VoIP and the Telcos Is there a life after death?

VON Europe 2003Industry Perspective

10. June 2003

Richard STASTNYÖFEG/TELEKOM AUSTRIA, Postbox 147, 1103-Vienna

enum:+43 664 420 4100E-Mail: richard.stastny@oefeg.at

richard@stastny.com

Richard Stastny

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Content

Apocalypse now for telcos? – Problem statement

User expectations of IP based telecommunications

What a VoIP user needs and what not

Where does he get this from

What else he may need

VoIP is a product – not a service

And where is the beef?

There is life after death!

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The Problem In telephony networks

the telephony service is the core business telephony networks are vertically integrated and specialized for 64kb/sec voice and related services the intelligence is in the network

the Internet is multi-purpose and multi-media VoIP is just another application it is a “simple” transport network, the intelligence is on the

edge horizontal layering

for telcos VoIP is a disruptive technology changing the value-chain breaking up the vertically integrated networks horizontally

To survive a telco MUST change it's business model

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"First it can't possibly work, and if it did, damned if we are going to ALLOW the creation of a competitor to ourselves." (AT&T's Jack

Ostermann to Paul Baran about the Internet, quoted by Lawrence Lessig)

"If there is one thing certain about governments and innovation, it is that those who are threatened by new a innovation will turn first to the government for help. Every new idea is a threat to those who depend upon old ways of doing business."(Lawrence Lessig)

“The milk of disruptive innovations doesn't flow from cash-cows.”(David Isenberg to Lawrence Lessig)

How do telcos deal with these issues?

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This is not really new

“Innovations make enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is indifferent partly from fear and partly because they are generally incredulous, never really trusting new things unless they have tested them by experience.”

(Machiavelli - The Prince)

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Vertical Structure

Access

Transport

Services T

E LCO

T E LCO

T E LCO

T E LCO

NGN?

NGN?

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Horizontal Layer Unbundling

Access

Transport

Services

Internet

PSTN

ISDN

GSMUMT

S

ADSL

W-LAN

SIP MAIL IM WEB ...

...

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FUTURETODAY

The Future of the Telcos?

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Where the action is … Enterprise Toll Call

ENUM may solve the problem of cross domain or “Inter-Enterprise” call capture. So 80% or more of Enterprise calls can go all IP, leaving only 20% to the Telco.

Toll Calls are a $110 Billion revenue stream. $987 per Business line per year in toll charges (source FCC)

Intra-Enterprise Calling (40 %)

Employees atdifferent locations

Inter-Enterprise Calling (40 %)

TypicallyCustomers and Suppliers

Other (20%)

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Have we reached a tipping point?

Switched minutes are down …

… the first time since the Great Depression in the 30’s.

(Source FCC)

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User expectations of IP based Telecommunication Services

Reduce CAPEX and OPEXRe-use existing IT-Infrastructure and Internet access

Reach everybody else also on IP via IP directly Keep "already used" features and capabilities

Dial phone numbers as usual (internal and external)Reach everybody on the PSTNKeep the existing phone number (E.164)

Get new features and capabilities Instant Messaging, buddy lists, video, ... Integration in IT-Infrastructure, mobility, ...

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What does a VoIP user need ...

... to make and receive voice calls?

No phone networkNo telephony serviceNo billing system

Therefore he does not need a Telco .

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What a VoIP user needs ...

... to make and receive voice calls is:

a broadband access to the Interneta terminal (a SIP phone, a PC or a

PDA)a SIP Server (Proxy)a SIP Address (URI)phone numbers (ENUM)

In addition, he may also use these products for instant messaging, presence, video, conferencing, ....

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Where does he get this from?

the broadband access from an ISP

the terminal in a shop

the VoIP service via subscription on the Internet

the VoIP address from his domain name provider or VoIP service provider

an ENUM domain from a registrar

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What else he may need?

To make calls to the PSTN?a gateway provideran account from a VoIP service provider ora credit card assertion (e.g. from Liberty

Alliance)

To receive calls from the PSTN?an E.164 number (new or existing) from a

Registrar routing of this number on the PSTN to a gateway routing of this number on the Internet (ENUM)

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... and as an enterprise?

All of the previous mentioned items plus: a VoIP Server HW by re-using an existing PC a VoIP server SW on a CD-ROM or via download More terminals and PBX features?

install a switched LAN (if you have not already) go buy more terminals in the shop ... this is called IP PBX!

Possibility to outsource? outsource the VoIP Server ... this is called IP Centrex!

Use ENUM ... this obsoletes IP Centrex

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e.g. a Pingtel phone is a product

VoIP is a Product – not a Service

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The ZapMail Example The story of ZAPMail:

In 1984 Federal Express announced a new service called ZapMail, which guaranteed document delivery in 2 hours. They built this service not by replacing their planes with rockets, but with fax machines.

Two years and hundreds of millions of dollars later, FedEx pulled the plug on ZapMail.

The story of ZapMail's collapse holds a crucial lesson for the telephone companies today: Federal Express didn't get that faxing was a product, not a

service. Because of this, it failed to understand how the fax network

would be built - by individual customers buying one fax machine at a time.

Finally it misunderstood who its competition was: its customers.

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ZapPhone and VoIP As FedEx was about faxes, the telephone companies are in deep denial

about the change from circuit switching to IP-based voice.

Telcos developed the following strategy:

Step #1: Scrap the existing network

Step #2: Replace it with an inexpensive IP network

Step #3: "Preserve the revenue stream" by continuing to charge the same

prices

This will not work, because the customers don't need to wait for

the telephone companies to offer services based on IP. They

already have access to an IP network -- it's called the Internet !!

Two cheap consumer devices that create enormous value for the owners

while generating little revenue for the phone companies exist already:

WiFi access points, which allow the effortless sharing of broadband

connections,

and VoIP Phones and VoIP converters (e.g. the Cisco ATA).

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So what can a Telco/ISP provide?

The broadband access to the Internet Part of the backbone The gateway to the PSTN Routing of the E.164 number to this gateway ENUM Registrar and ENUM Nameserver

service VoIP server hosting (residential and IP centrex)

Domain Name hosting Circle of Trust for accounting and billing Intelligent packaging for Joe Doe users

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And where is the beef?

VoIP and video users need broadband Boosts DSL rollout - $$/month

SIP Server hosting - $/month ENUM hosting - $/month Gateway operation

Incoming calls - $/call on PSTN Outgoing calls - $/call on Internet (via assertions)

Participation in trust circles % on each transaction Certificates $/month

Sell books, info, sex and flowers (transfer premium rate services to assertions)

Move up the value chain to services and consulting

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Best Bets

% shares of the IT industry's profit, by sector

1995 2000 2005 Trend

Business consultancy 10 13 17 Services & Software 30 29 41 – Server/Storage

Hardware – Clients

18 20 12 13 9 6

Technology 29 29 24

Source: IBM

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So there is life after death!

Maybe it is not as much $$ as nowBut not "yet" the Apocalypse

The bad news isEverbody can do this

The good news isEverbody can do this

so also a telco can do it

So this may "only" be The Perfect Storm

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Live Demo of VoIP + ENUM

The following demos are shown in the Expo at the

VON Europe 2003:

ENUM Webpage http://enum.nic.at

ENUM Administration via Web-Interface

Registration of ENUM Domain Names

ENUM Subscriber Provisioning

ENUM query via Webpage, ENUM Clients, ENUM-enabled

SIP-Server

ENUM at work in the different VoIP scenarios

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ENUM Application and Provisioning

ENUM TIER 2

NS

ENUM TIER 1

NS

ENUM TIER 0

NS

Internet ENUM TIER 1 Registry

ENUM TIER 2 Register

ENUM Registrar

ENUM SUBSCRIBE

R

ENUM USER

ENUM DNS

QUERY

ENUM Application email

VoIPetc.

Communication

REGISTRATION

ENUM NAPTR

MODIFICATION

ITU TSB RIPE NCC

3.4.e164.arpa

x.x.x.x.3.4.e164.arpa

Web SERVICES

Registrynic.at

ENUM SP Telekom Austria

Web portal

ENUMDELEGATION

RTR policy

framework

VALIDATION

WHOIS

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VoIP and ENUM

PSTN/ISDN/Mobile

Telekom Austria

at43 iptel.org FWD Siemens Kapsch

Internet

e164.arpa

dns ENUMtree

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The End

Thank you for your attention