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Canino, Jories P. 1.

VoIP has transformed the telecommunications industry and broadband internet access


Over the last decade, driven by growth in broadband networks and reductions in costs, voice over Internet Protocol (VoIP) services have proved to be a disruptive technology that has transformed the telecommunication industry. VoIP has gained widespread acceptance among service providers, consumers and businesses, offering a cheaper way to get in touch. Instead of using conventional landlines, people can make phone calls via the Internet. And operators themselves are saving money by using IPbased networks. Convergence and VoIP services are redefining markets and blurring boundaries between networks and content. They are eliminating barriers to entering markets (as competitors no longer need to own a network) and bringing facilities-based providers into direct competition with service-based competitors, redefining the role of regulators in the process. The size of the market Estimating the global number of VoIP subscribers is difficult, for several reasons. The various definitions in use mean that countries report different numbers. Also, it is hard to estimate the number of computerto- computer or pure VoIP users, including those who employ such services as Skype, or who use embedded VoIP in online games. This means that estimates of the total number of VoIP subscribers are almost always presented as a range; for example, the number of residential VoIP customers in the United States is projected to reach anywhere between 12 and 44 million by 2010. As regards the worldwide number of VoIP subscribers, Infonetics Research, based in the United States, estimates that there were some 80 million by the end of 2008. Point Topic, of the United Kingdom, suggests there were 92.2 million in the first quarter of 2009, while IDATE, of France, projected 175 million VoIP subscribers by 2009, equivalent to 10 per cent of total mainline subscribers, and more than 200 million by 2012 (see Figure 1). According to Point Topic, Western Europe accounted for the largest tranche (38 per cent) of all VoIP subscribers in March 2009 (see Figure 2). But this share is declining as VoIP gains popularity elsewhere. North America and the Asia-Pacific region are the next largest markets. South-East Asia, Latin America and Eastern Europe all have relatively small market shares, but these are growing fast. TeleGeography Research, of the United States, projected that international VoIP traffic reached 94.8 billion minutes in 2008, accounting for around one quarter of the worlds international traffic in that year (see Figure 3). Meanwhile, the popularity of VoIP as a business also continues to grow. AMI Research, of the United States, projects that global revenues from IP privatebranch

exchanges (IP PBX), VoIP gateways, soft switches, VoIP application services, IP phones and adapters will reach USD 9.7 billion in 2010.

Figure 1 Estimated number of VoIP subscribers worldwide, 2005 2011 Total and as a proportion of mainlines

Figure 2 Distribution of VoIP subscribers worldwide (March 2009) Regional distribution of VoIP subscribers, first quarter of 2009

Source: IDATE
A core element of business

Source: IDATE

VoIP is changing the telecommunication industry by opening up new markets and bringing in different players. Broadband, cable modem and wireless providers are now competing directly with each other. And VoIP boosts service-based competition by enabling operators to participate without wholesale access to infrastructure. The perception of VoIP is of new market entrants competing with traditional telecommunication providers. However, the reality is that most incumbents now use wholesale VoIP to carry international traffic over backbone networks. Wik Consult, a research firm based in Germany, has observed that large and small operators, incumbents and competitors, are converting their networks to next-generation networks (NGN) and are betting their businesses on a successful migration to VoIP. VoIP is now central to the business strategy of many service providers in both developed and developing countries. Incumbents in Bangladesh, Fiji, Ghana, Tunisia and Sudan, for instance, all use VoIP for the transmission of their international traffic. Potentially, the costs of carrying telecommunication traffic can be slashed. The cost of transmitting calls over IP could be as little as a quarter of that for sending calls through the public switched telephone network (PSTN), and maintenance expenses might be cut by 50 to 60 per cent because VoIP calls use only 10 per cent of the bandwidth required for a PSTN call. There are other forces behind the move to VoIP, too. Some operators point to the high costs of maintaining legacy infrastructure and the need to upgrade to intelligent networks based on the latest technologies. Other operators are trying to

respond to competitors (domestic and foreign) and position themselves in a truly global communications industry. As operators integrate voice and data networks, IP based networks may be seen as the foundation for business applications. And consumer VoIP runs over a range of devices, offering flexibility in the first step towards seamless communications. On the other hand, incumbents may be reluctant to introduce VoIP because they already offer voice services over PSTN and do not wish to cannibalize their higher-margin international service offerings. For some operators, IP-based transmission is the first incarnation of a nextgeneration network. It could be that cable television firms are at an advantage compared with PSTN operators in this field, because it is easier to adapt cable networks for VoIP (which is transmitted in a similar way to video) than it is for fixed-line operators to add high-speed data, video and Internet services.

Figure 3 Growth in international VoIP and time division multiplexing (TDM) traffic

Figure 4 Worldwide regulation of VoIP (20042009)

Source: IDATE
Note VoIP traffic includes all crossborder voice calls over IP networks, but terminated on PSTN. Computer-tocomputer and private network traffic are excluded. Figures for 2008 are projections. Regulatory challenges

Source: IDATE
Note Closed means countries where wholesale VoIP is permitted, but retail VoIP is banned, as well as those countries where only the incumbent is licensed to provide VoIP.

VoIP service providers, such as Vonage, Fastweb or Skype, often have quite different business models and service portfolios. Defining VoIP is one basic step every country can take in determining the regulatory environment it wishes to see. And if VoIP is to spread, it needs broadband networks, deployed within the level playing field of a technologically neutral and competitive environment.

Most countries view broadband Internet access as the future of modern communications. By 2008, according to ITU data, broadband Internet services were commercially available in 182 countries. Other regulatory measures that encourage the growth of VoIP include ensuring number portability between PSTN and VoIP users, and rules to prevent the blocking of VoIP traffic. By 2004, VoIP had been explicitly legalized in 46 countries (see Figure 4), mainly in Europe, North America and Asia. In another 57 countries, VoIP was also broadly permitted, while 80 countries prohibited VoIP services, mainly in Africa and some Arab States. In contrast, today 92 countries have explicitly legalized VoIP and it is tolerated in just over two-thirds of the worlds nations, while the number of countries banning VoIP has fallen to 49, or around a quarter of all countries for which data exist. This growth raises a host of issues for regulatory frameworks designed mainly for the PSTN world. The main questions are whether VoIP should be regulated as an alternative to PSTN telephony, and whether the regulation of VoIP services should differ when they come from PSTN incumbents or from VoIP operators (including Internet service providers). Many developing countries still retain outdated telecommunication legislation from an era long before VoIP. Legacy obligations that worked well for the PSTN network (and more recently, updated regulations for mobile networks) can coexist with growth in VoIP, but it is difficult to apply them directly to VoIP services. For example, access to emergency service numbers is more difficult to achieve with VoIP, and some providers argue that requiring them to offer such services is, effectively, a barrier to entering the market. When the European Commission first examined VoIP regulation in 2004, it advocated a light regulatory touch. European regulators are now moving on to consider geographic numbering, nomadic services and caller location, as well as interconnection issues and lawful interception of calls. In the United States, VoIP has gradually become more regulated, especially in the context of security concerns (whether and how VoIP traffic can be monitored) and the provision of emergency calls. Regulators in the Commonwealth of Independent States take various views. For example, Georgia and Kazakhstan have generally allowed VoIP operators to flourish, while Turkmenistan applies a strict licensing regime. The bottom line Although VoIP can save money, incumbents may also be concerned about its impact on revenues. In several countries, greater use of VoIP has been widely associated with declining revenues for international calls, alongside the growth of such options as e-mail and the international short message service (SMS). For example, Ghana Telecoms revenues from international calls dropped from USD 42 million in 1998 to USD 14.4 million in 2002. FINTEL, the sole provider of telecommunication services to and from Fiji, saw its revenues fall from USD 41.27 million in 2000 to USD 24.91 million in 2004, as VoIP eroded its international business.

The effect of VoIP on an incumbents revenues depends on the structure of its tr affic. The CEO of Etisalat, a telecommunication provider based in the United Arab Emirates, commented in January 2008 that, overall, the company did not expect a huge net impact from any future roll-out of VoIP, given the scale of its business in sixteen markets. And growth in the use of VoIP does not always mean that a countrys incumbent operator will lose revenue. This is because the opportunities and volumes that the new technology may open up can compensate for losses, especially if countries actively promote the expansion of VoIP. For example, in Bahrain, over the two-and-ahalf years to July 2008, VoIP captured 60 per cent of international call minutes and about 40 per cent of revenues, taking these away from Bahrain Telecommunications Company (Batelco). But the overall market in Bahrain is growing and there is still money to be made. PSTN incumbents can also consider enhancing their revenues through offering value-added services, including IP television. Source:

2. Global Positioning System and Business Intelligence has changed the farming industry Ten years ago, a grain farmer walked the fields and stooped to run his fingers through the topsoil for a measure of its moisture and depth. He'd slide a notebook from his shirt pocket to pencil in the date he seeded the fields and how much fertilizer he sprayed. When he looked to the skies for the gray, cauliflower-shaped clouds that bring heavy rain, or the thin wisps that float over sunny days, he knew he could do only so much to coax corn planted in May to sprout enough sweet ears by September to make the sweaty, bent-back work profitable. Robertson, who is in his mid-30s, used to work that way. But for the past 10 years, he's worked among the growing ranks of "precision farmers" who supplement their farm sense with software and statistical analysis to help decide what to plant, how to grow it and when to sell it. The most advanced precision farmers plow and plant with auto-steer tractors equipped with global positioning systems that guide the machines over fields by themselves. They fertilize with sprayers loaded with geographic information systems maps and computerized instructions to vary the amounts of nitrogen applied to different spots on a field, down to four-inch patches. And, as they harvest their crops, weight and force sensors attached to 15-ton combines record the volume of corn or soybeans pulled from each plant at two-second intervals, associating the data with specific locations on field maps. Then, like the best Wall Street risk managers, precision farmers upload these data points, via Zip drives or wireless networks, into statistical analysis software on Microsoft Windows systems in their offices. There, the data is combined with business

information, such as the price of seed, cost of fertilizer, weather records and current market pricing. Analysis tools from SAS Institute, SPSS and others match costs and income to specific physical locations in the field to let farmers calculate crop profitability, row by row. Meanwhile, the U.S. Department of Agriculture and various universities offer data and analysis tools for free, for monitoring crop prices, predicting weather and comparing infestation treatments. And farmers buy and sell grain over the Internet, like day traders, at sites such as by Farms Technology in Overland Park, Kan. "Farming is the oldest known human activity. You'd think that after 10,000 years there'd be nothing left to improve. Not true," says Michael Swanson, agricultural economist at Wells Fargo, a bank whose $10 billion in annual agricultural loans make it the biggest lender to farms in the U.S. Information technology has made farming an analytical activity, and though some farmers shy away because of costs, many embrace the science. A close look shows that the technology produces solid returns and is drastically changing the business of agriculture. Education levels among farmers have increased since the early 1990s, the USDA says. In 1991, 35.8% of U.S. farmers had attended college. By 2003, the latest year for which data is available, it was 45.2%. Ninety-two percent of young farmers, age 18 to 35, use computers and 89% consider the Internet a farming tool, according to the American Farm Bureau Federation, a lobbying group in Washington, D.C. A reliable count of farms that do precision farming doesn't exist. But Purdue University estimates that 20% of U.S. grain, for example, is planted using tractors with auto-guidance systems and custom-fertilized with computerized sprayers. And half of all U.S. grain is harvested by combines with yield monitors. The effects of technology and business management techniques are evident to Swanson. In 1950, he notes, American farmers planted 83 million acres of corn, which produced 38 bushels per acre. In 2004, 81 million acres of corn were planted, with each acre yielding 160 bushels. Think about it: 2.5% fewer acres produced more than four times as much corn. If today's farmers didn't use the technology they do, Swanson estimates, they would have had to plant 320 million acres of corn last year to meet demand: "We'd be planting parking lots and backyards." Agriculture: Business Intelligence 10 Years Ago Today Seed, fertilizer Costs tracked in computer and machinery spreadsheets and business costs recorded analysis software. on paper. Tractors, Heavy machinery guided by global combines and positioning systems, with drivers sprayers driven in the cab monitoring the activity by farm workers. and, usually, turning the steering 5 years from now Wireless networks in rural areas enable use of handheld computers for tracking and analysis. Driverless, robotic machinery with onboard computers preprogrammed with 3D visualization maps of the fields

do all plowing, planting and harvesting. Planting Experience and "farm sense" Computer analysis and farmer decisions made supplemented with statistical experience further refined to on farmer analysis of historical trend data. include variables such as nearexperience and real-time data on international instinct. market demand and pricing. Source: 3. Digital Supply chain has changed the entertainment industry's distribution system Source When Warner Bros. Entertainment established an umbrella division, the Warner Home Entertainment Group, last October for all business units involved in the digital delivery of entertainment to consumers, it was fast-forwarding the most important technical transaction the studio has made in decades. "The great promise of digital technology is that consumers will be able to choose how they want to consume content," Kevin Tsujihara, president of the new division, said in making the announcement. "We're entering an exciting time in the entertainment business when the consumer, empowered by new technologies, has an active role in the process instead of being a passive participant." Warner Bros. Entertainment, a subsidiary of the Time Warner conglomerate, is in the process of transforming itself into a digital end-to-end business. This change has been largely driven by a fanning-out of how consumers want to consume content, says Charles L. "Chuck" Dages, senior vice president of emerging technology at Warner. "As we watched the consumer go digital, the production systems within Warner have followed suit," he says. "At the front end we're seeing the increasing use of digital cameras by filmmakers, and at other end we're seeing digital distribution through broadband, DVD and HDTV. Then there are pockets in between that have digitized early because of the production advantages of using digital effects and editing digitally." You'd be hard pressed to find another industry that has a more outdated application of I.T. technology," says Thomas Kuehle, vice president of digital vault services, digital photography and entertainment at Hewlett-Packard. "They've spent an enormous amount of money in applying technology to create movies and are very advanced in special effects, rendering, animation, etc. They spend the rest of their money on making content, but when it comes to production-oriented technology that helps create movies and, more importantly, house them, capture them, refurbish them and create the end-to-end workflows for movies or episodic TVit's a disaster." In part, the studios have failed to embrace technology in the past because of the decentralized structure of the business. "The film industry is almost still a cottage or boutique industry," says Dennis R. Short, professor of computer graphics at Purdue

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University and former director of the Purdue International Center for Entertainment Technology. "The companies are formed for production and then are dissolved, so it's not like the game industry or broadcast television, which have an ongoing presence. The film industry revolves around very short-term production and is very, very expensive. The studios also tend to lease a lot of their equipment, so the whole structure is built around that type of an action." It was also based on a business model held over from the days of Gone with the Wind. Notes Short: "The movie industry traditionally made its money off the initial release [of a film]. Distribution was almost a trickle-down [process] with the product going from major markets to smaller markets, so if you were out somewhere in Nebraska, it might take several years before the film got there. With the advent of DVDs, the Internet, broadband and cheaper storage, the industry began moving cautiously toward change, but in Hollywood old habits die hard. "When we showed up a few years ago and started to survey whether our technology could be applied there, all we saw was the classic thing where you ran these giant spaghetti charts," says HP's Kuehle. "Everything was siloed and tapebased, so every process was on tape and films were still being sent out via Fed Ex or courier. It was almost comical." With the exception of DVD,production-oriented technology that helps create, capture, refurbish and distribute filmsin effect, serve as a digital supply chainwere at best severely limited. Not to worry. The industry was stable. There was a comfortable window30 to 40 weeksbetween the time a film was released in theaters and the time a studio had to stamp and distribute the DVD version. The industry was only dealing with a few channels, mostly pay-per-view and video-on-demand (VOD). Given these limited requirements, the processes on the back end worked just fine. That's changed abruptly, according to Kuehle. "Now you suddenly have three different types of DVDs [DVD, HD DVD and Blu-ray Disc, or BD], and you have to concern yourself with Apple iTunes and other mobile devices plus more aggressive demand from VOD," he says. "This puts pressure on the studios to repurpose their content very close to the initial release date, which is completely breaking the existing systems down. They just don't scale." Which is why studios are now rushing to catch up. In recent months, a number of film companies have undertaken projects to digitize their operations. As an example, DreamWorks is now tapping into HP's enormous server farm for additional information-technology resources. HP is supplying technical workstations, servers, printers, networking and Linux technologies as DreamWorks develops its newest animation pipeline. Sony Pictures Entertainment is partnering with HP and Ascent Media Group, which provides solutions for the creation, management and distribution of content to entertainment and media companies, to digitize its library of movies. The Walt Disney Co., Cisco Systems and Intel recently announced they have invested in MovieBeam, a newly formed digital

entertainment venture that enables subscribers to access videos on demand wirelessly. Warner Bros., however, has arguably made the earliest and most far-reaching commitment to new technology. Compared with its competitors, the company has been quick to innovate, creating user-generated Web sites such as AcmeCity, which featured Warner characters, as far back as 1999, and pioneering the development of DVD. Currently it is partnering with HP, which provides a digital media platform, to transform the studio's entire film production and distribution process to an all-digital, file-based system and create an architecture that make the transaction possible. To grasp the scale of the undertaking, consider that last year the company produced in excess of 2,500 different DVDs; delivered more than 180 hours of video programming weekly over its global digital media exchange; produced and/or distributed 50-plus television series; is in the process of digitizing more than 6,000 feature films in its vaults for DVD release; and released numerous films, three of which earned more than $200 milliona studio and industry record for a single year. Warner's efforts to digitize its business jibed with HP's introduction of its digital media platform, a standards-based framework of software, hardware and services that functions like an operating system for rich digital media and relies on serviceoriented architecture. HP describes it as a platform on which users can create largescale distributed applications linking the systems used to work with digital media. "Warner's digital end-to-end vision very much mapped with some of the slides we made for our digital media platform," Kuehle says. "That's how we got together." With the HP EVA 8000 storage system as its centerpiece, Warner began digitizing and storing its films last year. "Typically, we scan a film to digital using 4K horizontal resolution, store and manipulate it, and then create the digital master," says Dages, who explains that "4K" refers to the number of picture elements in the horizontal scan of the image. At the same time, Warner may create what it calls an "Fproxy" of the same images at a lower resolution. The studio uses the Fproxy elements for editing and review of all the images created from live action sequences. Once the scenes of the film are edited, the high-resolution images are played from storage in sequence, then printed out to film. In the end, the studio has a complete film version plus a digital version for digital cinema release. Both versions, as well as ancillary information regarding rights, royalties and the likeor metadatamake up what the studios calls an "E-master" and are stored on file servers at Warner Bros. The E-master files are enormous, as much as 40 terabytes. In the repository on the lot, Warner installed 150 terabytes of active storage from HP and another 150 terabytes of backup storage, but even that was insufficient. "When we were putting this system together, we tried to leverage existing techniques for database management to handle the amount of data we were creating," Dages says, "but we found that the backbones that interconnected the storage itself were stretched beyond their capabilities. As a result, throughput dropped dramatically, and basically machines were crashing because rather than

having files of moderate size that were being moved around the system, we had these enormous gigabyte and terabyte files that were being moved from one process to the next." "These files are so big that technologies like DAM [digital asset management] aren't really effective even though you try to bend and morph them to apply to media," Kuehle adds. "You're taking about 200-gigabyte files that need to be moved through a workflow, quickly moved in and out of a repository, and quickly found and retrieved. It's just new territory." Working with HP, Warner accomplished a modification of its workflow analysis and increased parametric monitoring of the critical system parameters, coupled with high-performance storage systems. "These permit us to manipulate the files at the speeds we want," Dages says. At the same time, Warner and HP were able to deal with the different forms of distribution, which have varying requirements, by working with standard image files to create a high-resolution digital master of a film. As an example, video-on-demand requires bandwidth of 3 to 4 megabits per second, while high-definition broadcasts transmit at 10 to 20 megabits per second. The upshot is that about seven months ago when Warner started this process, Dages says, it was only able to process one or two pictures at a time. "Even at that rate, the network and the storage would clog up," he points out. "Today, we have the capability of taking upward of 10 simultaneous motion picture projects and working on them in this environment. The creation of these digital masters obviously is important in that we can make a transformation to whatever channel we need to get to the consumer." Now that the digital repository initiative is well underway, Warner is accelerating its effort to digitize the 6,000 or so movies, many of them made in the late 1930s, in its film library, using digital technology to restore the original quality of the Technicolor photography. In August, it also announced an online Web initiative that will enable fans of various cartoon shows such as Looney Tunes to download new interactive content, related games and flash animations of Bugs Bunny, Daffy Duck and the like. "We found that consumers wanted to do things with our contentcut up Looney Tunes, for examplecreate content of their own and post it on their Web sites for others to see," Dages explains. Were it not for rights issues, Warner could offer the same kind of interactive offering for its live action movies Entertainment: Digital Media 5 Years Ago Today 5 years from now Products on 35mm Products on film, video, Products on Blu-ray Disc (BD), HD film and video. DVD, etc. Delivery media DVD, wireless VOD, etc. Delivery Delivery media include broadband, media include iTunes, end-to-end include Fed Ex and Internet, video-on-demand digital supply chains, and SOAcourier. (VOD) and pay-per-view. based digital media platforms and storage systems. Source: