VoIP Market ‐ VoIP Market India

August 2009

Executive Summary
 Legal VoIP service providers generated revenues worth INR 114.1 mn till March 2009  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  An entry fee of INR 430 mn has been proposed by DoT for the Internet Service Providers (ISPs)  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  High speed & good connectivity Internet are a prerequisite  Increasing Internet subscriber base offers immense growth potential  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  The under‐development of legal Internet Telephony services in India has led to unlicensed service  providers exploiting the large consumer base

Market

Regulations in  India

Factors  Factors affecting  growth

Competition

VoIP MARKET – INDIA.PPT

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

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VoIP uses the Internet to transmit voice, which has its  advantages as well as disadvantages 
Introduction
• Internet Telephony or VoIP (Voice‐over Internet Protocol) is a term for the technologies that use the 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 infrastructure • Due to its effective line capacity and use of the Internet, additional features like call conferencing and roaming do not cost extra to the consumer • 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

Connectivity through the Internet Cloud 
Computer IP Phone

Internet  Cloud
Mobile Phone Fixed Phone

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PCs, Mobile Phones, Fixed Phones and IP Phones can be used as  terminals to access VoIP services
Classification – by terminals used
Net  Net connected  Instrument to  Net  connected  Instrument

Terminations allowed in  India (for ISPs) currently
Domestic International

Packets

Internet
Packets

• Voice packets are transmitted  over the Internet

  

  
5

Net  connected  Instrument to  Conventional  Phone

PSTN signals

Gateway
Packets PSTN signals PSTN signals

• Voice packets travel to a gateway over the Internet • Converted into PSTN signals • Transmitted by the local telephone infrastructure to the receiver’s telephone

Conventional  Phone to  Conventional  Phone

Gateway
Packets

Gateway Internet
Packets

• PSTN signals from the phone g p travel to the gateway via the local telephone infrastructure • Converted into packets which travel over the Internet • Follow the reverse process to reach the receiver

VoIP MARKET – INDIA.PPT

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  PC

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

Net connected  PC

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

Net connected  Instrument

Consumer generally pays a monthly flat‐rate. Pulse‐rate plans also exist for services to various countries

Conventional  Phone

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

Conventional  Phone

Biggest challenger to PSTN services. Revenues are split among various parties as per the revenue model

Conventional  Phone 6

* Foreign Service Provider, in case of International Calls VoIP MARKET – INDIA.PPT

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 Provider INR 0.0 Conventional  Phone Gateway Internet Service  Internet Service Provider INR 0.0 Bandwidth cost: INR 0.1 Gateway Access Service  Access Service Provider INR 0.0 Conventional  Phone

STD call (NLD) for INR 0.5
Access Service  Provider INR 0.3 Conventional  Phone Gateway y Internet Service  Provider INR 0.1 Bandwidth cost: INR 0.1 Gateway y Access Service  Provider INR 0.0 Conventional  Phone

ISD call (ILD) for INR 1.0 ISD call (ILD) for INR 1.0
Access Service  Provider INR 0.3 Conventional  Conventional Phone Gateway Internet Service  Provider INR 0.2 Bandwidth cost: INR 0.1 Gateway Foreign Service  Provider INR 0.4 Conventional  Conventional Phone

VoIP MARKET – INDIA.PPT

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

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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

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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 •E Emergency 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 to be notified • Licence Fee: An entry fee of INR 430 million has been proposed by DoT for the ISPs wanting to offer VoIP based telephony services on a pan‐India basis. Regional services would incur a lesser fee • Sharing of Annual Revenues: ISPs that obtain a licence for VoIP 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 Service Regulation Licence Fees % of AGR Current Scenario Limited Services max of INR 2 mn 6% Proposed Scenario Unrestricted  Services 430 mn 9%

VoIP MARKET – INDIA.PPT

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

VoIP MARKET – INDIA.PPT

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VoIP market in India is yet to take‐off, although numbers  indicate immense growth potential
Overview
• Current call‐rates in India promote intra‐nation calling but act as a barrier to International Long Distance (ILD) calling Di t lli • Still, ILD outgoing calls accounted for 5.5 bn minutes in 2009 from wireless phones alone, witnessing a 68% growth between 2007‐2009 • Inspite of the fact that VoIP offers low cost ILD service, Minutes of Usage (MoU) account to less than 1/10th of the ILD outgoing calls • These figures indicate the impact of government g regulation on the VoIP services market in India but also exemplify its future prospects once the market is opened up • At the end of March 2009, ISPs reporting the services, generated INR 114.1 mn worth revenues from I t f Internet T l h t Telephony • The reported MoU have
 Grown 21% year‐on‐year between 2007‐2009  Increased considerably ever since the recommendations by TRAI were published in August, 2008

ILD Outgoing Calls MoU (Wireless only)*
In mn
6,000 4,000 2,000 0 1,962

+68%
3,226

5,534

2007

2008

2009

VoIP ‐ Minutes of Usage (MoU)
In mn
150

Quarterly y Yearly
129

In mn
133 133 132 121 600

112
102 100 78 78 89

115 112 509

450

478 347

300

50

150

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 VoIP MARKET – INDIA.PPT

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

VoIP MARKET – INDIA.PPT

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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
• Target group ranges from large MNCs to  SMEs • Developing nature of the country  promotes cross border businesses b d b i

Internet penetration I i
Factors  affecting  growth
• High speed & good connectivity Internet  are a prerequisite • Increasing Internet subscriber base offers  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
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Effective infrastructure usage in VoIP cuts down call‐rates  drastically
Call‐Rates Comparison Regular v/s VoIP
•Low‐cost call‐rates are the biggest driver of Internet Telephony in any economy •In the current Indian scenario, International callers are the biggest gainers from VoIP‐based services •Call‐rates from Internet Telephony to USA and Call rates Europe are priced equivalent to a local call (through PSTN) in India •Current VoIP providers in India offer service packages which allow unlimited calls to locations like USA & Canada, UK, with a flat monthly fee •Opening up of the Indian markets to unrestricted t l h t i t d telephony would d i d ld drive down call ll rates to minimal, promoting stiff competition among service providers

Call‐Rates Comparison ‐ ILD
INR/min.
USA Middle East Singapore Europe

Wireline  (BSNL)
7.2 9.6 9.6 9.6

Wireless (Vodafone)
6.4 11 6.4 6.4

VoIP (MTNL)
1 6 1 1

VoIP Tariff plans ‐ by providers
World Phone
Unlimited calls to USA & Canada Unlimited calls to UK, USA & Canada

Tariff*
INR 1995 INR 2995

Swiftfone
6000 minutes to UK, US & Canada 500 minutes to UK, US & Canada

Tariff*
INR 4000 INR 600

* One‐time costs not included 15

VoIP MARKET – INDIA.PPT

Although Internet penetration is increasing rapidly, the current  numbers reflect the lack of broadband infrastructure
Internet – a prerequisite
• High speed & good connectivity Internet is a prerequisite for VoIP, which becomes a major barrier for the Indian markets where Internet penetration is at just 4.3% • The high installation charges for a Broadband connection deters the common Indian’s interest of personally owning the service • But, the increasing Internet subscriber numbers, which have risen from 11.1 mn in March 2008 to 13.5 mn in March 2009, offer healthy future prospects • The growth rate of 5% Q‐o‐Q in Internet subscriber base has been dominated by the increase in Broadband Internet subscribers rather than Dial‐up users, which is favorable for VoIP • Cyber Café‐cum‐PCOs could act as the bridge for VoIP services to penetrate rural markets, as a single broadband connection can connect multiple phones offering low‐cost calls

Internet subscribers
Dial‐up Subscribers Broadband Subscribers Broadband to Dial‐up Ratio In mn +5% 12.9 13.5 14 11.7 12.2 10.4 11.1 9.3 9.2 9.6
0.85

1.0 0.8 0.6 06 0.4 0.2 0.0

7
0.34

0

2.3

2.4

2.7

3.1

3.9

4.4

4.9

5.5

6.2

Mar ’07

Jun ’07

Sep ’07

Dec ’07

Mar ’08

Jun ’08

Sep ’08

Dec ’08

Mar ’09

Number of PCOs in India
In mn
7 6 5 4 4.2 4.5 5.1 5.3 5.9 5.6 5.6 5.8 6.2 6.2 6.3 6.0 6.2

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
VoIP MARKET – INDIA.PPT

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The consumer segment offers quantity, but the revenues would  be hard to come by from this segment
End User Segment ‐ Consumer
• India has 429.72 mn telecom subscribers, out of which 91% are wireless subscribers • Although, this indicates immense potential for services like Mobile‐VoIP, the requirement of a smartphone, a data connection and good connectivity to access these services act as a huge barrier • Phones supporting high‐end services like 3G are costly and not so easily affordable by the average Indian • Numbers indicate that 52% of the wireless subscribers possess mobile phones which are capable 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 commendable changes in the Indian telecom industry
28% Rural Wireline
9%

Statistics ‐ Telecom subscribers
Total Subscribers  Wireline Subscribers Wireline Subscribers Wireless Subscribers Urban Subscribers Rural Subscribers 429.72 mn 391.76 mn 391 76 mn 37.96 mn 72% 28%

91% Wireless

72% Urban

VoIP MARKET – INDIA.PPT

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Enterprises offer the biggest growth prospects for VoIP services  in India
End User Segment ‐ Enterprise
• The target users in the enterprise segment range from large MNCs operating in the country to the Small Medium E t S ll & M di Enterprises (SME ) i (SMEs) • The primary reasons which drive VoIP usage in the enterprise segment are a need to have an integrated phone system across multiple locations, scalability, operational cost savings and to converge voice and data networks • India has been a major hub for outsourced work; developing nature of the country has attracted large MNCs to setup their offices in the country • The domestic market on the other hand, is primarily SME driven, who operate region‐wise or on a pan‐ India basis • Captive networks or close user groups (CUGs) in India, have b I di h been allowed t use V IP services ever ll d to VoIP i since 1999, promoting acceptability of the service across enterprises • These factors coupled with a healthy GDP growth rate might fuel sustainable increase in VoIP usage across enterprises

Indian Export – Year‐wise 
INR bn
8000 6000 4000 2000 0 3753 2934

Revenues from Export +22%
4564 5718 6402

2004

2005

2006

2007

2008

Revenues – IT Industry Revenues – IT Industry
USD bn
80 60 40

Exports Domestic 48 37 22 28 18
10

64 41 32
16 23

72

47

20 0

24
13

13 8 2004

24

2005

2006

2007

2008

2009

VoIP MARKET – INDIA.PPT

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

VoIP MARKET – INDIA.PPT

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VoIP market in India is currently fragmented, but is expected to  be organized once the ISPs are allowed unrestricted services
Competition
• Since 2002, when DoT opened up the Indian market to Internet Telephony, 169* VoIP licences have been issued • 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 TRAI’s recommendations for unrestricted Internet Telephony • Only 34 licence holders are reporting Internet Telephony Services (see appendix), as of March 2009 p p ( g • At present all telecom operators (offering wireline and wireless services) have the licence to provide “unrestricted” Internet Telephony in India • But, even after lapse of approximately 3 years, these services have not been started by the operators •P Presently, BSNL h ld th l tl holds the largest market share i t t k t h in terms of f customer base for Internet related services in India • MTNL, Data Infosys and YOU Telecom are the large market share holders who report Internet Telephony services to TRAI • Under‐development of legal Internet Telephony services in p g p y India has led to unlicensed service providers exploiting the large consumer base • The grey market for Internet Telephony in India has evolved considerably leading to a DoT’s notice to all ISPs, to block the websites of around 39 foreign firms offering unlicensed Internet Telephony services in India
* As of 31st January, 2009 VoIP MARKET – INDIA.PPT

Year‐wise addition of VoIP Licenses
200 150 100

Additions Total 10 0 14 43 12

169 1

22
50 0

168

67 2002 2003 2004 2005 2006 2007 2008 2009*

Market Share of major ISPs
Internet Telephony is  provided by ISPs holding  a cumulative of more  than three‐fourth of the  market share

BSNL 54% MTNL Bharti Reliance 1% 4% 3% 2% 3% 3% 7% Sify Tata
16%

Giants like Bharti  and Reliance have  not yet forayed  into providing  VoIP‐based services

Hathway Data Infosys You Telecom Others 20

8%

Services offered by few Internet Telephony licence holders in  India
City Online Plans for Residential SME Corporate Call Center n/a n/a Data Infosys Opto Network Pulse  Telesystems Swiftmail Trak Online  Net YOU Telecom World Phone

         
n/a

 
n/a n/a

   

   
INR 5100 for  11000 min INR 5100 for  11000 min INR 5100 for  INR 5100 for 11000 min

   
INR 2499 for  3000 min INR 2499 for  3000 min INR 2999 for  INR 2999 for 3000 min

         
n/a

   

       
n/a

Monthly Flat‐Rate Plans to USA Canada UK Australia Asia Pacific Middle East Services Provided Installation Soft Phone IP Phone Adapter n/a n/a n/a n/a INR 1000

     

INR 2500 INR 2500 INR 3000 INR 3500

INR 1995 INR 1995 INR 2995 INR 3495

  

  

 

 

  

  

  

  

  

  

  

  

VoIP MARKET – INDIA.PPT

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

VoIP MARKET – INDIA.PPT

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Appendix 1: Internet Service Providers reporting VoIP Services
• Apna Telelink Ltd. • Asianet Satellite Communications Ltd. • Blazenet Ltd • Broadband Pacenet (I) Pvt. Ltd. () • City Online Services Ltd. • CJ Online Pvt. Ltd. • Data Infosys Ltd. • DelDSL Internet Pvt. Ltd. • Digital2Virtual ISP Pvt. Ltd. • Dishnet Wireless Ltd. • Karuturi Telecom Pvt Ltd(Estel Communications Pvt Ltd ) Karuturi Telecom Pvt Ltd(Estel Communications Pvt. Ltd.) • Mahanagar Telephone Nigam Ltd. • Manipal Ecommerce Ltd. • My Own Infotech Pvt. Ltd. • Mylai Karpagambal Information Systems (P) Ltd. • NetMagic Solutions (P) Ltd. • Nettlinx Ltd. • Opto Network Pvt. Ltd. • Narmada Cyberzone Pvt Ltd • Pulse Telesystems Pvt. Ltd. • Sify Ltd. • Southern Online Bio Technologies Ltd. • Swiftmail Communications Ltd • Swastik Netvision Telecom P. Ltd. • Trak Online Net India Pvt.Ltd • Trikon Electronics Pvt. Ltd. • Tata Communications Ltd (Videsh Sanchar Nigam Ltd.) • Tata Communications Internet Services Ltd Tata Communications Internet Services Ltd • YOU Telecom India Pvt. Ltd. • World Phone Internet Services Pvt Ltd • Cordia L T Communications Private Ltd • IOL Netcom Ltd • Tata Teleservices (Maharashtra) limited • IKF Technologies Ltd

VoIP MARKET – INDIA.PPT

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