol (VoIP): IP Telephony in which the principal transmission network or networks are private, managed IP-based networks, which allows improved quality of service and performance. This paper uses the term IP Telephony to generally encompass both methods of transmission. 11.223 Growth and Development of IP Telephony Applications There are three main types of IP Telephony: PC-to-PC; PC-to-phone; and phone-to-phone. These forms of IP Telephony are differentiated by the type of terminal used, the physical location of the gateway, 11 and the underlying means of transmission. 9 For example, regulators should consider the potential for IP networks to offer a flexible and cost-effective option for building communications infrastructure within countries with low teledensity. An ITU study notes that IP telephony has the potential to provide access to communications infrastructure at an investment cost of five to eight times less than a PSTN line. See ITU Case Study on Thailand: IP Telephony and the Internet, available at: http://www.itu.int/iptel. 10 ITU-D Study Group 2 has a Rural Application Focus Group that is studying the development of wireless IP-based technologies for rural areas. See http://www7.itu.int/itudfg7/. 11 IP telephone service can be provided in either of two ways: (1) through software and hardware at the customer premises; or (2) through gateways that enable applications originating and/or terminating on the PSTN. Gateways are computers that transform the circuit-switched voice signal into IP packets, and vice versa. They also perform associated signaling, control and address translation functions. The gateway on the originating end of a call can be located in the users’ terminal device, at an ISP or IP Telephony Providers, or in the central or end office of a PTO. If a gateway is not deployed, premises-based equipment must be available as an alternative. 22
  23. 23. 5/6/2010 12:51 a5/p5 11.2231 PC-to-PC The first generation of IP Telephony, computer-to-computer calling, was introduced around 1994. With PC-to-PC telephony, both the calling and called party require a PC equipped with audio capabilities, the same software12 and an Internet connection. Both callers had to be online at the same time. Since there was no way to notify users who were not online of incoming calls, callers usually had to prearrange calling sessions. On the technical side, PC-to-PC calls do not require a connection, or gateway, to the PSTN because they are not switched by the PSTN. Instead, the public Internet is often the means of data transmission. [Aside from Internet access fees, there is usually no charge for this type of service.] 11.2232 PC-to-Phone Computer-to-phone voice applications, the second generation of IP Telephony, became available around 1996. As with PC-to-PC applications, the originating user’s PC had to have special software, a microphone, speakers and a sound card. Unlike PC-to-PC applications, the called party can receive the call on an ordinary telephone. In terms of technical operations, the calling party accesses the Internet using his PC. The caller’s voice is converted to packets on the originating user’s PC, and the voice signal then is transmitted over the Internet to a gateway. The call data is converted from packets at a gateway server, which then routes the call to the appropriate telephone on the PSTN.13 The called party receives the phone call on a regular telephone. Since calls are terminated on the PSTN, this type of telephony is more administratively complex than the PC-to-PC format. Calls must be billed and routing arrangements must be negotiated, including interconnection payments in distant locations where applicable.14 For this reason, many service providers sometimes restrict the service offering to a limited range of countries. 11.2233 Phone-to-Phone The third generation of IP Telephony is phone-to-phone service, which became commercially available around 1997. For consumers, this form of IP Telephony most closely approximates traditional telephone service. Since phone-to-phone IP calls both originate and terminate on the PSTN, both the calling and called party use regular telephone handsets. 12 This type of IP Telephony often uses free or low cost software that can be downloaded from the Internet. 13 See discussion in International Telecommunications Union, IP Telephony Workshop, Background Issues Paper, June 2000 (“ITU Workshop”) at 2.1.2. 14 Id. 23
  24. 24. 5/6/2010 12:51 a5/p5 Although these calls begin and end on the PSTN, at some point during the transmission, they are converted to packets and travel over an IP network. The public Internet can be used as a means of transmitting these calls, however, it is more likely that the services will be provided on closed, managed IP networks with formal billing arrangements among gateways and carriers.15 Since most current commercial IP Telephony services are phone-to-phone applications, this is the most important and controversial segment of the market. Retail phone-to-phone voice services are commonly provided via pre-paid calling cards, and mobile networks often use VoIP to transport pre- selected long-distance and international routes for outgoing long distance and international calls.16 An increasing number of carriers are also transporting calls in part on internal IP networks. In most cases, the motivation for using this service is toll bypass to achieve lower costs. 11.3 Regulatory Frameworks for IP Telephony 11.31 Which regulatory and legal classification applies to IP Telephony – voice telephony or data? Over the years, analysts have suggested that the various forms of electronic communications will merge. This process is already well underway as cable companies have begun to offer telephony and data services, Internet service providers offer telephony, telephone companies can provide video services, and broadcasters can use their spectrum to offer certain wireless services. Policymakers are struggling to develop regulatory regimes that facilitate this convergence and regulate services in a “technologically neutral” manner. In other words, policymakers are recognizing the need to develop rules that will apply to all providers of a particular service, regardless of the communications platform (e.g., cable, wireless, PSTN, IP) on which the service is delivered. The rise of IP Telephony, which merges telecommunications and information features, has placed the issue of convergence squarely in front of many regulators around the world. Policymakers must decide whether their particular national goals are best achieved through the application of: traditional voice telephony rules; information or data services rules; or perhaps, by the creation of a new set of rules that acknowledges the unique hybrid nature of IP Telephony? Countries have reached different conclusions in making this evaluation. Several years ago, both the U.S. and the E.U. launched preliminary inquiries into the regulatory status of IP Telephony. The conclusions of these inquiries, which currently govern the classification of services in these two regions, are briefly summarized below. 11.311 United States 11.3111 The U.S. Has Adopted a Voice/Data Test to Classify IP Telephony Services. 15 Id. at 2.1. 16 ITU Workshop at 2.1. 24
  25. 25. 5/6/2010 12:51 a5/p5 The U.S. has adopted a complex regulatory framework that generally distinguishes “telecommunications” services, like telephony, from “information” services, which include Internet applications. Telecommunications services are subject to a rather burdensome array of FCC regulations that include interconnection requirements, universal service contributions, consumer protection standards and security obligations. Information services, on the other hand, are subject to an FCC policy of “non-regulation”, and therefore, escape the various requirements imposed on traditional telephony carriers. In the U.S., “telecommunications” is defined as: “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.”17 “Telecommunications service” is the “offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available to the public, regardless of the facilities used.” These definitions generally encompass traditional telephone services offered over the PSTN. By contrast, Internet-based applications, termed “enhanced services” (also now known as “information services”), have been distinguished from “telecommunications services” since the 1970s18 and left free of regulation.19 Basic telecommunications services were defined to include standard voice transmission offerings. Enhanced services were then defined to encompass “any offering over the telecommunications network that is more than a basic transmission service.” More specifically, “enhanced services” include: “services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber’s transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information.20 Internet access has always been treated as an “enhanced” service since ISPs engage innumerous information processing functions, such as authentication, e-mail storage and retrieval, web page hosting, and domain name server lookups, which provide more than basic transmission services. Many ISPs also offer access to local content through databases, message boards and chat areas. These functions offer substantial computer processing and interaction with customer-supplied information, and therefore fall squarely within the definition of enhanced services. Accordingly, ISPs have not been subject to traditional telecommunications regulation. 17 47 USC Section 153(43). 18 See Computer II Final Order, 77 FCC2d 384 (1980). 19 The FCC’s existing framework for regulating the Internet is embodied in the “Computer II” proceedings, which establishes the FCC’s policy towards “enhanced services” provided through the telephone network. Computer II states that although the FCC has authority to regulate these services, direct regulation would not serve the public interest. 20 Special enhanced services include protocol processing, alarm monitoring, voice messaging, and electronic publishing, as well as the provision of access to data networks such as commercial online services and the Internet. For a more detailed discussion of what types of services are “enhanced”, see discussion on this subject in the U.S. case study. 25
  26. 26. 5/6/2010 12:51 a5/p5 11.3112 Applying the Voice/Data Classification to IP Telephony The FCC initially applied this voice / data regulatory distinction to the converged technology of IP Telephony in a 1998 report to the U.S. Congress. The FCC observed that IP Telephony often blurred the line between “telecommunications” and “information” services. The FCC decided that its categorization of this hybrid service would depend on “the functional nature of the end-user offering.” The FCC’s factual inquiry therefore examined whether IP telephony offers a service that provides pure “telecommunications” or pure transmission capacity, as does traditional telephony. In applying its analysis, the FCC distinguished three types of IP Telephony: PC-to-PC; PC-to-phone; and phone-to-phone. In a non-binding evaluation, the FCC suggested that PC-to-PC IP Telephony does not appear to qualify as “telecommunications” because it does not provide basic transmission capabilities to users. The Commission observed, for example, in the case of PC-to-PC IP Telephony, “individuals use software and hardware at their premises to place calls between two computers connected to the Internet.” The IP Telephony software is an Internet application that subscribers run using Internet access provided by their ISP. The Internet service provider does not appear to be “providing” telecommunications, and in fact, may not even be aware that its customers are using IP Telephony software because IP packets carrying voice communications are indistinguishable from other types of data packets. The FCC also observed that companies that provide only software and hardware installed at the customer premises do not qualify as “telecommunications” since they do not transmit information.21 The FCC concluded that PC-to-PC and PC-to-phone IP Telephony products appeared not to constitute “telecommunications service” under the Act’s definition of that term.22 Non-regulation therefore was found to be appropriate for PC-to-PC and PC-to-phone IP Telephony because these products, on a functional and technical level, were easily distinguished from traditional telephone service. However, the FCC also indicated in its 1998 report that phone-to-phone IP telephony closely resembled “telecommunications services.” It stated “phone-to-phone IP Telephony services that rely on “dial-up or dedicated circuits … to originate or terminate Internet-based calls” appeared to “bear the characteristics of ‘telecommunications services’” where the service met four criteria:23 (1) it holds itself out as providing voice telephony service; (2) it does not require the customer to use customer premises equipment (“CPE”) different from that CPE necessary to place an ordinary touch-tone phone over the public switched network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content. 21 See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report to Congress, 13 FCC Rcd 11501 (1998) (“Stevens Report”) at paragraphs 86 –87. 22 IP NPRM at paragraph 29. 23 Id, citing Stevens Report. 26
  27. 27. 5/6/2010 12:51 a5/p5 The FCC’s analysis in this instance, however, was non-binding and did not impose regulations on phone-to-phone IP services. The FCC expressed an intent to reexamine the issue as well as specific IP Telephony services in the future, and it reserved the right to subject these services to regulation at that time. Pursuant to this regulatory distinction between telecommunications (i.e., basic services) and information services (enhanced services), and the FCC’s initial analysis of IP Telephony, regulators in the U.S. have, to date, let IP Telephony develop free from federal regulation. 11.3113 The FCC is Currently Reevaluating the Regulatory Classification of IP Telephony but has Promised a “Light-Regulatory Touch” IP Telephony services have improved technologically and achieved more commercial success since the FCC first reviewed them in 1998. As traditional carriers increasingly view these services as commercial threats, the FCC has been asked to make a formal ruling on various aspects of the regulatory treatment of IP Telephony. In early 2004, the FCC issued a ruling that formally classifies certain PC-to-PC telephony applications as “information” services that are to remain unregulated.24 The Commission also issued a separate ruling that showed its willingness to subject phone-to-phone IP Telephony applications to certain targeted telephone regulations, in this case access charges.25 Most importantly, however, in early 2004, the FCC also initiated a broad rulemaking proceeding to examine the appropriate regulatory classification for the range of IP-enabled services, including IP Telephony. The difficulty posed in this policy inquiry is that IP Telephony, and other IP-based applications, are hybrid services that do not fit neatly into a regulatory classification scheme that requires services to be treated as either a “telecommunications” or an “information” service. The Commission acknowledges this regulatory dilemma. Although it believes that certain IP Telephony applications, such as phone-to-phone IP Telephony, may appear to be functionally equivalent to traditional telephony services, it hesitates to fully regulate them as such. The Commission has expressed its reluctance to apply telephony regulations to this application because IP networks are both technically and administratively different from the PSTN. 26 The FCC also believes “traditional economic regulation designed for legacy networks should not apply outside the context of the PSTN”27, and should not be imposed on IP Telephony. Rather than forcing new IP-based technology into old regulatory classifications, a variety of commentators are arguing that a more sophisticated regulatory framework must be developed to 24 See the U.S. Case Study for a more thorough discussion of this issue and the details of the Pulver.com ruling. 25 See the U.S. Case Study for a discussion of the FCC decision on AT&T and access charges. 26 IP NPRM at paragraph 4. 27 Telecommunications regulation of telephone providers was an effort to control the historic monopoly ownership of the PSTN. Since the market for IP-enabled services in the U.S. is not generally characterized by monopoly conditions, key policy makers within the FCC “doubt that there is a compelling justification” to impose traditional telephony regulations on providers of IP-based services. 27
  28. 28. 5/6/2010 12:51 a5/p5 address the trend towards convergence of telecommunications and computer services. The shape and content of the appropriate new framework is far from clear, however, and is the current subject of vigorous debate within the industry. 28 11.312 European Union – Are IP Telephony Communications “Real-Time”? The European Union developed a four-part test to determine whether an Internet voice communication qualifies as “voice telephony.”29 The criteria are: 1. Is the service the subject of a commercial offer, e.g., has the service been advertised? (If the service is offered free of charge, it cannot be telephony.) 2. Is the communications provided for the public? (Networks that are not offered for use by the general public, such as office LANs or private user groups, are not engaged in telephony.) 3. Does the communication connect service to and from public switched network termination points on the fixed telephone network? (If Internet access does not use the PSTN, for example, if leased circuits are used for transmission, then it is not telephony. In addition, there is no telephony, if the user can only call other Internet subscribers whose computers are connected via a modem and who are using similar software.) 4. Does the communication involve direct transport and switching of speech in “real time”30? The first three criteria generally mirror those examined by the FCC. However, the fourth criterion introduces a test for “real-time” transmissions. This criterion is important as it differentiates the categorization tests imposed in the U.S. and the E.U. 28 MCI’s Richard Whitt has developed a white paper which argues that policymakers can best deal with technological convergence by adopting a new legal framework that regulates along “horizontal network layers” rather than along vertical industry segments (i.e., broadcast, telephony, wireless, etc.). This is an interesting concept paper that is available on MCI’s website, at: _________. Also see the National Cable & Telecommunications Associations’ Policy Paper entitled Balancing Responsibilities and Rights: A Regulatory Model for Facilities-Based VoIP Competition, February 2004, available at: www.ncta.org. 29 See EU Directive 90/388/EEC. 30 Voice transmissions over the Internet are subject to delay due to the packetization, compression and transmission processes. PSTN voice quality usually does not exhibit delays of more than 150 milliseconds. Delays associated with IP Telephony often exceed this length of time, and therefore are not always considered to meet technical standards for “real- time” communication. Regulators that use time delay to distinguish between IP Telephony and traditional telephony usually use delays of 250 milliseconds as the boundary. ITU-T Recommendation G.114 states that delays of 0-115 milliseconds are acceptable for most user applications. Delays of 150-400 milliseconds will degrade some user applications. Delays that exceed 400 milliseconds are generally unacceptable. 28
  29. 29. 5/6/2010 12:51 a5/p5 No form of IP Telephony currently meets all four of the E.U. criteria. As a result, the EU does not currently regulate any forms of IP Telephony as voice telephony.31 This could change in the future as the technology, especially data transmission times, improve.32 11.313 ITU The ITU also has recommended an informal set of criteria to determine the functional equivalence of IP Telephony and PSTN voice services. This analysis is designed to determine which IP telephony services most closely resemble traditional PSTN voice service. The ITU’s recommended criteria reflect those used in the U.S. and the E.U., and are listed below:33 Is the service available for use by the public?  If not, this eliminates closed user group services, such as enterprise voice networks. Is voice the dominant or only communication service provided?  If not, this eliminates integrated voice/data, voice/video (real-time and messaging), and all fax services. Is the service priced for a fee (pre-paid or post paid)?  If not, this eliminates “free” PC-to-PC and PC-to-phone service. Is the PSTN used on the originating end, other than in the course of a dial-up Internet session?  If not, this eliminates calls originating on private networks with dedicated IP data lines. Is the originating PSTN gateway physically located outside the premises or equipment of the caller but within the same regulatory jurisdiction as the caller?  If not, this eliminates all PC-to-PC, PC-to-phone, and PC-to-fax services. Is an ordinary phone (or variant) used as the originating terminal device?  If not, this eliminates PC-to-PC and PC-to-phone services. Is the service “real-time” (i.e., transmitted without significant average delays (of example, more than 250 milliseconds), which makes conversation awkward?  If not, this eliminated medium to high delay services. Is conversational speech transmitted instantaneously (i.e., perceived to be natural by both callers)? 31 The EU does not, therefore, currently subject any forms of IP Telephony to universal service contributions. 32 Interestingly, in 2004, regulators in Jordan found that VoIP technologies were “real-time” because delay times had been reduced to levels consistent with services offered by circuit-switched voice operators. Regulators, however, prohibited competitive provision of most VoIP applications, finding that they encroached on the incumbent licensees exclusive right to provide voice services. See ____ at _. 33 See [ITU Bkgrd document] at 31. 29
  30. 30. 5/6/2010 12:51 a5/p5  If not, eliminates even slight delay services. If the answer to these questions is yes, then the ITU suggests that the service appears to be functionally equivalent to traditional PSTN voice service. 11.32 How are regulatory frameworks applied to IP Telephony services? Individual countries have adopted a wide variety of domestic regulatory frameworks for IP Telephony. These regulatory approaches generally fall into four categories, each of which is discussed below. 11.321 IP Telephony Is Permitted As previously discussed, many developed and industrialized countries, including the U.S. and Europe, have made regulatory distinctions between Internet-based applications, such as IP Telephony, and traditional telephony. IP Telephony currently is permitted without restriction and is not regulated as telephony. To date, these nations have avoided treating IP Telephony as a basic voice service and have instead allowed these applications to develop unfettered. In the U.S., this approach has created a vibrant and rapidly growing market for IP Telephony services. The reasons given to justify this liberal and non-regulatory approach include: • Encouraging emerging technologies; • Encouraging migration to IP-based networks; • Giving users more freedom of choice; • Benefiting consumers by reducing long distance prices; • Encouraging trade; and • Uncertainty regarding how to properly regulate this evolving technology. Although the U.S. is currently rethinking its regulatory framework for IP Telephony and other Internet- based services, the FCC has indicated that any federal regulations that are adopted will be “narrowly tailored.” 11.322 IP Telephony Is Prohibited or Restricted A fair number of countries have taken a restrictive approach to IP Telephony and opted to prohibit the provision of this Internet application. ITU data released in March of 2001, indicated that approximately 35 countries prohibited IP Telephony. The reason for the prohibition varies by country, but many commentators have observed that these restrictions often stem from short-term governmental concerns with incumbent revenues, and do not generally reflect independent efforts to fully evaluate the technology. These limitations also run counter to trends in industrialized countries that are seeking to develop forward-looking policies that accommodate the shifting technological paradigms in the communications industry. 30
  31. 31. 5/6/2010 12:51 a5/p5 11.3221 Regulatory Restrictions Often Seek to Preserve Monopoly Control of Voice Services Explicit prohibitions on IP Telephony occur primarily in countries where the fixed telephony system is still a state-owned monopoly. The prohibitions imposed by these countries generally seek to prevent government-owned telcos from losing revenues due to competition with the monopoly provider. Prohibitions also are frequently imposed in markets where the government has sold its interest in the national telco, but has granted a private company monopoly rights over certain voice services, for a limited period of time, to ensure a return on this private investment. In this instance, there is not always an explicit regulation prohibiting IP Telephony. Instead, the regulatory limitation results indirectly from pre-existing legislation that limits competition by restricting the provision of voice service to those with a license. Voice telephony is, in these cases, often defined broadly to include IP Telephony applications. In many countries, therefore only the incumbent carrier or carriers with exclusive licenses can provide such voice services.34 Not surprisingly, there also is a marked difference in the attitude of incumbent operators in open and closed markets. In emerging markets, where competition in basic telephony is either not allowed or is limited in scope, incumbents often attempt to block the rise of IP telephony.35 Incumbents in many countries have been reluctant to embrace or support the emergence of IP telephony or other Internet applications for fear that it will undercut their existing services. For the reasons described above, restrictions on IP Telephony appear frequently in countries where the interests of the government and the incumbent carrier are aligned.36 Commentators suggest, however, that consumer welfare is improved under a more liberal approach towards IP Telephony.37 11.3222 Prohibitions Also Seek to Preserve Revenues from International Settlements. 34 Regulators in Jordan have prohibited ISPs from providing VoIP service. It believes these services would encroach on the incumbent’s exclusive license to provide voice service. Regulators have interpreted this exclusivity clause broadly and use it to also prohibit ISPs from marketing voice services to users by selling software, prepaid cards and hardware with payment processing capabilities or functionality that would enable the use of VoIP on their data networks. Notably, the incumbent provider stated that it lost more than 7.5 million dinar during 2001 due to unauthorized VoIP activity. See TRC, Final VoIP Statement, Explanatory Text available at: http:// www.trc.gov.jo/static_Arabic/New%20Stuff/Final%20VoIP %Statement%20Final.doc (visited May 31, 2004 (“TRC Final VoIP Statement”). 35 For example, in Panama, the regulator blocked the deployment of VoIP at the request of the incumbent voice carrier. The restriction was widely viewed as an attempt to uphold an exclusivity contract that Panama signed with Cable & Wireless. The trade press also reported a similar regulatory battle in Guyana. VoIP and the Internet would provide a boost to economic development and consumer welfare in Guyana by allowing cheaper and easier communications between local and international residents. However, the incumbent operator reportedly worked to block an IADB project to expand Internet access in order to preserve a 40-year exclusivity contract that it signed with the government in 1991—before the Internet had been really developed. [cite]. 36 Independent decision-making is more likely in markets where the government has created an independent regulatory agency, and divested its ownership interest in communications service providers. 37 See IP Telephony Workshop at 4.1. The main consumer benefit offered by IP Telephony is that it is cheaper than traditional telephony. 31
  32. 32. 5/6/2010 12:51 a5/p5 Regulators also prohibit IP Telephony in an effort to protect revenues earned from international settlements. International settlement rates are part of a complex accounting system established to compensate carriers for terminating international telephone traffic. The system generally functions in this manner: [a]ccounting rates are the “price a U.S. facilities based carrier negotiates with a foreign carrier for handling one minute of international phone service. The settlement rate is usually half of the accounting rate - one half goes to each of the two carriers. [Payment of these rates is based on the fact that a nation’s international calling service carrier can collect the so-called termination costs associated with terminating a call on that nation’s PSTN] Each carrier tallies the net minutes of service that it originated for a certain period of time. If these amounts are equal, the carriers pay each other nothing. However, when one carrier originates more calls than the other, that carrier must make a settlement payment to the other, determined by multiplying the rate times the number of excess minutes of service.”38 Accounting rates in many developing countries far exceed cost. As a result, carriers in developed nations often reluctantly, and in their view unnecessarily, make large international settlement payments pursuant to this accounting regime. Since many industrialized nations are unhappy with this regime, several practices have developed to effectively bypass this system. IP Telephony is one such bypass technique. Since the settlement rate regime applies only to the PSTN, calls routed through IP networks avoid this regulatory system and the associated inflated fees. As many carriers have discovered, avoidance of these fees can create crucial cost savings in extremely competitive telephone markets. IP Telephony, therefore, provides a mechanism for carriers to conduct regulatory arbitrage. It allows carriers to deliver high-quality calls while avoiding the PSTN and the associated accounting rate system, thereby reducing the level of settlements due to partner countries. Regulators and carriers in some developing countries, therefore, have embraced IP Telephony as a valid mechanism to move international fees closer to cost. For these same reasons, developing countries with high international tariffs often seek to limit the use of IP Telephony to terminate voice traffic within their borders. Many of the calls routed over phone- to-phone IP Telephone services (via privately managed IP networks) are calls that would have otherwise been sent over the PSTN. As a result, incumbent carriers often view IP Telephony as a threat to their market share. This trend is especially worrisome to governments that maintain an ownership interest in the national carrier, often a monopoly, since a loss in market share would cause a direct reduction in government revenues. Many developing nations, therefore, believe they have a vested interest in blocking technologies, such as IP Telephony, that would undermine the current system of international settlements. For example, when regulators in Jordan recently considered the regulatory treatment of IP Telephony, one of the main issues under discussion and consideration was the effect the application would have on 38 Shaun P. Montana, An Approach to the International Regulatory Issues of IP Telephony, at 697, available at http://www.bromsun.com/pub/professional/IP_Telephony%20Article_SPM.PDF (“Montana”). 32
  33. 33. 5/6/2010 12:51 a5/p5 international settlement payments. Jordanian regulators observed, in fact, that international settlement payments constituted “the bulk of revenues for developing-world providers.”39 Clearly a potential revenue loss of this magnitude can create political pressures and incentives within some developing countries that are difficult to ignore. Commentators suggest, however, that these governments and PTOs should not view IP Telephony as the main threat against revenues of incumbent carriers. They note that countries with “more monopolistic telephone systems have maintained high accounting rates, while those with more competitive systems have not”40, and that this market and pricing structure will remain under constant pressure to reform – with or without IP Telephony. As the Jordanian regulators noted, revenues “are under threat from many bypass technologies and techniques.”41 IP Telephony is simply one of the newer techniques. Various international actors have sought to reform or replace the accounting rate system, eliminate price distortions and move carrier charges to reflect actual costs.42 For example, the World Trade Organization’s 1997 Agreement on Basic Telecommunications, the U.S. Federal Communications Commission and general market forces are all actively working to decrease international accounting rates. With or without IP Telephony, foreign carriers must recognize that international trends, including other forms of bypass, will eventually force them to change their current business models.43 IP Telephony is but one of these techniques. 11.323 Some Forms of IP Telephony Permitted It is important to note that the total number of countries that ban IP Telephony is decreasing.44 A variety of governments are seeking a middle road by imposing partial bans that allow some forms of IP Telephony. For example, regulators in Jordan recently held that voice services provided using VoIP technology were “the functional equivalent of voice service provided using circuit switched voice technology.” Therefore, Jordan Telecom, the incumbent carrier, was found to have the exclusive right to provide public switched voice using VoIP technologies. The regulator issued rules prohibiting any other commercial provider from using phone-to-phone VoIP technologies to provide voice service to the public until Jordan Telecom’s exclusivity period ends in 2005. The regulator also prohibited any other commercial provider from using VoIP technologies to terminate international calls on Jordan’s PSTN, including its mobile networks. However, under the new rules, individual private users are granted some limited rights to use IP Telephony. They are 39 [See Ministry of Information and Communications Technology Policy Consultation, Draft VoIP Guidelines, ___________ at 7.] 40 IP Telephony & Its Various Aspects at 3-4. 41 Id. 42 Id. 43 IP Telephony & Its Various Aspects at 3-4, available at radcal2.vsnl.net.in/rakesh/ipdraft.htm 44 According to the Global Internet Policy Initiative, between 1999 and 2001, eight countries that prohibited IP Telephony began to allow it within limits. [See www.internetpolicy.net___]. 33

×