Rumblings of a phoney war

30 Jun 2004

A growing list of providers are preparing to offer voice-over internet protocol services with a view to destroying Eircom’s steely grip on the business and residential call market.

The successful introduction of internet telephony could cannibalise the business and residential markets of existing incumbent players such as Eircom unless they move to augment their existing services with competitive mobile and data services. In the US last week AT&T predicted a 30pc drop in voice revenues by 2007.

According to Juniper Research, the voice-over internet protocol (VoIP) segment of the market will be worth at least 12pc of the total world telephony market by 2009, contributing US$32bn to a market worth US$260bn.

Ian Cox, a broadband specialist with Juniper, says: “VoIP brings new revenue-generating opportunities to the telephony market, by combining voice services with other IP applications. This will redefine the telephone bringing brand new services, with telephony at its core.” The challenge to service providers will be to carefully manage this convergence, balancing new VoIP revenues against declines in traditional fixed-line revenues. Flat-rate IP-based voice tariffs will gradually replace time and distance-related tariffs, he says.

The initial residential use of VoIP will be via a ‘PSTN-bypass’ through a PSTN interconnect (this excludes free PC-to-PC or peer-to-peer services that do not offer PSTN interconnect). However in the longer term voice will be offered as part of a service bundle that includes email, internet access and video telephony. This will be the fastest growing segment by 2009. For the business user calls using an adaptor will be the largest segment, although significant growth in the IP-PBX and IP-Centrex markets will occur. Calls from IP virtual private networks will also grow quickly as enterprises take advantage of network convergence to reduce costs.

Up and coming telcos such as Smart Telecom and Ryanair Telecom are readying various VoIP products that are expected to debut in the marketplace later this year. Esat BT also entered the fray in recent weeks with plans for a small to medium-sized enterprise (SME) VoIP service to be rolled out in the next two months, followed later in the year by residential services.

Smart recently signed a technology deal to deploy IBM’s eServer xSeries and CirPack’s carrier-class soft switch and PSTN gateways. As well as enabling single billing, the technology will also enable Smart Telecom to grow its prepaid-service business, optimise its long distance call routing, manage all of its public payphones, lower overall costs and prepare for VoIP to offer to the Irish residential and SME markets. Smart says it specifically sees VoIP as an offering that both residential and corporate customers are now ready to embrace. “We are planning on installing equipment at 50 local telephone exchanges to supply a range of broadband internet and telephone services,” says Oisín Fanning, Smart Telecom’s chief executive.

Another up and coming local company with high hopes for the residential and business market is aptly titled VOIP Ireland, established in 2000 by Aircoach co-founder Brian Powell. The company currently provides businesses with DSL and VoIP products, which enable firms to make calls to Europe and America for two cent per minutes and China and Australia for three cent per minute.

VOIP is expected to this week introduce its Voice Ireland carrier pre-select (CPS) service, which promises free calls between people on the network. As DSL becomes more prevalent around Ireland, the company plans to begin migrating customers from CPS to VoIP services as part of a DSL/Wi-Fi bundle.

Powell explains: “With the voice-over internet service, we are offering business and residential customers 95pc savings on calls internationally and 50pc savings on local Irish calls compared with Eircom.” Powell says that the creation of the call centre is a necessity, not only for sales and marketing purposes to ramp up numbers, but also to counter the well-publicised customer win-back strategies of Eircom. “Customer retention is the big battle facing anyone in the CPS market. We have received funding from Enterprise Ireland to support the establishment of a call centre in Tipperary. We aim to start with 20 jobs and ramp this up to 50 positions within two months.”

Dublin-based Wi-Fi operator BitBuzz envisages offering corporate laptop users VoIP service on the move. Last week Stephen McCormack of BitBuzz demonstrated the use of VoIP over a Wi-Fi network from the new Kylemore restaurant in St Stephen’s Green Shopping Centre. “At present, using services such as, people can make calls for free or for next to nothing. I can see businesspeople beginning to search out cheaper ways of making calls on the move. It’s absurd that using this service it is cheaper to ring New York than to call a business down the street. Once more people start using it, the word will spread,” he said.

McCormack pointed to moves by the Commission for Communications Regulation (ComReg) to instigate a numbering strategy for the use of VoIP in Ireland. In recent weeks ComReg issued a consultation document with a number of solutions, including one that would see users of VoIP service receive an ’07x’ prefix similar to the mobile prefix ’08x’.

BitBuzz is currently in initial negotiations for exploring opportunities in the Wi-Fi/VoIP space with another young Irish technology firm Cicero Networks, formerly known as mQuery.

Cicero’s CEO Ross Brennan says: “We’ve developed an application that allows businesspeople to route VoIP calls over Wi-Fi or Bluetooth connections on their laptops. The core aim of all of this is to make a saving on calls. The biggest robbery at present is the cost of terminating a mobile call in this country. At present we have two trial implementations in Ireland and two customer implementations in Ireland and the UK. The big driver for VoIP is broadband penetration. It is coming like a train down a track and fixed-line operators are more than a little terrified,” Brennan concludes.

VOIP Ireland’s Brian Powell: ‘Creating 50 new jobs on the back of internet telephony’s promise’

By John Kennedy