IP Telephony The Empire Strikes Back?

The telco-OTT partnerships could be the beginning of a new development that could potentially challenge and disrupt the ISP-driven models

The IP/Internet telephony landscape is more complicated than it appears to be. It is also a segment that can be potentially much disruptive to telcos’ traditional voice service businesses, with a number of over the top (OTT) voice service providers vying for a piece of the hugely lucrative voice pie.

The ISP Players

The genesis and rise of this segment in India is easily traced back to the VoIP offerings that internet service providers (ISPs) came up with in the early 2000s. Due to a lack of regulatory clarity then, it led to a bitter controversy that ensued and lasted between the telcos and the ISPs. It was settled after a ruling that an operator with an ISP license could not terminate VoIP calls over PSTN networks. This also led to players like Sify taking a unified service license later to comply with the modified regulatory guidelines and requirements.

According to Telecom Regulatory Authority of India (TRAI), as many as 33 ISPs were offering Internet telephony in India, as of December 2013 (see table). TRAI said the total outgoing minutes of usage recorded for Internet telephony stood at 319 million in 2013, as compared with 260 million minutes in 2012.

The players listed by TRAI included Tata Teleservices, Sify, Tata Communications and BSNL, among others.

The OTT Players

The key OTT providers include the more established players like Skype, Viber and Nimbuzz but also the likes of Fring and Tango. Further, messaging apps providers like WhatsApp, WeChat and Line are also in the fray through the voice messaging and chat features. BlackBerry also joined in later with its BBM Voice launch while WhatsApp is expected to launch its calling feature in 2014.

Towards the end of 2013, Viber made a significant inroad into India by entering into a tie-up with leading telco Bharti Airtel for its ‘Viber Out’ offering. Viber is offering significantly lower rates than Skype for calling to mobile and landline numbers, with packs starting Rs 70 for postpaid Airtel users. This potentially gives Viber an important edge over Skype, which accepts payout only in select currencies including USD, Euro and HK dollars. The service, however, is costlier than a similar service offered through a Spectranet-Nimbuzz tie-up.

What Next?

The primary demand for the service, whether offered by telcos or ISPs or through OTTs, is in the international calling segment. This is obvious, given that the international call rates are still considerably high, which leads to a considerable volume of the communication happening on app-to-app (like Skype-toSkype) platform using Wi-Fi or over the PCs. OTT and telco based IP/Internet calling offers the added flexibility of using the mobile access devices to call international numbers at significantly lower costs than the standard carrier rates.

It is a win-win for the operator as well as the users, for a good part of their communication needs, especially when less-than-toll quality is an acceptable solution to the user. For the telcos too, such offerings are a good way to get back some of the traffic they would have otherwise lost to app-to-app calls. For the pure-play ISPs, it makes the greatest business sense, as it helps them add an attractive revenue stream to their existing offerings.

Going forward, as the 3G and 4G subscriber base and usage grows significantly, the telco-OTT segment is expected to see a faster growth, especially if telcos decide to give it a greater thrust. The flexibility of operator billing would be a determining factor, apart from pricing, in which OTT app is able to cover more ground in this segment faster than the competition. This also has the potential for telcos to win back some of the lost ground to ISPs more than a decade ago.