VOIP is a Challenge for Telephone Firms
The Nation (Nairobi)
COLUMN August 16, 2005 Posted to the web August 15, 2005 Pauline Wangui Nairobi
It is now official. The Communications Commission of Kenya last week issued guidelines for the provision of voice over internet protocol (VoiP).
Going by the Commission's definition, VoiP is the transmission of voice as packets over traditional switched networks or over internet networks (a telecommunication service whereby voice messages are transmitted as packets over the internet or other telecommunications network).
This means that VoIP is finally taking off and the prospect of internet telephony displacing traditional telephony is now a reality.
VoiP kills distance, and is of great interest within the telecom industry. With VoiP service, subscribers have an opportunity to significantly reduce their local and long-distance calling expenses, while long-distance carriers have an opportunity to possibly avoid sharing a large portion of their revenues with the local telephone companies for use of their access links.
Moreover, VoiP enables a rich array of services ranging from web-like phone displays, information services, and data exchange.
This is a transformative technology, that will redefine the phone and the way people use it.
As more businesses and consumers adopt the lower-cost alternative of VoIP, the normal carriers will be forced to lower their wireline intercarrier tariffs in order to compete.
Already, large companies like Time Warner Cable have experimented VoiP service within their various service territories over the past year.
Although regulation for VoiP is still being defined, operators including incumbent Telkom Kenya and new entrants can now incorporate VoiP as long as they have been licensed.
However there are key business issues to be addressed.
The bottom line is that for this or any technology to flourish, there must be a sustainable business model behind it. The door to the inner core of telecommunications has just been opened to innovators willing to expand on relatively simple technologies of digitizing and putting voice in packets.
This ability enables a new paradigm in the telecom sector that is really just beginning. But are the traditional voice carriers ready to deal with VoiP at operational levels, are they prepared and are they capable of managing a successful migration?.
Companies like Net2Phone and Vonage press ahead with new business models. New comers like Skype and Free World Dial-Up drive innovation and integration of new uses.
Collectively such consistently reshape their markets by adopting new business models that provide for layered services like voice, data, video, audio and internet. Such innovators can and will erode the revenue base that the telecom industry fights so hard to hang on to.
Corporate strategy will have to be reconsidered and decisions made about the new position in the new voice market.
Flexible and effective management information systems have to be put in place in the new environment. Migrations plans must be put in place to ensure that the migration to VoiP is both operationally and financially successful.
Telcos must move fast to position themselves in the VoiP value chain. They are used to focusing on maximizing returns from their current infrastructure.
However, with many new VoIP entrants expected in the market, the traditional operators cannot afford to sit back as simple infrastructure providers but need to effect strategies that maintain their positions. They need to work out how best to position themselves in this new IP-driven value chain and assess the impact this will have on their already existing business.
They also need to know how they intend to deal with new alliances and partnership with applications and content providers as they maintain customer s during migration.
Among the main issues operators will face in the transition are costs and success of customer migration.
Extensive investment is required. Risks associated with migration need to be addressed.
VoiP-specific issues, such as voice quality and customer churn have to be looked into.
With VoiP, the market battle is expected to intensify. What IP services do consumers want? Who can best deliver them?
Who can build a sustainable business model, and who will continue the evolution by keeping the pressure on all the players to innovate.
These are just but few issues. In telecommunications, you lead, follow or get out of the way. You can be a steamroller, or you can become part of the pavement others walk on.
But if you are, innovative, and creative, you can outrun the telecom industry that is still slow in this region.
The writer is a telecoms strategy analyst.
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