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And
they're off: Africa's first legal VOIP services set a cracking pace
Extracted
from Balancing Act Issue 251
April 04, 2005
http://www.balancingact-africa.com/news/back/balancing-act_251.html
Legalised VoIP services
are slowly creeping on to the mainland continent of Africa. South
Africa has legalised them and Kenya was due to follow before the
Kenyan Government sacked its regulator. Last week the Egyptian regulator,
NTRA announced significant changes to its attitude to VOIP including
legalising PC to PC telephony, a significant move in a country with
many computer users. Until now VoIP services have existed in the
grey margins but they will now have to compete in the cold light
of public competition.
Before February 1st,
regulatory restrictions had prevented South African companies from
reaping the benefits of converged voice and data networks through
VoIP applications. In the past two months since the deregulation
of the telecoms industry came into force, South Africa has witnessed
a number of VoIP offerings enter the market as telecommunication
service providers capitalise on the legalisation of this voice service.
Although the provision
of VoIP services existed before liberalisation companies are now
introducing "above-board" VoIP products. The first offerings
have came from Datapro, Internet Solutions and Storm who have been
rolling out their different VoIP services since February 1st while
MWEB has recently launched the first product in its range of VoIP
solutions. Despite the different features of each package, all four
service providers claim to offer the most cost-effective and reliable
solution. Mapara Syed compares the different offerings and looks
at what each service has to offer as well as what VoIP developments
are occurring across the continent.
Over the past week MWEB
Business, the division of MWEB that focuses on the specialised needs
of businesses, has been heavily marketing its initial VoIP offering.
OfficeCall has been designed to reduce the inter-branch call charges
for businesses with offices operating from two or more locations.
MWEB claim that OfficeCall will realise substantial cost savings
on customers' inter-branch telephone calls by converging voice and
data onto a single network. "The calls are free so all they
pay is the fixed monthly rental which starts from R200 plus an extra
charge of R30 for itemised billing," says Barry Collins, the
Product Manager at MWEB Business. The fixed monthly charges increase
with the different variations of the OfficeCall product, from which
customers can choose between analogue and ISDN access options. Both
the analogue and ISDN range require an installation fee of R1,800.
OfficeCall is also intended to integrate seamlessly with existing
telecommunication equipment, negating the need for large capital
outlays. "We may not be the cheapest in comparison to other
services but we are the most cost-effective as our customers do
not have to replace their existing equipment. We just come and attach
our VoIP box to their exchange and off they go," Collins added.
The OfficeCall range
is furthermore supplied with bandwidth saving and compression features
to ensure the quality and speed of an existing data network is not
compromised when voice is added, while on the other hand, a multi-protocol
label switching (MPLS) network ensures priority is always given
to voice traffic. In addition, should the call quality deteriorate
below a predetermined standard, the call will automatically switch
to public switched telephone network (PSTN) lines, which means that
call quality is never impaired as a result of the unavailability
or deterioration of VOIP data lines. Although MWEB have made the
assertion that their first VOIP offering has been designed with
the needs of various sized businesses in mind, in fact they are
targeting a very niche market at the moment. "It's a
small market at present because you have to bear in mind that we
can only attract companies with more than 3 or 4 branches,"
says Collins. "We have a couple of clients already (since roll-out
on 25th February) but once we break out with our international and
cellular services in mid-June, that's when our VoIP product
will boom and really take off." According to Collins, MWEB
will be offering 30-40% savings on international calls and calls
to mobiles when these VoIP services are introduced in the summer.
Everyone is currently
rolling out their services in phases, including new entrant Internet
Solutions: "We've started with a certain suite of services
but the message we are going to market with is very much a migration
service so the offering we have available now is a fraction of what
we are going to have available come mid-year, year-end, next year
and a continual evolution," says Greg Hatfield, General Manager
of Voice Solutions at IS. "The VoIP market in South Africa
is still very immature so people are not likely to go for the big
bang approach. We've offered our customers the ability to
let them walk before they runs so it's very much an evolutionary
process."
The stage-by-stage rollout
of VoIS has been implemented with an initial four services. The
first product is VoIS branch-to-branch and is limited to their VPN
clients whose wide area network IS run. "For them the transition
is a very easy step. They literally just have to reconfigure their
PBX to send some calls over IS as opposed to the national carrier
Telkom," says Hatfield. Technically, the service is delivered
by essentially segmenting a layer on the network, which serves as
the transmission infrastructure, and allocating it to voice traffic
as opposed to data. "These types of traffic do share each others
capacity so if no calls are being made the data bursts into that
additional capacity therefore it's good utilisation of the
infrastructure," claims Hatfield.
"On the back of
our VPN logically we have always had a voice plane so because it
is a MPLS network we have got various classes of traffic in terms
of priority. Voice is the highest priority." In terms of the
raw circuits, the MPLS VPN network is leased from the incumbent
Telkom who serves as the only facilities provider in the country
but IS manage this network entirely extending across South Africa
into Hong Kong, New York and London and various links between there.
This service is charged on a voice channel basis. The channel is
purchased for a fixed R1100 a month (R2000 for an international
channel) and depending on how well the customer utilises that channel,
their effective price per minute fluctuates. "If flatlined
the cost per min averages out to 10c a call, which is a substantial
saving on Telkom's 80c a call," says Hatfield. "Realistically,
if the customer only gets 50% utilisation out of the channel they
are still paying effectively 20c a call, which is still a quarter
of Telkom's rate. So even if the customer doesn't use
the channel particularly well, they still have quite a lot of money
to save."
The second cost-saving
product from the VoIS range is the outbound global service. Unlike
the inter-branch service, which requires the different branches
to be connected to the network, customers of the global service
just need one leased circuit into the IS node. "Again it's
a simple implementation task as the PBX just has to be reconfigured
to decide that anything with a 09 prefix is routed to IS instead
of Telkom," claims Hatfield. "Through our interconnect
with AT&T in New York and Teleglobe in London, we carry it on
to them who have onward connections and can terminate the call for
us anywhere in the world." At R1.04 the price of these international
calls save 30-40% when Telkom's rate of R1.50 (excluding VAT)
is used as a benchmark.
The third and fourth
products of the VoIS suite are also delivered using this global
network and IS's nodes abroad. VoIS Contact is especially
designed for contact centres, established by foreign companies in
South Africa, where IS acts as the carrier instead of Telkom. "We
receive calls into our international nodes, carry them down to South
Africa and then pass the call on to wherever the call centre may
be," says Hatfield. Similarly, the Voice National service is
delivered through international re-filing. "We use a more cost-effective
route rather than a direct route so we take the international calls
to AT&T or Telegllobe in London and they bring them back into
South Africa with their existing interconnect agreement with Telkom,"
adds Hatfield.
The reason being is that currently IS do not have interconnect with
Telkom so have to dial-out into their network, which is more expensive.
"With interconnect we can handle wholesale minutes to Telkom
at 10c/min as opposed to 56c/min, which we are currently paying
to dial into their network," says Hatfield. "At 70c/min
through the re-filing method, customers only make 10-15% saving,
which is not enough to motivate a customer to move operators. Using
interconnect, a national service then becomes a lot more sustainable
and feasible. The service at present is just an interim solution
until the regulator obligates Telkom to interconnect with us. We
make less of a saving and virtually no margin as a service provider
but we are willing to incur risks to ensure we have something on
offer nationally to compliment the other more cost-saving products
and complete the whole range."
Greg Hatfield believes
that Telkom's recent tariff changes are actually a tactical
approach to make it more difficult for VoIP operators to sustain
a cost-effective national service using the present dial-out system.
"By lowering the national rate we now have less room to play
with after we pay the dial-out cost of 56c, which now leaves us
24c to try and make a saving with," he adds.
If the interconnect framework
is published and promulgated into law by the end of the year, IS
intend to rollout the remaining VoIP products. "Future services
will include allowing customers to call each other on the IS network,
which is the On-Net call scenario. Once interconnect is in place
and we have access to the Number Plan, which ICASA are also resolving,
we can terminate cellular traffic and receive inbound calls,"
explains Hatfield. At present, all the services from IS are virtually
no risk because if the IS network goes down or they have under-provisioned
capacity, voice calls will overflow and dynamically route back to
Telkom, as with a lot of the other VoIP offerings. "We are
not saying to our customers to sever their link with Telkom but
just saying to make a decision to route some of the calls to IS.
However, once we reach a stage when we can offer every kind of service,
IS will be able to be a complete telco and have full telco capability
so customers can then dispose their link to Telkom."
At the moment, IS's
strategy is corporate and channel as opposed to consumer. "Our
target is corporate because due to the low penetration of broadband
in South Africa, everybody in the corporate space can benefit from
VoIP whereas only a few people in the consumer space can benefit.
The opportunity for the consumers in the VoIP space is limited to
those that have DSL connectivity," says Hatfield. Hatfield
went on to say that "IS is positioning itself in the VoIP market
as not the cheapest provider but a toll quality operator with corporate
focused voice quality with some cost savings. But we are acutely
aware of the demand particularly coming from consumer, SOHO and
SME markets for a much more price competitive and be it, a somewhat
prejudiced quality service. With this in mind, we are going to be
to be differentiating downwards and offering a more competitive
pricing perspective, potentially an internet telephony type service
like Skype. So come mid-year, around May or June, we absolutely
fully intend to have a consumer broadband VoIP service available
in South Africa."
With regard to the rest
of the continent, Hatfield is keen to express the importance of
Africa to IS. "Whenever IS places a node in say, Nigeria, it
is always voice reading so fully fitted with gateways to dial into
and receive calls from the PSTN and any of those sorts of services,"
he explains. "There is a large enterprise market in Africa
where lots of American, European and Asian businesses are setting
up shop so to speak. Therefore, we will absolutely be able to provide
all VoIP services, bar the call centre option as it may not be applicable,
to wherever the client may be."
However, with 250 corporates
and around 2500 branches connected to IS as well as an online community
of around 4000, only about nine of these clients have signed on
to VoIS. "We have been planning and testing our product since
September 2004 when the liberalisation announcement was made but
we are still starting from scratch. We have invested a lot of money
like installing a billing engine and we are currently busy implementing
our Broad Soft solution in regards to IS's soft switch, says
Hatfield. "We have 4000 customers with leased line connectivity
so it's just a matter of converting them from data customers
to VoIP customers. Through our channel and various dial-up ISP resellers
like MWEB and Tiscali, about 60-70% of dial-up customers dial into
an IS node so we intend to deliver our VoIP strategy through them
as well. Our perception though is that the market will take some
time convincing to mass migrate, even when we do become a full telco,
which we are aiming to achieve legally and technically by 2006 if
the interconnect and Number Plan issues are resolved."
One company that seems
to be attracting a much larger customer base so far is Storm. Currently,
the business voice and internet service provider has a total number
of customers in the region of hundreds and is signing up dozens
of customers a week to the service, according to joint CEO, Tim
Parsonson. Storm's VoIP solution has officially been in the
market since the beginning of February but has been in operation
on a trial basis since September 2004. Storm believes that their
service is appealing not only because of the cost savings but as
a result of the manageable solution they have come up with through
years of voice telecoms expertise. "In terms of the packaging
of the product, one of the big issues about VoIP is that to date
it's a new technology obviously and a lot of people are uncertain
about it. Therefore, people will go and buy expensive new equipment
and then they will upgrade their existing fixed capacity or they'll
get new fixed capacity to cater for voice because they need a certain
amount of fixed capacity. So the fixed cost increases quite a lot.
Now they do that on the basis that they expect to capture all the
calls and lower their variable cost so that they can make a return,"
explains Parsonson.
"What we find is
that a lot of customers don't know how to manage this so they'll
put it in and find that things go wrong, equipment goes down and
then a couple of months later they realise that actually they haven't
been capturing as many of the calls. As a result, the calls will
be going all over the PSTN at normal rate and they have this additional
fixed cost to add. So what Storm is doing is putting in a service
where basically we don't charge for the gateway, we don't
charge for any of the bandwidth so there's no ISP cost. We
put the gateway in at our cost and we put all the bandwidth in.
We manage that and we give a service delivery agreement to say that
we guarantee that we'll capture your traffic as well providing
quality, and then we just charge a per minute rate. So essentially
our customers are just paying for the calls they use, which differentiates
us from the other VoIP operators." He went on to say that "the
bottom line is once you're sitting in front of it nobody's
actually really interested in VoIP, everybody's just interested
in saving money so the more they get into the technology aspect
the more loss they're going to encounter. The problem with
other such solutions that we found is that the customers take quite
a lot of risk on that technology and it doesn't work so they
actually lose money. So what we try and do is just take all of that
risk out of the equation."
The VoIP service is delivered
through a permanent internet connection into the company, which
is not dial-up nor wireless nor ADSL and is not provided over other
existing ISP connections. "What we at Storm are doing is that
we will sell our VoIP solution to a customer/company and on the
back of that we will then put in a permanent connection using Telkom's
diginet service so it's a leased line. That connects the company
to Storm and then what we do is we put a VoIP gateway on the back
of their existing PABX so they don't have to change it. We
will then interconnect all or some of the ports coming out of the
PABX into that gateway and then that gateway converts it into VoIP
and it goes into the IP connection," described Parsonson. "We
also monitor the IP network so if for some reason the IP quality
goes down and the diginet service breaks at Telkom's end,
all the calls will automatically transfer to Telkom's PSTN.
So it gives total peace of mind."
However, by using a diginet
service Storm have encountered a problem. Most businesses in South
Africa are turning from diginet connections to broadband and leased
line solutions of broadband, which is an issue for Storm as more
money is saved with when using broadband connections. Nevertheless,
Tim Parsonson is not phased by this factor. "A lot of have
businesses have been coming back to a diginet service because Telkom
have put in lots of restrictions into its DSL offer, by capping
bandwidth and not providing fixed IP addresses, which is not very
good for a corporate environment. Because of all of these features
that Telkom has built into the offer at the moment, which they have
done purely because they don't want to cannibalise their diginet
network, it's not really a great service. For small businesses
it's quite good but it doesn't really work with VoIP."
Storm's VoIP customers
pay 30-55c/min to any number in South Africa, resulting in a 30-60%
saving when compared to Telkom's national rate, and R1.05
from a fixed line to a mobile. "If you call any other Storm
customer, which will be obviously if you're a multi-branch
company, it will be any one of your other branches or in fact any
other Storm VoIP customer, then there's an on-net charge,
which is about 60-70% cheaper than Telkom's national service,"
adds Parsonson. Aimed at business customers making over 5000 minutes
of international calls a month, overseas charges vary depending
on the destination but a typical rate is 80c/min to somewhere like
the UK, which is just over half of what Telkom's global calling
rate is.
In terms of the quality
of the calls Storm customers can expect when using VoIP, Tim Parsonson
claims that the quality is "genuinely indistinguishable."
He compares the quality of Storm's VoIP solution to services
like Skype. "If you put it in and you do it right, you don't
notice a difference. If my customers look at using VoIP they can
look easy things like Skype, it's an amazing product but sometimes
it can work great and sometimes it won't work at all. This
is because if you do voice over the free for all internet then nobody's
managing the quality of that data bandwidth. If that IP bandwidth
fluctuates this will affect the quality by upsetting the bit speeds
of which the data packets can go through and affect how consistent
it all is. VoIP is very sensitive to those quality effects so in
South Africa where we have much less internet bandwidth and businesses
are working on very thin connections in comparison to somewhere
like the UK, you've got to manage that quality of service
very tightly. So for consumers Skype is great because it's
a free service but for businesses, where making quality voice calls
is essential for the day-to-day operations, it's terrible."
Although Storm is a corporate
focused provider, they do have consumer offerings and aim to take
their VoIP service to the consumer market. "We do pre-pay cards
for consumers but we don't operate as Storm. We offer it to
resellers and they re-brand it and then offer it on to their customers.
When the DSL issue is resolved and the SNO gets its act together
so there's some competition and a bit more of an ADSL market
out there, then I think we will combine voice with ADSL and take
our VoIP service to the consumer market," says Parsonson. "It's
actually a killer application because if people get tonnes of bandwidth
for their internet and they get very cheap or free phone calls,
they can eradicate their monthly charges for their phone rental.
So when broadband really comes to South Africa, domestic VoIP is
going to be a massive thing," he adds.
Along with Storm, Datapro
has been also offering a full range of VoIP services since the liberalisation
of the market. "We started dabbling in voice services around
two to three years ago but only implemented these services in South
Africa when VoIP became legal essentially," says Datapro Managing
Director, Douglas Reid. It is because of this past experience that
Reid believes that Datapro have the upper hand in the VoIP market.
"Other VoIP providers don't have the experience with
voice like us and providers of voice don't have experience
in relation to the internet. We already had our gateways and switches
and interconnect and so forth in place so we had an advantage over
the other local providers to begin with and that is why we are quite
ahead."
With around 40 VoIP customers
to date, Reid believes the service is growing fairly fast as Datapro
sell into their corporate base of 3000-4000. The cost of the service
varies depending on product category. At the moment customers who
normally expect to pay R30,000 or more in telephone bills can appreciate
a 35% saving on their entire bill, according to Reid, who adds that
there also exists a service for SMEs. The 35% economising incorporates
roughly a 70% saving on international calls, 35% on cellular calls
and 10% on local calls. "On net charges are lower obviously
so the savings are 70-80% on local calls and 65-80% on international
calls depending on the destination of the call," says Reid.
In contrast to the SA
market, those planning VoIP services in Kenya at the moment have
been largely focusing on the consumer space in addition to the corporates.
A number of VoIP services are planned in Kenya offering competitive
rates and quality voice calls. At present, these VoIP offerings
cannot be divulged due to recent developments in Kenya with the
dissolution of the regulatory body, which has left VoIP provision
and other breakthrough services very much in limbo.
Elsewhere in Africa,
Egypt has announced its intention to legalise VoIP. In a report
released by the country's National Telecommunication Regulatory
Authority, the general regulations for the provision of this service
are outlined. Although many of the policies adopt a cautious line
the most notable inclusion is that PC-to-PC services, like Skype,
will be permissible and do not necessitate licensing from NTRA.
In a country with a large proportion of PC users this regulation
will have a significant impact. In regards to VoIP for internal
usage in organisations, these services will be provided on networks
established by companies and authorities for private purposes and
these private networks will be monitored by the main networks according
to the license issued to the latter (Egypt Telecom and data companies).
Licenses for VPN services will be issued to data companies and will
be restricted to clients of such companies. Other limitations include
not being able to obtain a number plan and connecting a mobile or
fixed telecommunications network.
For more information,
contact:
Russell
Southwood, Balancing Act, 71 Crescent Lane, London SW4 9PT
Tel/fax: + 44 20 7720 5993 Cell: 07973 561987 E-mail: info@balancingact-africa.com
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