Inevitable reality

With calls for the introduction of Voice-over-IP services ringing out across the region, telecoms firms are taking their first steps towards developing services for enterprises.

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By  Piers Ford Published  October 13, 2008

With calls for the introduction of Voice-over-IP services ringing out across the region, telecoms firms are taking their first steps towards developing services for enterprises.

Whichever way you cut the statistics in the global VoIP market, there is no avoiding the extent to which the long-held vision of voice as just another data stream on the Internet has become a reality.

According to analyst iLocus, for example, service providers around the world carried some 1.18 trillion minutes of VoIP traffic in 2007. And industry watchers at Point Topic estimate that as a value-added service, VoIP constitutes more than half an international market currently worth almost $26 billion.

While consumer growth is certainly a major driver behind that volume, the enterprise remains the main focus of convergence technology vendors as they grapple for supremacy in the corporate backbone.

Last year, more than 11 million desktop IP phones were sold, along with 14.8 million enterprise gateway ports. And yet there is still a sense in the Middle East that this is a market frustratingly poised on the verge of lift-off.

While regulators in countries including Qatar, Bahrain and the UAE are taking a more liberal stand and allowing VoIP to emerge as a competitive proposition, elsewhere it remains boxed into a corner as voice revenue preservation remains a priority for nervous incumbent telecoms operators.

As a result, the market landscape is confusing. Regional enterprises are excited by the ability of VoIP to streamline their communications but reluctant, for various economic and cultural reasons, to arrive at a coherent strategy for managing and addressing these reservations.

"Liberalisation and deregulation continue at a rapid pace across the Middle East," says Hugh Roberts, senior strategist at Patni Telecoms Consulting.

"However, during this process the status of competition remains in flux, and there are widely different examples of the relationships between governmental policy, the independence of regulation, the independence (and privatisation) of the incumbent operator and the range of services opened up to new telecoms operators in each country.

"The situation is made more complex given the increasing tendency for senior Middle East-based network operators and investment organisations to embrace cross-border ownership as the markets open up, and the perceived need for regional governments to control the pace of change and the flow of information to and from external sources," he adds.

Roberts points that like most ‘new' technology, VoIP has the potential to be disruptive, and upset the financial balance of the incumbent asset base.

"As networks are opened up, the potential for third parties to extract revenues increases greatly, through legal, ‘grey' and illegal offerings.

In many markets outside the region, VoIP is being adopted within more complex service bundles as a means to controlling the cost of supporting it in the face of dwindling margins. The unproven expectation is that revenues from new content and data services will more than compensate for the shortfall," he explains.

"Unfortunately, for many Middle East-based governments, short-term revenue enhancements elsewhere are coming from third-party advertising and from content streams such as gambling and adult services, all of which is ‘culturally sensitive'," adds Roberts.

Understandably, while the VoIP landscape remains fragmented across the region, incumbents continue to be cautious about embracing new business models that would allow them to compete with the new breed of service providers in a deregulated market. And yet they hold the key to the rapid infrastructure development that will, eventually, enable the market to lift off.

VoIP vendor perspective

VoIP technology vendors are working closely with operators to find ways of making VoIP a service that's as controllable as regular voice services and can be translated into revenue streams on a similar scale.

Christian Bartosch, head of services for the Middle East and Africa at Nokia Siemens Networks, says that to some degree there is also still a cultural fear that VoIP could unleash an unmonitored communication channel.

Inevitably, young ISPs look better placed to move in on a wave of Google-style business models and a more instinctive feel for generating revenues from value-added service bundles, while offering essential services like voice effectively free of charge.

Incumbent operators will have to make a considerable imaginative leap to create new models but, like most industry watchers, Bartosch feels that the momentum of the market will eventually prove irresistible.

"There is still a range of progress, with somewhere like Bahrain now reasonably deregulated and the UAE easing some restrictions although still concerned about the uncontrolled flow of information, and other countries remaining very restrictive," he says.

"We're working with operators on the technology side to find a way through the issues of control and develop solutions to the challenges that are preventing the widespread use of VoIP.

"We're also working with enterprise customers on the business challenges of VoIP adoption."

As Bartosch explains, VoIP is already a mainstream technology in much of the world. And with five billion more people expected to gain access to broadband technology by 2015 - most of them in developing markets like the Middle East - it is likely to be an unstoppable force.

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