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Tue 14 Oct 2008 04:00 AM

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Inevitable reality

With calls for the introduction of Voice-over-IP services ringing out across the region, telecoms firms are taking their first steps towards developing services for enterprises.

With calls for the introduction of Voice-over-IP services ringing out across the region, telecoms firms are taking their first steps towards developing services for enterprises.

Whichever way you cut the statistics in the global VoIP market, there is no avoiding the extent to which the long-held vision of voice as just another data stream on the Internet has become a reality.

According to analyst iLocus, for example, service providers around the world carried some 1.18 trillion minutes of VoIP traffic in 2007. And industry watchers at Point Topic estimate that as a value-added service, VoIP constitutes more than half an international market currently worth almost $26 billion.

While consumer growth is certainly a major driver behind that volume, the enterprise remains the main focus of convergence technology vendors as they grapple for supremacy in the corporate backbone.

Last year, more than 11 million desktop IP phones were sold, along with 14.8 million enterprise gateway ports. And yet there is still a sense in the Middle East that this is a market frustratingly poised on the verge of lift-off.

While regulators in countries including Qatar, Bahrain and the UAE are taking a more liberal stand and allowing VoIP to emerge as a competitive proposition, elsewhere it remains boxed into a corner as voice revenue preservation remains a priority for nervous incumbent telecoms operators.

As a result, the market landscape is confusing. Regional enterprises are excited by the ability of VoIP to streamline their communications but reluctant, for various economic and cultural reasons, to arrive at a coherent strategy for managing and addressing these reservations.

"Liberalisation and deregulation continue at a rapid pace across the Middle East," says Hugh Roberts, senior strategist at Patni Telecoms Consulting.

"However, during this process the status of competition remains in flux, and there are widely different examples of the relationships between governmental policy, the independence of regulation, the independence (and privatisation) of the incumbent operator and the range of services opened up to new telecoms operators in each country.

"The situation is made more complex given the increasing tendency for senior Middle East-based network operators and investment organisations to embrace cross-border ownership as the markets open up, and the perceived need for regional governments to control the pace of change and the flow of information to and from external sources," he adds.

Roberts points that like most ‘new' technology, VoIP has the potential to be disruptive, and upset the financial balance of the incumbent asset base.

"As networks are opened up, the potential for third parties to extract revenues increases greatly, through legal, ‘grey' and illegal offerings.

In many markets outside the region, VoIP is being adopted within more complex service bundles as a means to controlling the cost of supporting it in the face of dwindling margins. The unproven expectation is that revenues from new content and data services will more than compensate for the shortfall," he explains.

"Unfortunately, for many Middle East-based governments, short-term revenue enhancements elsewhere are coming from third-party advertising and from content streams such as gambling and adult services, all of which is ‘culturally sensitive'," adds Roberts.

Understandably, while the VoIP landscape remains fragmented across the region, incumbents continue to be cautious about embracing new business models that would allow them to compete with the new breed of service providers in a deregulated market. And yet they hold the key to the rapid infrastructure development that will, eventually, enable the market to lift off.

VoIP vendor perspectiveVoIP technology vendors are working closely with operators to find ways of making VoIP a service that's as controllable as regular voice services and can be translated into revenue streams on a similar scale.

Christian Bartosch, head of services for the Middle East and Africa at Nokia Siemens Networks, says that to some degree there is also still a cultural fear that VoIP could unleash an unmonitored communication channel.

Inevitably, young ISPs look better placed to move in on a wave of Google-style business models and a more instinctive feel for generating revenues from value-added service bundles, while offering essential services like voice effectively free of charge.

Incumbent operators will have to make a considerable imaginative leap to create new models but, like most industry watchers, Bartosch feels that the momentum of the market will eventually prove irresistible.

"There is still a range of progress, with somewhere like Bahrain now reasonably deregulated and the UAE easing some restrictions although still concerned about the uncontrolled flow of information, and other countries remaining very restrictive," he says.

"We're working with operators on the technology side to find a way through the issues of control and develop solutions to the challenges that are preventing the widespread use of VoIP.

"We're also working with enterprise customers on the business challenges of VoIP adoption."

As Bartosch explains, VoIP is already a mainstream technology in much of the world. And with five billion more people expected to gain access to broadband technology by 2015 - most of them in developing markets like the Middle East - it is likely to be an unstoppable force.

At unified communications software vendor CommuniGate Systems, vice president of business development Jon Doyle says that rather than focusing on the threat of VoIP to their legacy ‘access' or ‘toll and tariff' models, incumbent operators should be looking at the potential for value-added services to balance the erosion of traditional voice revenues.

"Without question, VoIP will come to the ME region, and could be viewed as a valuable service if packaged correctly," he says. "For example, in some countries 70% of the population are expats, and these people call home often, using all sorts of tricks and ring back schemes, not to mention Skype.

"If the telecoms operators offered an easy and convenient service, perhaps as part of their ADSL product lines, they could capture back some of this market."

Doyle says that operators should also consider the VoIP revenue potential of servicing mobile business customers by providing an alternative to expensive international roaming charges.

"Imagine a business person travelling to London from Qatar," he says. "Right now, that person uses roaming, say on the O2 network, to make and receive calls. If Qtel were to allow these people to use VoIP, they could ‘register' to their account regardless of where they were located, and make calls that terminate on the local exchange network, driving new revenues.

Part of the problem, he suggests, is the misconception that VoIP is simply a free or cheap service, causing telecoms operators to see it as a threat rather than an opportunity.

"When the true qualities of VoIP are exposed, including its mobility, powerful business class services, and the power of unifying the user account into one address, it will take off," he says.

Meanwhile, there are signs of real progress. Bahrain, for example, opened up its VoIP market as long ago as 2005 and has issued more than 30 international service licences since then.

And in the UAE, regulation has been relaxed to the extent that customers have the option to access VoIP services within country - subject to submitting their requirements to service providers, who must then consult with the Telecom Regulatory Authority (TRA) regulatory authority before going ahead with the implementation.

At VoIP World in Dubai this summer, the TRA also indicated that by the end of the year, it will further modify its policy to allow licensed operators to offer international call services across VoIP - another step in the right direction, which will also be music to the ears of frustrated Skype users in the region who find access to the global VoIP service blocked.

At Dubai-based systems integration company Alpha Data, product manager K. V. Sarma says there is growing demand for VoIP solutions among businesses of every size as they look for the associated benefits of unified management, reduced cabling, a single converged network, employee mobility and voice integration for core business systems and applications.

"Alpha Data has installed VoIP-ready networks across the UAW, with either standalone systems ready to talk to each other using SIP trunks or single systems with branch office solutions," he says.

"CIOs in this region are all opting for VoIP for their new infrastructures. Those with existing, older networks are gradually migrating from their old systems to VoIP. There is a very clear trend in going for VoIP as it brings strategic benefits such as cost saving and mobility to organisations."

Cracking the Middle East VoIP marketThe potential VoIP explosion in the Middle East enterprise market makes it a primary target for ambitious technology vendors. British ISP Internet Central, the company behind the IC-Talk VOIP telephone system, has set its sights on Dubai and is working with its distribution partner GTFS to establish a foothold in an arena that is likely to quickly become highly competitive.

"As a UK-based company, the main issue we have faced is having the IC-Talk product certified for use in Dubai," says Internet Central's Ian Rowley.

"This was a time consuming process but we appreciate that it had to be completed to ensure compliance with the UAE's strict telecommunications policies and to ensure full compliance with existing infrastructure.

"Another issue we anticipate is that in the UAE, consumers tend to buy brand names, whether they be BMW, Mercedes-Benz or, for telephony, Cisco or Avaya. We don't have an established brand and we will have to overcome that quickly."

Internet Central's strategy for gaining a foothold in the region is based on the expectation that enterprise demand for the flexibility, ease of use and economic benefits of VoIP as an integrated service will ensure the market achieves strong momentum in the short- to medium-term.

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