VoIP: On the runway
VoIP in India represents a great opportunity. If minor changes are made in regulations, and other issues like interoperability addressed, the market could take off in a big way.
Talking over the telephone, one does not bother how the call is being routed or over what kind of a network one’s voice traveling. What concerns the caller is the clarity of voice and the absence of delays and jitter. Once these issues are addressed, the underlying technology really does not matter to the common user, be it VoIP or standard PSTN. All he is concerned about is that the message should be conveyed.
In this context, VoIP as a technology has over the years managed to gain a certain level of acceptance, if not a ubiquitous presence. It all started with organizations establishing closed user group (CUG) voice links between their head office and branch offices. The concept has served companies well, particularly large enterprises and those organizations in industry verticals such as banking, logistics, and ITeS.
Earlier the technology was plagued by problems galore namely network latency, packet loss, jitters, and other issues that marred its image as a promising information communication technology. Gradually these have been taken care off, and stage has been set for widespread adoption of VoIP/ IP telephony in India.
According to Frost and Sullivan, the market for Internet telephony has experienced exceptional growth over the last two years, and the sales of IP PBX systems witnessed a growth of 65% in 2006-07. The technology is projected to account for 65% of the entire enterprise voice market by 2008. IP Telephony revenues touched $209 million in 2007.
According to Gartner, the acceptance and adoption of VoIP in India is increasing, and the market is showing signs of maturity. The growth in the Indian market though is relatively slow when compared to that in other APAC markets such as Australia; the overall outlook, however, is quite positive.
|  "The recent announcement further opening up IP telephony means that IP telephones and equipment will be able to freely interconnect with normal TDM lines, be it for calling within CUG or outside, irrespective of whether the called party is outside India or inside India"
- Biswajit Patnaik
Voice Business Development Manager, Polycom India |  "VoIP is picking up in India and it is expected to be the second largest market in the APAC after China. Till a few years ago, IP PBX systems were deployed only at large enterprises. But today, SMEs are also adopting IP PBX systems"
- Minhaj Zia
National Sales Manager,
Cisco, India & SAARC
|
|  "Regulations should be restricted only to the extent of guidance and should not be used as a restrictive mechanism. The restriction through regulations limits the speed of growth in India"
- Desi Valli
COO,
Net4 India |  "Since large enterprises have the buying potential, they are showing more interest in VoIP. SMBs in contrast are not that aggressive"
- Parminder Kaur Saini
Senior Research Analyst, ICT Practice,
Frost & Sullivan, South Asia & Middle East |
From the vendors’ perspective
The market for VoIP in India, and the way in which it is evolving, represents a mixed bag of opportunities and challenges for vendors. There also emerge mixed reactions as far as the satisfaction with the growth of this market is concerned. While some are quite happy with the development of this market and are quite optimistic, others believe that corrective measures are required if this market segment is to flourish.
“The market is growing at a phenomenal rate globally and the Indian market will not be left far behind. VoIP is picking up in India and it is expected to be the second largest market in the APAC after China. Till a few years ago, IP PBX systems were deployed only at large enterprises. But today, more and more small & medium enterprises are also adopting IP PBX systems,” said Minhaj Zia, National Sales Manager, Cisco, India & SAARC.
“The Indian IP telephony enterprise equipment market is finally emerging from the shackles of government-enforced restrictions. The recent announcement further opening up IP telephony means that IP telephones and equipment will be able to freely interconnect with normal TDM lines, be it for calling within CUG or outside, irrespective of whether the called party is outside India or within the country,” said Biswajit Patnaik, Voice Business Development Manager, Polycom India.
V Praveen Kumar, Head – Enterprise Voice & Teleconferencing, Avaya GlobalConnect said, “India is embracing IP Telephony rapidly due to the inherent benefits of this technology. Almost all organizations are moving towards IP based intelligent communications—especially large multi-location organizations. It has a huge potential for growth in India.”
In contrast, Desi Valli, COO, Net4 India, presented a completely different point of view. He said, “We are not satisfied with the growth. It is unfortunately restricted to limited usage in India. Growth of a business of this kind should be controlled by the market acceptance and not by regulations. The regulations should be restricted only to the extent of guidance and should not be used as a restrictive mechanism. The restriction through regulations limits the speed of growth in India.”
“The Internet Telephony market in India is in its infancy, and we are not satisfied with the growth. The growth is directly linked with broadband. As broadband is not growing at the pace projected, all applications, which run on broadband including Internet Telephony, are suffering. Compared to over 60 million broadband subscribers in China, India has only 3 million,” said Rajiv Kumar, COO, World Phone Internet Services Pvt. Ltd.
Sources in BSNL said that this market has been growing in a haphazard manner and that growth is unsatisfactory. Due to initial hiccups with the service, people are skeptical about its adoption. They added that the telecom license regime has been dominated by the traditional voice service providers who are also the last mile owners, and that the license restrictions have not let the VoIP service grow freely as per its potential.
Opportunities and Challenges
Opportunities for VoIP in the Indian context are tremendous. For a country that simply loves talking (something that is evident from the growth in the mobile phone market), the adoption of VoIP could skyrocket and it may bring the same benefits, as did mobile communication, namely ease of use, cost benefits and flexibility. Besides, with the Internet being used for multiple purposes, this technology can also be used for sending voice and video. This could bring down the cost per service drastically.
Additionally, IP based solutions are likely to enable enterprises to deploy other services such as audio, Web and video conferencing. Some also believe that VoIP might stimulate network development and significantly expand universal service coverage. “VoIP presents a huge opportunity to Indian business. VoIP is not about cost considerations today. Rather it allows you to integrate advanced applications, which adds value to the business process,” said Sanish KB, Research Analyst, Gartner.
Finally, with businesses operating in a globalized environment, the need for establishing a communication link with each other assumes prime importance. It becomes all the more important to establish this link over the Internet, when the Internet has emerged as the lodestone of business today.
That said, despite all these advantages, VoIP faces certain challenges that impede its growth. A few of these are, costly IP phones, low levels of awareness, regulatory restrictions, low penetration of broadband in India, and quality of service etc. “Security is another obstacle. Viruses can affect VoIP servers since most of them run on common operating systems and operate on data networks. Hence, VoIP networks inherit all security problems encountered in data networks like hacking, spoofing etc.,” said Patnaik.
“Interoperability is another issue that needs to be resolved. Not all phones, soft phones, gateways and call managers are interoperable as they support some proprietary variant of a standard protocol. This limits enterprises from free mix and match of components,” said Zia.
In addition, added BSNL sources, VoIP as a service has a hidden cost, i.e., the cost of broadband/Internet service itself. It is not only the monthly rental, even the amount of download/upload during a VoIP call is also charged by the ISP.
Reasons for restricted growth
There are three different aspects to VoIP in India. Firstly, it has largely been evaded by SMBs and remained restricted to large enterprises, courtesy costly IP phones. Secondly, it has been restricted to closed user groups only. Thirdly, even though VoIP is considerably cheaper than the traditional telephone service, it has remained attractive only to those segments of market, which spend on ILD calls on a regular basis.
“Since large enterprises have the buying potential, they are showing more interest in VoIP. SMBs in contrast are not that aggressive. Presently, four verticals, ITeS, BFSI, Telecom and the government sector are employing VoIP and account for 70-80% of this market in India. The government sector is investing a lot in VoIP. Other verticals like education, healthcare, hospitality, manufacturing are comparatively slow,” said Parminder Kaur Saini, Senior Research Analyst, ICT Practice, Frost & Sullivan, South Asia & Middle East.
In this context, it is important to look at the licensing policy. VoIP as a service is provided under the Internet Telephony Service Provider (ITSP). Under the ITSP license, calls can be made from one IP Phone to another and to PSTN / mobile phones outside India only. In contrast, a user can receive a call on his IP phone only from another IP phone but not from a PSTN / mobile phone. This means that a user cannot have an IP phone number similar to a PSTN / mobile number. The IP phones can make calls only within their own network in a closed loop.
Sources say that these license conditions are based on the protection of market segmentation of PSTN /mobile / Internet, and that the government is getting a huge revenue share out of voice services. If cheaper options like VoIP take over this market the revenues share will also drop.
According to Sanish another reason for restricted growth is, “It is the lifecycle for products in India which is longer when compared to other countries. For instance, a product that may be used for five years abroad may be used for eight years in India. This is not allowing us to accept new technology.”
“Due to its usage restriction that limits it to be used for PC to PC or PC to phone outside India, it is difficult for any user to use the same only for restrictive services as the TCO is high, if it is used only for restrictive services,” added Valli.
What the future holds
VoIP has indeed come a long way from just being a PC to PC calling phenomenon. The call rates have been coming down over the last few years to keep it as an attractive option in comparison to PSTN. The spread now depends on the availability of broadband, inexpensive end terminals, and international long distance carrier options. Now, with the approval of logical partitioning of PSTN and VoIP closed user group, VoIP would get some much-needed impetus.
“We see good growth for VoIP in 2-3 years time. Factors like increase adoption of unified communication applications, availability of required bandwidth and increased awareness levels will drive this market,” opined Saini.
According to BSNL sources, the success of VoIP now depends on the rollout by the last mile owners of telecom. These service providers considered VoIP, for a long time, as a service which would eat into their own voice market. Over a period of 3-4 years a sizable chunk of the customers have shifted to ILD calling through Internet. The situation has now forced the service providers to rollout VoIP services in a cautious manner. So, now the growth of VoIP depends on the growth of broadband.
It is important for large-scale penetration of VoIP in India that the tag of computer calling is removed from its name and it is marketed as a convenient way of making calls, contrary to the common perception that it is a cumbersome way of making calls through a computer.
