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- 1.VoIP Overview in Emerging Economies and Deregulating MarketsDaniel Raye Manager of Sales Engineering VocalTec Communications LtdJan 21, 2003This presentation may contain forward-looking information with respect to plans, projections, or future performance of this Company and its subsidiaries and businesses, the occurrence of which involves certain risks and uncertainties, including, but not limited to, product and market acceptance risks, the impact of competitive pricing, competitive products, product development, commercialization and technological difficulties and other risks detailed in VocalTec Communications' reports filed from time to time with the Securities and Exchange Commission. The Company disclaims any duty to update such forward looking statements.VocalTec Communications - Confidential & Proprietary
2. Section 1: About VocalTecSection 2: VoIP at A GlanceSection 3: Market TrendsSection 4: Case Studies/Customer Success StoriesSection 5: VocalTec SolutionsVocalTec Communications - Confidential & Proprietary 3. Section 1: About VocalTecSection 2: VoIP at A GlanceSection 3: Market TrendsSection 4: Case Studies/Customer Success StoriesSection 5: VocalTec SolutionsVocalTec Communications - Confidential & Proprietary 4. About VocalTecVocalTec is widely recognized as the founder of VoIP technology Innovator and leading provider of VoIP solutions since 1995 with installed base in over 100 countries Traded publicly on NASDAQ stock market (VOCL) VocalTec offers packet voice solutions for international and national long distance calling as well as hosted services Customer base includes world leading carriers such as NTT Com, China Telecom PTAs, Deutsche Telekom, CAT of Thailand, ITXC, etc.VocalTec Communications - Confidential & Proprietary 5. VocalTecs Milestones Feb 1995: Internet Phone Mar 1997: Invented & developed first gatekeeper Feb 1998: Firstcomplete IPtelephony solution January 2000: Largest deployment of VocalTec VocalTec introduces call center technology new SoftSwitch architecture1995 1996 1997199819992000 20012002 Deutsche Telekomselects VT as Apr 2001:exclusive NGN partner VocalTec SIP for carrier servicesJul 1999: Firstserverdeployment ofaddresses new Aug 1997:gateway 2000 markets Deutsche Telekom Feb 1996: invests in VocalTec industry IPO (NASDAQ: VOCL)VocalTec Communications - Confidential & Proprietary 6. Extensive field experience Having deployed H.323-based networksworldwide for the past 5 years, VocalTec hasa wealth of experience and an installed baseof gateways that few of its competitors canboast. Current Analysis, October 2001VocalTec Communications - Confidential & Proprietary 7. VocalTec Powers the World`s Leading Carriers with State-of-the-Art VoIP solutionsVocalTec Communications - Confidential & Proprietary 8. Section 1: VocalTec OverviewSection 2: VoIP at A GlanceSection 3: Market TrendsSection 4: Case Studies/Customer Success StoriesSection 5: VocalTec SolutionsVocalTec Communications - Confidential & Proprietary 9. VoIP Network advantagesNetwork providing all communicationsneeds Voice, Fax and Data servicesLower OpEx Remote and Centralized Management Less personnel needed Reduced maintenance costs Short training intervals for highly skilled staffLower CapEx Using commercially available hardware platforms Less space consuming Scalability expend as you grow Best price-per-mission effectiveness as entry-level is cheap Faster time to market at a lower cost of provisioning VocalTec Communications - Confidential & Proprietary 10. VoIP Network advantages .continuedPacket-switched technology Provide evolution, flexibility, and innovative service creation Shared resources throughout the network Multipoint to multipoint nature - Better network flexibility to adjust and grow at a lower cost Multi vendor sourcingCentralized dialing plan rather then per switch Dialing plan provisioning as opposed to complex, switch-by-switch manner onlyTurn-key and centralized introduction of servicesEnhanced Routing Capabilities: Hours of service (time-based routing) Provide Differentiation of QoS/Source based routing: the termination criteria for a call is based on who (what gateway/domain) originated the call- different quality of paths (VPNs) will be provisioned to different customers. Flexible gateway least-cost routing permissions/restrictions VocalTec Communications - Confidential & Proprietary 11. VoIP Network advantages Maintain Quality of Service FeaturesLoad balancing/Congestion Avoidance FeaturesQuicker, more effective RoutingSource-based routingInterdomain pollingHours-of servicePermissions/restrictionsPrioritizing and percentage Distribute Call Load/ Prevent CongestionResource AvailabilityGW redundancy: Can load balance on GWsGK redundancy VocalTec Communications - Confidential & Proprietary 12. Section 1: VocalTec OverviewSection 2: VoIP at A GlanceSection 3: Market TrendsSection 4: Case Studies/Customer Success StoriesSection 5: VocalTec Solutions VocalTec Communications - Confidential & Proprietary 13. VoIP Market Evolution Converged networks Enhancedservices Application Infrastructure conversion Consumerlong distance TollBy-pass1996Timeline 2006 Source: IDC VocalTec Communications - Confidential & Proprietary 14. TDM vs VoP Growth Growth Traffic for VoP in250000 international networksTDM VoPGrowth in VoP traffic far200000 surpasses growth in TDM traffic150000 100000 VoP replace the TDM international network 50000 TDM traffic to see negative 0 growth starting 200420012002 2003 200420052006Source: Probe ResearchVocalTec Communications - Confidential & Proprietary 15. International Continues to Drive VoIP PenetrationSource: Probe Research 40%International 8% of all international traffic 35%35%runs on VoIP (6% acc. toDomesticTelegeography) 30%Local 26% 25%By 2006, 45% penetration ofVoIP in ILD 20% 18% 90% of all ILD traffic is run on 15%14%H.323 networks13%International traffic and services is one10%8%8% area where growth has proceeded rather predictably in the last couple of5% 5%5% 5% years. A growing volume of traditional 2% 2% international long distance calls is being1% 0% transported over IP via either wholesale 2000 20012002200320042005 carriers or global business voice and data providers.- Probe ResearchVocalTec Communications - Confidential & Proprietary 16. ILD VoP Minutes Forecast 140000 2001- roughly 10B VoIP ILD minutes of use 120000 100000 2002: Grow 68% toMillions of Minutes 18.5 billion minutes 80000 of use.600002007, volumes expected to reach40000124 billion minutes of use.20000 02000 200120022003200420052006 2007Traffic 5544 11021 18502 28706 46057 68900 97567 123974VocalTec Communications - Confidential & Proprietary 17. International VoP Traffic Patterns Source: Probe Research2002: 50% of the International VoPtraffic originates from the US alone International VoP Traffic by Originating Region2002Africa& Middle2007: Balance of power will shift Asia Pacific Eastwith US originated VoP accounting 23% 1%for only 35%.This will be due to rapid Central & Southderegulation & adoption in Asia- AmericaPacific, Eastern Europe and Africa3% Europe North AmericaNational markets with high VoP 20%53%penetration for outbound ILDinclude Nigeria, Australia, Korea,the Philippines, Thailand, the International VoP Traffic by Originating Region2007Czech Republic, Finland, Norway, Africa& MiddleSweden, the UK, and all the largerEastcountries in South America.North America 7%35% Asia Pacific28%National markets with high VoPpenetration for inbound ILD include:Israel, China, Indonesia, Japan,Korea, the Philippines, Taiwan,Thailand, Russia, Mexico, the USand most of the larger countries inCentral &South America. South America8% Europe22% VocalTec Communications - Confidential & Proprietary 18. WorldWide ILD VoP Minutes Forecast WW ILD Minutes Probe Research 2001 2002 20032004200510.82B18.39B 29.55B46.88B70.41BILD VoP Minutes by Region160.00 AFME 140.00CALA Billions of Minutes 120.00Asia Pacific Europe 100.00 North America80.00 60.00 40.00 20.000.00 2001 2002 20032004 2005Source: Probe ResearchNorth America continues to be the biggest marketGrowth is more prominent/promising in APAC and Africa/MiddleEast Region VocalTec Communications - Confidential & Proprietary 19. International Long Distance: Pricing TrendsSource: Probe Research International rates, in the current telecom environment are not25000 expected to erode as quickly as previously expected, resulting in higher industry revenue for international calls. 20000 In 2001: Increase in the averageMillions of Minutes per-minute rate for international15000 calls in over half of the 60 countries tracked by ProbeLarger and more long-term10000 contracts in wholesale are commanding a higher rateThere is a the growing demand for 5000 terminating calls to mobile phones - allowing the wholesalers a little extra margin over the premiums they must pay to wireless carriers.02000 2001 2002 2003 2004 200520062007 Retail Revenues1495 2978 4288 6400 9775 13677 17789 20805VocalTec Communications - Confidential & Proprietary 20. Changing Market Drivers for VoP120% Network EquipmentToll by Pass or ArbitragePhysical Facilitiesopportunity was the biggestFiber100% Operationsdriver for deployment of VoP 80% 45% 60% Core network efficiencies &25%commercial maturity becoming 25% the prominent driver for VoP 40%15% deployments:20% 20%20% - Time to market - Capital & Opex cost savings10%7% 0% - Routing FlexibilityLegacyNextGen - Path to innovationsSource: CIBC VocalTec Communications - Confidential & Proprietary 21. Softswitch Architectures Are Gaining Momentum Today 90% of VoIP ILD minutes are on softswitches controlled networks that utilize H323 Service Applications Layer protocolVoIP Networks are migrating to Network ServiceCreationmulti protocol Softswitch andServices Control Layerand Self -provisioning, Architecture. Softswitches areManagementand-administrationandProvisioning -personalizationsoftware-based switchesEnvironments providing:- Layered, open architectures -Support for multiple standard protocols e.g. SIP, MGCP, Megaco, Sigtran, H.323 - Carrier-grade performance and reliability Media and Signaling Transport Layer - A high degree of scalability - A multi-vendor network environment enabled by open APIs VocalTec Communications - Confidential & Proprietary 22. Adoption by new carriers vs. Incumbents Incumbents & Leading CarriersIncumbents & Leading Carriers deploying VoIPdeploying VoIP VoIP started mainly by adoption by collection ofSome VocalTec Incumbent Customers:: Some VocalTec Incumbent Customers phone card marketers, gray-Deutsche Telekom-Deutsche Telekom operators, and few competitive -Communications Authority of-Communications Authority of operators Thailand(CAT)Thailand(CAT) -RomTelecom (Romania)-RomTelecom (Romania) -Netia, Poland-Netia, Poland -Marconi, Portugal-Marconi, Portugal More and more incumbents-Entel, Chile and competitive operators are-Entel, Chile increasingly adopting the -China Telecom-China Telecom VoP technology: -Data Access-Data Access - led by competitive and revenue drivers.-ITXC-ITXC--iBasis iBasis VocalTec Communications - Confidential & Proprietary 23. Conclusion: Market Driving Forces Deregulation IncreasedCompetitionLow margins & customer churn New Services Lower CapEx Lower OpEx VocalTec Field Proven H.323 Solution + Softswitch Architecture 4000Voice VPNLower cost per port Converged networksCalling Card Low entry level costCheaper maintenanceConferencing Flexible deployment Better topology VocalTec Communications - Confidential & Proprietary 24. Section 1: VocalTec OverviewSection 2: VoIP at A GlanceSection 3: Market TrendsSection 4: Case Studies/Customer Success StoriesSection 5: VocalTec Solutions VocalTec Communications - Confidential & Proprietary 25. Case Studies/Customer Success Stories1. Carrier-class Solution Global DeploymentGlobal Customer Support, Unmatched SS7 Flavors Deutsche Telekom 2. Newly Deregulated Market ILD Termination -> NLD -> Voice VPNTime to Market, Minimized CapEx & OpEx Data Access, India 3. International Long Distance Wholesale Exchange Carrier Superior Routing, Proven Interoperability ITXC4. Rural Telephony VoIP + VSAT/WLLLow Entry Cost, Promptly Addressing Customer Needs Bhutan & Africa 5. Revenue Generating Quick ROI NLD/Calling Card SolutionBeating Competition, Cash Cow Service China Telecom, Liaoning PTAVocalTec Communications - Confidential & Proprietary 26. 1. Case Study T-SystemsGlobal Support, Superior SS7 SolutionT-Systems (Deutsche Telekom) Europes 2nd largest integrated systems provider Carrier-grade global VocalTec-powered VoIP network for wholesale international services in service since January 2001 Certified carrier-grade systemFull SS7 tunneling over IP and SS7 redundancyGuaranteed level of service using T-Systemsdedicated linesCarrier-class telephony gateways withsuperior voice qualitySeamless VoIP billing based on PSTN-likeCDR formatCentrally managed, fully redundant network Recently expanded by T-Systems to handle growing demand for VoIP-based international services Reseller agreement enables T-Systems to resell VocalTec VoIP equipment to carrier customersVocalTec Communications - Confidential & Proprietary 27. 2. Case Study Data Access Time To Market ILD/NLD Stay Ahead of Competition BackgroundData Access (India) Ltd. is a joint venture between SPA Enterprises Ltd. and HongKong based Pacific Century Cyberworks (PCCW).Data Access provides wholesale voice & data servicesData Access was incorporated in 1999 and launched the Network of the World (NOW)brand in India in October 2000 and its ILD service in July 2002ILD Network on VocalTec Platform Data Access built up Indias largest private sector global connectivity operation for TDM and IP, which will now be leveraged for both voice and data. Within 4 months of operation, Data Access has been able to garner 25% market the total ILD minutes VocalTecs ILD solution has enabled Data Access to fully meet its business requirements: Superior Voice Quality: Data Access MOS is 4.5 for BSNL-originated calls, and 4.62 for MTNL-originated calls, well above the license-stipulated minimum of 4. High Call Completion Rate Leads to Customer Satisfaction The average CCR over Data Access packet telephony network is 62% Time to Market:VocalTec completed the installation of 5 POPs in the space of 2 weeksVocalTec Communications - Confidential & Proprietary 28. 2.1 Case Study Data Access Time To Market ILD/NLD Stay Ahead of Competition Our network performance interms of MOS, PDD and CCRensures that our customers enjoythe highest level of call qualityand service reliability, saidSiddhartha Ray, CEO at DataAccess. The network is of aninternational quality and iscomparable to that of DeutscheTelekom, MCI, Telstra, NTT andTeleglobe. It makes us ageneration ahead of allinternational carriers in India. VocalTec Communications - Confidential & Proprietary 29. 3.1 Case Study ITXC Global Wholesale Proven Interoperabil...