IP TELEPHONY TO CARRY ALMOST HALF OF ALL INT'L TRAFFIC BY 2003
Thursday, 6th August 1998
Tarifica has produced the first ever forecasts of IP traffic volumes based on both
accounting rate and bypass models, which suggest that as much as 43% of international
fixed and mobile traffic will be IP telephony by 2003, with as many as 236 million users.
In a report just launched, Towards an IP Universe - Evaluating the Global Impact of IP
Telephony, Tarifica's Internet Consultancy Practice has analysed the cause and effect of
global adoption of Internet telephony. The report also presents the vision of IP, and
delivers forecasts to support what it will mean in real terms - users, minutes and
international market share. A companion report, Towards an IP Universe in Japan, is the
first ever study of IP in Japan based on the most extensive survey of industry players and
government bodies.
The report finds an increasingly populated service provision market, with an array of new
market entrants including Internet Telephony Service Providers, Systems Integrators,
Internet Service Providers and Mobile Operators offering IP telephony.
In a survey of European Telcos, included in the report, few were found to be committed to
delivering IP services, with the notable exception of Deutsche Telekom and Nordic
country operators, who are leaders on the route towards an IP Universe.
"Telcos who fail to enter IP, particularly given the advent of IP wholesaling, will place
themselves at enormous disadvantage and lose market share and revenue opportunities,"
comments Margrit Sessions, Managing Director of Phillips Tarifica.
Although quality and interoperability issues persist today, Tarifica believes that most of
the current technical challenges will be largely overcome during the next five years by
which time hybrid IP/PSTN networks will co-exist.
"IP-based services will radically change Telco customer and revenue models over the
next five years", says Margarita Areteos, Tarifica's Consultant and lead researcher for
the report.
"What many imagine as a slow transition to an IP Universe will actually take place in a
relatively short timescale, during which time the competitive impact will completely alter
the current landscape".
Among the key findings of the report are:
IP Telephony is not about cheap phone calls. In the short to medium term, cheap
calling and price arbitrage represents the major proposition of IP telephony. It
offers a lower cost entry point for new competitors and the opportunity to build a
customer base in a nascent but flourishing sector. The report further reveals that
margins are significantly higher for routes to countries where monopolies still
persist and ITSPs are exploiting this short to medium term opportunity.
IP infrastructure investment is growing exponentially. Network build occurring on
transatlantic, inter-European and transpacific routes will offer from inception IP
capability, and drive the diffusion of IP-based services which represents a
paradigm change from the traditional Telco PSTN model.
Intelligence is no longer network-centric but has moved to the periphery. A
distributed architecture supported by IP packet technology, enables the integration
of voice and data and promotes a multimedia rich communications environment.
Competition in delivering IP services is global. IP service providers are no longer
restricted by national boundaries but can operate from almost any geographic
location. They are using new distribution models such as retail organisations and
utilities, who have both established customer base and billing capabilities.
The market will coalesce with hybrid PSTN and IP solutions. The internetworking
of IP and PSTN technologies will force rival players to collaborate in order to
optimise network efficiency and exploit the opportunities.
The business sector offers the largest opportunity for IP Telephony. Despite
prevailing quality concerns, the advantages of integrating voice on to data networks
are already driving corporate adoption.
Value-add will lead us towards an IP Universe. Although the arbitrage advantage is
short-lived, the future of IP is even more attractive. IP networks are flexible,
scaleable, cheap and suitable for the multimedia-rich, enhanced service future that
is awaiting us.
Through a detailed analysis of current trends, the report forecasts suggest that IP
Telephony has the potential to achieve almost half of total international traffic volumes by
2003.
The report has significant implications for international voice and data service providers.
The outcome of the report strongly suggests that Telcos need to accelerate their
involvement in IP, and develop strategies to prepare for an IP future.
"We are in transition towards an IP Universe. It is a gradual and complex process that will
transform telecommunications irreversibly", comments Ms Areteos.
Editorial Notes
Tarifica is an independent telecommunications consultancy based in London.
Tarifica's Internet Practice has already achieved critical acclaim in the forward-thinking
Internet Telephony Report, produced at the beginning of 1997, and subsequently with The
Net Effect which examined the impact of the Internet on international
telecommunications.
In the latest report, Towards an IP Universe, research and analysis has moved forward to
focus on the longer-term outlook for IP-based services - Internet telephony, fax and
multimedia.
For further information, please contact:
Margarita Areteos (Consultant)
Tel: + 44 (0) 171 440 6511
E-mail: mareteos@tarifica.com
Philip Low
Tel: +44 (0) 171 440 6504
E-mail: ptlow@tarifica.com
Phillip Cosford (Sales)
Tel: + 44 (0) 171 440 6520
E-mail: pcosford@tarifica.com
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Phillips Tarifica Ltd.
40-41 Furnival Street
London EC4A 1JQ UK
tel:+44(0)171.440.6509
fax:+44(0)171.831.8552
email:consult@tarifica.com
Copyright c 1998, Phillips Tarifica Ltd.
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