Internet telephony rings loudest in the enterprise

Despite the growing number of Indian Internet users, ISPs are still struggling to make money. One service that has the potential to turn things around for service providers is Internet telephony, says AKHTAR PASHA

According to Srikant joshi, while Sify will expand the number of iWays offering these services, the company is also formulating a quality product for the retail market, which will be made available shortly

Internet telephony encompasses telephone calls made over the Internet irrespective of the use of traditional phones, multimedia PCs or dedicated terminals in the calls. The watershed in this sector was the legalisation of Internet telephony by the Indian government in April 2002. In the nine-month period from April 2002, PC-to-phone traffic stood at 35 million minutes. That’s expected to grow to 211 million minutes by 2007, according to a report by iLocus, a leading industry research group. The firm says some six million minutes of PC-to-phone traffic originate from Indian ISPs every month. IDC India translates this into a market opportunity of Rs 1,589 million (by revenue) in 2003, which is expected to grow to reach Rs 3,370 million in 2008. Internet telephony traffic is estimated to grow from 315 million minutes of usage in 2003 to reach 1,130 million minutes of usage by 2008. That’s a big market opportunity for Internet Telephony Service Providers (ITSPs) such as Sify, HCL Infinet, Net4India, Synapse and BSNL.

Kapil Gupta, who’s head of Marketing at the VoIP division of Synapse Communication India says, "The voice market in India is estimated to be worth around Rs 33,000 crore, including International Long Distance (ILD) and National Long Distance (NLD). Of this, Net telephony is likely to grab a share of 2-3 percent initially and is expected to account for 4-5 percent by 2004-05." On an average, nearly 1.5 million users make a call outside India even at existing TRAI rates—that’s the target segment that ISPs hope to tap with ‘Net telephony’.

Enterprises are early adopters

The most significant benefit of Net telephony and main drivers of its evolution are cost savings and easy implementation of value-added services. Vijay Narayan, research analyst at IDC India says, "Net telephony offers substantial cost reductions, resulting in real savings in long distance telephone costs, which is extremely important to most enterprises, especially those considering global operations. The enterprise market is driving Internet telephony in India." Let us take a look at the cost saving factor. Customers may take advantage of flat rate Internet access vs. slab-wise PSTN rates and save money by letting their long-distance calls to be routed over the Internet. In the past one year a large volume of Net telephony calls have been generated by enterprises such as HLL, Whirlpool, Electrolux, Ingersoll Rand, Snecma Aerospace, Lucent Technologies, J K Industries—the list goes on. Nagesh Rao, assistant manager for Network & Communication at Ingersoll Rand says, "We buy a pre-paid enterprise package for Rs 20,000 for eight users from Net4India every month and we find voice to be toll quality (Net telephony calls) to the US and Canada. Because of QoS (Quality for Service) provided by the ITSP, we are able to extend the calls and talk longer for about 30-45 minutes during conference calls. That’s the value Net telephony is giving us today."

Corporate customers are chatting longer. Vijay Kumar, systems administrator at Snecma Aerospace says, "When we started operations eight months back there were only 20 users making calls worth Rs 30,000. Today the number of users has gone up to 100 and our communications cost has remained more or less below Rs 30,000." On an average, Snecma make 500-550 calls per month on its Net telephony system and saves 40 percent on ILD charges.

Since enterprise customers generate large volumes of Internet telephony calls, most ITSPs are focusing on the enterprise market with similar offerings. Though a small percentage of their business (2-3 percent) comes from Net telephony, ITSPs say that this business will grow steadily with corporate customers bringing in the bulk of revenues. Srikant Joshi, Sify’s president for Access Media says, "Net telephony will always be an additional service being offered for the convenience of users. However, it is becoming popular due the quality of user experience when compared to the cost. We expect the percentage contributed by Internet telephony to double in the near future." Sify gets approximately Rs 3 crore in revenues from its Net telephony business, which is part of the Access Media business. On an average Net4India records four million minutes per month of Internet voice traffic, which fetches them a revenue of Rs 22 crore. M Ashok Kumar, vice president for Sales & Marketing at HCL Infinet says, "We are finding stable business from our enterprise customers such as HLL, Electrolux and others. 2 percent of our total ISP revenues come from Net telephony." But he is worried about the manner in which private telcos such as Bharti and others are slashing their ILD charges in the range of Rs 9 per minute to the US.

On an average Net4India records four million minutes per month of Internet voice traffic, which fetches them Rs 22 crore in revenues, says uday sodhi

Net telephony access devices proliferate

While enterprises are pushing the Internet telephony market at the top level, ITSPs are giving equal importance to retail where non-PC IP devices serve as a PC-substitute for Net telephony. These standalone devices are the vehicle for delivering Net telephony to retail (home) users. Uday Sodhi, Net4India’s COO says, "In the last six to nine months we have seen an increase in the sales of dial-up devices. According to our estimate there are around 4,000 to 5,000 units of dial-up devices in the market." HCL Infinet too is offering Yapjack (a telephone with a built-in modem) that helps make Net telephony calls. The starting price of dial-up devices starts from Rs 3,500.

Innovative delivery channels

Owning a PC is no longer an issue for making Net telephony calls as ITSPs are bringing Internet telephony closer to the masses through retail chains of Internet cafes and special Net telephony-enabled PCO booths offering Net telephony. Sify is offering Internet telephony calls through its 500 iWay Internet cafes. Joshi says, "We are seeing more people walking into our iWay centres, especially in the age group of 50-55 years, to make Net telephony calls to their sons and daughters staying in the US or Canada. They just walk-in to an iWay centre and make calls just as they would on an ordinary phone." An average of 8,50,000 calls is registered every month through Sify’s iWay centres. In JFM 2003, 3,40,000 calls were made every month through Sify’s iWay centres.

Sify’s focus for Net telephony has been on the iWays as it controls the last mile broadband connectivity and can ensure high quality services. "While we will expand the number of iWays offering these services, we are also formulating a quality product for the retail market and this will be made available shortly," says Joshi.

Similarly Net4India has an innovative delivery channel, it offers Net telephony through a network of 175 Telecentres (special IP-enabled PCO booths) across the country. Customers making use of a Telecentre can make Net telephony calls much as they would make calls in a conventional PCO. This project runs on a franchisee model, where the franchisee invests in the space at a set-up cost of Rs 1.25 lakh, while Net4India implements the entire solution along with hardware on a 32 kbps voice-only leased circuit.

Sodhi says, "We see a big opportunity for Internet telephony in PCO booths as it will eliminate the need for owning a PC to make Internet telephony calls. Currently Net telephony-enabled PCO booths are contributing 35 percent (Rs 9.8 crore) to our total revenues (Rs 29 crore)." HCL Infinet is evaluating similar plans for setting up PCO booths that offer Net telephony.

For those who can afford to have a PC at home, there are a variety of options to choose from with renewable pre-paid calling cards available in denominations ranging from Rs 100 to Rs 500.

IDC India says the market is slow to adopt because of the poor quality of service (QoS). But that’s not a concern because ITSPs such as Sify, HCL Infinet and Net4India are using technology to counter this very problem. They are using MPLS (Multiple Protocol Label Switching) and managed voice network service that let them allocate bandwidth for Net telephony calls as they are initiated.

With a string of innovative delivery channels in place and quality issues largely ironed out, Net telephony has finally entered the mainstream market.

Net Telephony—who’s offering what to whom?