Market Research India - VoIP Market in India 2009

VoIP Market ‐
VoIP Market India
August 2009

Executive Summary

 Legal VoIP service providers generated revenues worth INR 114.1 mn till March 2009
Market  ILD outgoing calls accounted for 5.5 bn minutes in 2009 from wireless phones alone
 Internet Telephony MoU account to less than 1/10th of the ILD outgoing calls

 The Department of Telecom (DoT) recently gave green signal to Internet telephony within the
country, but the guidelines are yet to be notified
Regulations in  An entry fee of INR 430 mn has been proposed by DoT for the Internet Service Providers (ISPs)
India wanting to offer VoIP based telephony services on a pan India basis
wanting to offer VoIP based telephony services on a pan‐India basis
 ISPs that obtain a license for VoIP based services within the country might be asked to share 9% of
their annual service revenues with the government

 Low‐cost call‐rates are the biggest driver of VoIP services
Factors
Factors  High speed & good connectivity Internet are a prerequisite
affecting  Increasing Internet subscriber base offers immense growth potential
growth  Low spending power of an average Indian make the initial infrastructure unaffordable
 Developing nature of the country promotes cross border businesses

 Since 2002, when DoT opened up the Indian market to Internet Telephony, 169 VoIP licences have
been issued; only 34 licence holders are reporting Internet Telephony Services
Competition  The under‐development of legal Internet Telephony services in India has led to unlicensed service
providers exploiting the large consumer base

VoIP MARKET – INDIA.PPT 2

•Introduction
•Regulations on VoIP in India
g
•Market Overview
gg
•Factors affecting growth
•Competition
Appendix
•Appendix


VoIP uses the Internet to transmit voice, which has its
advantages as well as disadvantages
Introduction Connectivity through the Internet Cloud
• Internet Telephony or VoIP (Voice‐over Internet
Protocol) is a term for the technologies that use the Computer IP Phone
Internet P t l' packet‐switched connections t
I t t Protocol's k t it h d ti to
exchange voice
• It uses the more efficient route of Internet to
transmit voice after breaking them into numerous
digital packets unlike Public Switched Telephone
Network (PSTN) which use a dedicated line
• This technology allows numerous users to send
information over the same line, providing a more
efficient utilization of the telecommunications Internet
infrastructure
• Due to its effective line capacity and use of the
Cloud
Internet, additional features like call conferencing
and roaming do not cost extra to the consumer Mobile Phone Fixed Phone
• Q lit of service (Q S) th
Quality f i (QoS) through V IP d
h VoIP depends d
primarily on the quality of Internet connection used
• Good bandwidth provides comparable quality but
slowing down of the connection might result in loss
of quality and call drops
• Power failures result in non‐functioning of VoIP


PCs, Mobile Phones, Fixed Phones and IP Phones can be used as
terminals to access VoIP services
Terminations allowed in
Classification – by terminals used India (for ISPs) currently
Domestic International

Net
Net Packets
connected

 
• Voice packets are transmitted
Instrument to Internet
Net
over the Internet
connected
Instrument Packets

PSTN signals • Voice packets travel to a gateway
Net

 
over the Internet
connected
Gateway • Converted into PSTN signals
Instrument to
Conventional • Transmitted by the local
Phone telephone infrastructure to the
Packets receiver’s telephone

PSTN signals PSTN signals • PSTN signals from the phone
g p
travel to the gateway via the local

 
Conventional telephone infrastructure
Phone to
Conventional
Gateway Gateway • Converted into packets which
Phone travel over the Internet
• Follow the reverse process to
Packets Internet Packets reach the receiver


Internet service providers, gateways and access service providers
are the major revenue generators from VoIP‐based services
Business Model
Net connected PC to Net connected PC
Internet Service
Internet Service
Provider

Net connected Consumer pays only for the Internet connection. No extra charge is incurred for the communication Net connected
PC PC

Net connected Instrument to Conventional Phone
Internet Service Access Service
Provider Provider*
Gateway
y

Net connected Consumer generally pays a monthly flat‐rate. Pulse‐rate plans also exist for services to various countries Conventional
Instrument Phone

Conventional Phone to Conventional Phone
Conventional Phone to Conventional Phone
Access Service Internet Service Access Service
Provider Provider Provider*
Gateway Gateway

Conventional Biggest challenger to PSTN services. Revenues are split among various parties as per the revenue model Conventional
Phone Phone
* Foreign Service Provider, in case of International Calls


Call‐rates in India can witness significant positive changes with
the usage of VoIP‐based services
Proposed Revenue Model for Phone‐Phone through VoIP‐based services
Local‐call for INR 0.1
Access Service
Access Service Internet Service
Internet Service Access Service
Access Service
Provider Provider Provider
Gateway Gateway
INR 0.0 INR 0.0 INR 0.0
Conventional Conventional
Phone Bandwidth cost: INR 0.1 Phone

STD call (NLD) for INR 0.5
Access Service Internet Service Access Service
Gateway
y Gateway
y
INR 0.3 INR 0.1 INR 0.0

ISD call (ILD) for INR 1.0
ISD call (ILD) for INR 1.0
Access Service Internet Service Foreign Service
Gateway Gateway
INR 0.3 INR 0.2 INR 0.4
Conventional
Conventional


•Introduction
g
•Market Overview
gg
•Competition
Appendix
•Appendix


VoIP services in India have gone through drastic regulatory
measures, directly impacting the future of the market
VoIP – History
1999

• DoT bans any form of Internet Telephony in India (only allowed within closed user group)

2002

• On TRAI’s recommendation DoT opened up the telecom sector to VoIP in a limited manner
On TRAI s recommendation, DoT opened up the telecom sector to VoIP in a limited manner

2005

• DoT permits unrestricted Internet Telephony to only access providers in India

2006
• DoT introduced unrestricted telephony to access providers and restricted approach for Internet Service Providers
• ISPs offering IP telephony
 asked to pay 6% of revenues as licence fee
 cannot provide termination in India nor offer carriage in India

2008
In August 2008, TRAI, in order to open up the Internet telephony market in India, proposed unrestricted VoIP‐based
g , , p p p y ,p p
services approach for the ISPs as well


Current proposal offers the much needed boost to the VoIP‐
based services in the country
Salient features of the recommendations
• Level Playing Field: Internet telephony may be permitted to Internet Service Providers (ISPs) with permission to provide Internet telephony
calls to PSTN and vice‐versa within country and necessary amendments made in the license provisions
• Interconnection: National Long Distance (NLD) Operators shall be permitted to connect to ISPs through public Internet to facilitate
termination of Internet telephony calls on PSTN and vice‐versa; including among ISPs, both within telecom circle as well as across the
telecom circles
• NLD shall make suitable commercial and technical arrangements with access providers (PSTN/PLMN) for unrestricted Internet telephony
• Numbering: TEC shall identify distinct number resources for Internet Telephony subscribers
•EEmergency calling number: I
lli b Internet telephony service providers may b encouraged to f ili
l h i id be d facilitate access to emergency number calls;
b ll
however they may not be mandated to provide such services at present
• Lawful Interception and Monitoring: Each Service provider intended to provide Internet telephony service within country shall install
Lawful Interception (LI) equipment fulfilling all the requirements stipulated by the security agencies
• Quality of Service: QoS on Internet telephony may be left to market forces at present

DoT’s Current Ruling
• The Department of Telecom (DoT) has recently given the green light
to Internet telephony within the country, but the guidelines are yet
Current Scenario Proposed Scenario
to be notified
• Licence Fee: An entry fee of INR 430 million has been proposed by Unrestricted
Service Regulation Limited Services
Services
DoT for the ISPs wanting to offer VoIP based telephony services on a
pan‐India basis. Regional services would incur a lesser fee Licence Fees max of INR 2 mn 430 mn
• Sharing of Annual Revenues: ISPs that obtain a licence for VoIP % of AGR 6% 9%
based
b d services within the country might b asked to share 9% of
i i hi h i h be k d h f
their annual service revenues with the government


•Introduction
g
•Market Overview
gg
•Competition
Appendix
•Appendix


VoIP market in India is yet to take‐off, although numbers
indicate immense growth potential
Overview ILD Outgoing Calls MoU (Wireless only)*
• Current call‐rates in India promote intra‐nation In mn
calling but act as a barrier to International Long 6,000 5,534
+68%
Distance (ILD) calling
Di t lli
• Still, ILD outgoing calls accounted for 5.5 bn minutes 4,000 3,226
in 2009 from wireless phones alone, witnessing a 1,962
2,000
68% growth between 2007‐2009
• Inspite of the fact that VoIP offers low cost ILD 0
service, Minutes of Usage (MoU) account to less than 2007 2008 2009
1/10th of the ILD outgoing calls VoIP ‐ Minutes of Usage (MoU)
• These figures indicate the impact of government
regulation on the VoIP services market in India but
g In mn Quarterly
y In mn
also exemplify its future prospects once the market is 150 Yearly 600
opened up 129 133 133 132
121
• At the end of March 2009, ISPs reporting the 112 115 112
450
services, generated INR 114.1 mn worth revenues 102
from I t
f Internet T l h
t Telephony 100 89
78 78 478 509
• The reported MoU have 300
 Grown 21% year‐on‐year between 2007‐2009 347
 Increased considerably ever since the recommendations by
50 150
TRAI were published in August, 2008
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
’06 ’06 ’06 ’07 ’07 ’07 ’07 ’08 ’08 ’08 ’08 ’09
* Approximate figures


•Introduction
g
•Market Overview
gg
•Competition
Appendix
•Appendix


Factors affecting growth

Low call‐rates
• Low‐cost call‐rates are the biggest driver
of VoIP services
• PSTN ll t
PSTN call‐rates expected to be slashed by
t dt b l h db
atleast 50% with advent of unrestricted
VoIP services

End user segment ‐ E
E d Enterprise
i Internet penetration
I i
• Target group ranges from large MNCs to • High speed & good connectivity Internet
Factors
SMEs are a prerequisite
• Developing nature of the country affecting • Increasing Internet subscriber base offers
promotes cross border businesses
b d b i growth immense growth potential
i h i l

End user segment ‐
End user segment Consumer
• India has more than 400 mn telecom
subscribers
• Low spending power of an average Indian
make the initial infrastructure
make the initial infrastructure
unaffordable


Effective infrastructure usage in VoIP cuts down call‐rates
drastically
Call‐Rates Comparison Regular v/s VoIP Call‐Rates Comparison ‐ ILD
•Low‐cost call‐rates are the biggest driver of
Wireline Wireless VoIP
Internet Telephony in any economy INR/min.
(BSNL) (Vodafone) (MTNL)
•In the current Indian scenario, International USA 7.2 6.4 1
callers are the biggest gainers from VoIP‐based
Middle East 9.6 11 6
services
Singapore 9.6 6.4 1
•Call‐rates from Internet Telephony to USA and
Call rates
Europe 9.6 6.4 1
Europe are priced equivalent to a local call
(through PSTN) in India
•Current VoIP providers in India offer service VoIP Tariff plans ‐ by providers
packages which allow unlimited calls to
locations like USA & Canada, UK, with a flat World Phone Tariff*
monthly fee Unlimited calls to USA & Canada INR 1995
•Opening up of the Indian markets to Unlimited calls to UK, USA & Canada INR 2995
unrestricted t l h
t i t d telephony would d i d
ld drive down call
ll Swiftfone Tariff*
rates to minimal, promoting stiff competition
6000 minutes to UK, US & Canada INR 4000
among service providers
500 minutes to UK, US & Canada INR 600

* One‐time costs not included


Although Internet penetration is increasing rapidly, the current
numbers reflect the lack of broadband infrastructure
Internet – a prerequisite Internet subscribers
• High speed & good connectivity Internet is a Dial‐up Subscribers
prerequisite for VoIP, which becomes a major barrier Broadband Subscribers
for the Indian markets where Internet penetration is Broadband to Dial‐up Ratio
at just 4.3% In mn +5%
14 12.9 13.5 1.0
• The high installation charges for a Broadband 11.7 12.2
10.4 11.1
connection deters the common Indian’s interest of 9.3 9.2 9.6 0.85
0.8
personally owning the service 0.6
06
7
0.4
• But, the increasing Internet subscriber numbers, 6.2
0.34
3.9 4.4 4.9 5.5 0.2
which have risen from 11.1 mn in March 2008 to 13.5 2.3 2.4 2.7 3.1
0 0.0
mn in March 2009, offer healthy future prospects Mar Jun Sep Dec Mar Jun Sep Dec Mar
• The growth rate of 5% Q‐o‐Q in Internet subscriber ’07 ’07 ’07 ’07 ’08 ’08 ’08 ’08 ’09
base has been dominated by the increase in Number of PCOs in India
Broadband Internet subscribers rather than Dial‐up
In mn
users, which is favorable for VoIP
7
• Cyber Café‐cum‐PCOs could act as the bridge for VoIP 6.2 6.2 6.3 6.0 6.2
5.9
services to penetrate rural markets, as a single 6 5.6 5.6 5.8
5.1 5.3
broadband connection can connect multiple phones 5 4.5
4.2
offering low‐cost calls 4
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
’06 ’06 ’06 ’06 ’07 ’07 ’07 ’07 ’08 ’08 ’08 ’08 ’09


The consumer segment offers quantity, but the revenues would
be hard to come by from this segment
End User Segment ‐ Consumer Statistics ‐ Telecom subscribers
• India has 429.72 mn telecom subscribers, out of
Total Subscribers 429.72 mn
which 91% are wireless subscribers
Wireline Subscribers
Wireline Subscribers 391.76 mn
391 76 mn
• Although, this indicates immense potential for
Wireless Subscribers 37.96 mn
services like Mobile‐VoIP, the requirement of a
smartphone, a data connection and good Urban Subscribers 72%
connectivity to access these services act as a huge Rural Subscribers 28%
barrier
• Phones supporting high‐end services like 3G are
costly and not so easily affordable by the average
Indian
28% Rural
• Numbers indicate that 52% of the wireless
Wireline
subscribers possess mobile phones which are capable 9%
of accessing only basic services
• But, the introduction of low‐cost VoIP services, 3G
and WiMAX (to be auctioned by end of year 2009‐10)
would drive smartphone usage bringing about 72% Urban
91%
commendable changes in the Indian telecom industry
Wireless


Enterprises offer the biggest growth prospects for VoIP services
in India
End User Segment ‐ Enterprise Indian Export – Year‐wise
• The target users in the enterprise segment range INR bn
Revenues from Export
from large MNCs operating in the country to the 8000
Small Medium E t
S ll & M di Enterprises (SME )
i (SMEs) 6402
+22%
• The primary reasons which drive VoIP usage in the 6000 5718
enterprise segment are a need to have an integrated 4564
3753
phone system across multiple locations, scalability, 4000
2934
operational cost savings and to converge voice and
data networks 2000
• India has been a major hub for outsourced work;
0
developing nature of the country has attracted large 2004 2005 2006 2007 2008
MNCs to setup their offices in the country
Revenues – IT Industry
Revenues – IT Industry
• The domestic market on the other hand, is primarily
SME driven, who operate region‐wise or on a pan‐ USD bn
India basis 80 Exports
72
Domestic 64
• Captive networks or close user groups (CUGs) in
60
India, have b
I di h been allowed t use V IP services ever
ll d to VoIP i 48
37 47
since 1999, promoting acceptability of the service 40 41
28 32
across enterprises 22 24
• These factors coupled with a healthy GDP growth 20 18
13 23 24
rate might fuel sustainable increase in VoIP usage 8 10 13 16
0
across enterprises 2004 2005 2006 2007 2008 2009


•Introduction
g
•Market Overview
gg
•Competition
Appendix
•Appendix


VoIP market in India is currently fragmented, but is expected to
be organized once the ISPs are allowed unrestricted services
Competition Year‐wise addition of VoIP Licenses
• Since 2002, when DoT opened up the Indian market to 200
Additions 169
Internet Telephony, 169* VoIP licences have been issued 1
Total
• Th V IP li
The VoIP licences saw a d ti i
drastic increase i 2008 i th wake of
in in the k f 150 43
TRAI’s recommendations for unrestricted Internet Telephony 14
10 0
• Only 34 licence holders are reporting Internet Telephony 100 12
22 168
Services (see appendix), as of March 2009
• At present all telecom operators (offering wireline and
p p ( g 50
67
wireless services) have the licence to provide “unrestricted”
Internet Telephony in India 0
• But, even after lapse of approximately 3 years, these services 2002 2003 2004 2005 2006 2007 2008 2009*
have not been started by the operators Market Share of major ISPs
•P
Presently, BSNL h ld th l
tl holds the largest market share i t
t k t h in terms of
f
Internet Telephony is BSNL
customer base for Internet related services in India
provided by ISPs holding 54% MTNL
• MTNL, Data Infosys and YOU Telecom are the large market a cumulative of more
share holders who report Internet Telephony services to TRAI than three‐fourth of the Bharti
market share
• Under‐development of legal Internet Telephony services in
p g p y Reliance
India has led to unlicensed service providers exploiting the Sify
1%
large consumer base 4% Tata
Giants like Bharti 3%
• The grey market for Internet Telephony in India has evolved and Reliance have 2% 3% 16% Hathway
considerably leading to a DoT’s notice to all ISPs, to block the not yet forayed
3% Data Infosys
into providing 7% 8%
websites of around 39 foreign firms offering unlicensed VoIP‐based services You Telecom
Internet Telephony services in India
Others
* As of 31st January, 2009


Services offered by few Internet Telephony licence holders in
India
Pulse Trak Online
City Online Data Infosys Opto Network Swiftmail YOU Telecom World Phone
Telesystems Net
Plans for

Residential n/a       
SME n/a       
Corporate   n/a     
Call Center   n/a     
Monthly Flat‐Rate Plans to
INR 5100 for INR 2499 for
USA
   INR 2500
11000 min 3000 min
 INR 1995

Canada    INR 2500
11000 min 3000 min  INR 1995

INR 5100 for
INR 2999 for
UK
   INR 3000
11000 min 3000 min
 INR 2995

Australia    INR 3500    INR 3495
Asia Pacific        
Middle East        
Services Provided
Installation n/a n/a n/a n/a n/a n/a n/a INR 1000

Soft Phone        
IP Phone        
Adapter        


•Introduction
g
•Market Overview
gg
•Competition
Appendix
•Appendix


Appendix 1: Internet Service Providers reporting VoIP Services

• Apna Telelink Ltd. • Opto Network Pvt. Ltd.
• Asianet Satellite Communications Ltd. • Narmada Cyberzone Pvt Ltd
• Blazenet Ltd • Pulse Telesystems Pvt. Ltd.
• Broadband Pacenet (I) Pvt. Ltd.
() • Sify Ltd.
• City Online Services Ltd. • Southern Online Bio Technologies Ltd.
• CJ Online Pvt. Ltd. • Swiftmail Communications Ltd
• Data Infosys Ltd. • Swastik Netvision Telecom P. Ltd.
• DelDSL Internet Pvt. Ltd. • Trak Online Net India Pvt.Ltd
• Digital2Virtual ISP Pvt. Ltd. • Trikon Electronics Pvt. Ltd.
• Dishnet Wireless Ltd. • Tata Communications Ltd (Videsh Sanchar Nigam Ltd.)
• Karuturi Telecom Pvt Ltd(Estel Communications Pvt Ltd )
Karuturi Telecom Pvt Ltd(Estel Communications Pvt. Ltd.) • Tata Communications Internet Services Ltd
Tata Communications Internet Services Ltd
• Mahanagar Telephone Nigam Ltd. • YOU Telecom India Pvt. Ltd.
• Manipal Ecommerce Ltd. • World Phone Internet Services Pvt Ltd
• My Own Infotech Pvt. Ltd. • Cordia L T Communications Private Ltd
• Mylai Karpagambal Information Systems (P) Ltd. • IOL Netcom Ltd
• NetMagic Solutions (P) Ltd. • Tata Teleservices (Maharashtra) limited
• Nettlinx Ltd. • IKF Technologies Ltd


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