A Qualitative Comparative Study on the Regulatory Framework of VoIP

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1 A Qualitative Comparative Study on the Regulatory Framework of VoIP 1 Shen Hongtao, 2 Liang Xuefeng 1 School of Management, Harbin Institute of Technology;School of Economics and Management, Heilongjiang Institute of Science and Technology, 2 School of Management, Harbin Institute of Technology, Abstract From a qualitative comparative analysis (QCA) angle, this paper investigates 35 countries whose VoIP regulatory practices are quite typical and sifts the key factors and their combinations that form various regulatory frameworks. The paper finds that different factors or factor combinations leading to different VoIP regulatory frameworks of sample countries. Finally, according to the results of QCA, authors analyze the features and effects of the existing VoIP regulatory policies in China, and then put forward several corresponding suggestions for how to improve the VoIP regulations. Keywords:VoIP Rregulatory Framework, Networked Information Management, QCA 1. Introduction Upon the network information technology s rapid developing since 21 st century, the process of globalization has been accelerated. The VoIP (Voice over Internet Protocol) based on the technology of speech transmission through the Internet has more advantages of cheap costs, great compatibility and saving broadband resources so that it has challenged the traditional communication technologies based on the public switched telephone network (PSTN). In order to maintain such services as common or emergency telephone and public security monitoring that the telecom operators have usually provided, most countries regulate the VoIP in a general sense. Internationally, however, the regulatory frameworks in different countries are quite different. But, what cause the differences of the VoIP regulatory framework in each county? What factors or factor combinations determine the important effects of various regulatory frameworks? These topics have been rarely discussed till now. So, this paper examined the basic principles of the VoIP regulatory frameworks with related knowledge. On the basis of the literature review, selecting the sample VoIP regulatory frameworks of representative countries and preliminarily setting key factors or cause variables, we use the qualitative comparative approaches to determine the final cause variables and their combinations and give some explanations of the VoIP regulatory framework formed by each class of cause variables and their combinations at the economic and political level. Furthermore, we introduce the characters and effects of the China s current VoIP regulatory framework and put forward the improving suggestions. 2. Methods In the light of its services, the VoIP has been classified three categories as the PC-PC, the Phone- Phone and the PC-Phone by the countries worldwide. The latter two are mainly discussed in this text. A qualitative comparative analysis has been performed for policy studies on the VoIP regulatory frameworks of different countries. This study selects 35 sample countries that have different VoIP regulatory frameworks. The data of cases are primarily collected from the International Telecommunication Union (ITU) and ICT Statistics in The analysis tools this study has used are fs/qca(2.0) and QCA(DOS Version) software packages. 2.1 Standards of classification According to the ITU s survey of 191 countries, the VoIP regulatory frameworks in these countries have been classified three categories as market banned, market closed *, market allowed and no framework [1]. We adopt the ITU s classification standards and calculate the amount of the countries International Journal of Information Processing and Management(IJIPM) Volume 4, Number 1, January 2013 doi: /ijipm.vol4.issue1.4 29

2 and regions whose regulatory policies are corresponding to these four frameworks from 2004 to 2009 [2]. Figure 1. Worldwide regulation of VoIP, , ITU(2009) *: Market closed means only allowing existing large state-owned telecom operators to provide the VoIP services, or a large scale VoIP operating is allowed in one country, but the scattered VoIP operation is prohibited. From the figure above we can see there are only 46 countries where the VoIP markets were allowed in 2004, and these countries are mainly located in Europe and North America. Besides, there are 57 countries where the VoIP markets were no framework. But by 2009, the countries of the VoIP markets allowed had increased to 92 and meanwhile 39 countries accepted the VoIP. The VoIP market banned countries decreased from 80 in 2004 to 49 in All these show that the VoIP market allowed has become a trend. 2.2 Configuration of samples Based on the literature review, we choose sample countries as the representative VoIP regulatory frameworks according to the sample size of the qualitative comparative analysis (QCA). These sample countries are China, USA, Germany, UK, France, Japan, Canada, Russia, Korea, Singapore, Israel, Hong Kong, Finland, Norway, South Africa, Egypt, Australia, White Russia, Nigeria, Angola, Qatar, Saudi Arabia, Brazil, Argentina, Ghana, UAE, Cuba, Paraguay, Costarica, Myanmar, Mexico, Nepal, Tonga, Bolivia and Turkmenistan. Table1. VoIP regulatory framework categories of sample countries Category Allowed No framework Banned Closed Sample Countries USA, Germany, UK, France, Finland, Norway, South Africa, Egypt, Japan, Korea, Singapore, Hong Kong, Mexico, Canada, Australia Nigeria, Angola, Qatar, Saudi Arabia, Brazil, Argentina Costarica, White Russia, Israel, UAE, Cuba, Paraguay China, Myanmar, Russia, Ghana, Nepal, Tonga, Bolivia, Turkmenistan 30

3 2.3 Determinants of key factors This study primarily selects five key factors relative to former research of the VoIP regulations as follows: (1) Competition of Telecom Markets: Because the VoIP services have a strong impact on the interests of traditional telecom operators, this will inevitably create a great loss to them. The provision of the VoIP services will be directly affected by the influence degree of the interest separation and whether the government will place a particular emphasis on maintaining the interests of traditional telecom operators. It is also a macro-environment factor whether the telecom market of that country is monopolized, sufficiently competitive or limitedly competitive [3]. (2) Competition of Internet Operators: This factor includes the competitive degree of the Internet operators, the amount of the main bodies of the backbone networks, the control degree of the Internet, the levels of the difficulty in the Internet operators accessing, the competitive degree of the providers of the backbone networks and the degree of their independence from the telecom operators. (3) Developing Levels of IT and the Internet: It refers to the developing levels of IT and communication technologies and the current situation of the integration of three networks including the Telecommunication Network, the Internet and the Cable Television Network. (4) Technological Reliability: The reliability and stability of the VoIP-related technologies and the ensured security of the VoIP application should be considered. (5) Political Structures of a State: This factor mainly focus on whether the political structure of a state tends to be an authoritarian system controlling information flow or a democracy encouraging information unconfined flow; whether nationals can fully express his own interest demand; and to what extent the government will accept their requirements and carry them out. Considering it is too general to distinguish the political structure of a state, here we simplify this factor as the degree of the free speech and assign a value according to the index of the freedom of the press. 3. VoIP regulatory frameworks of different factor combinations By analyzing the QCA results and the specific conditions of different countries, this study has concluded different factor combinations of various VoIP regulatory frameworks. 3.1 Market allowed In the case of the market allowed of the VoIP regulatory framework, the competition of telecom markets and the competition of the Internet markets and the developing levels of IT and the degree of free speech are all much better in such countries as USA, UK, Germany, France, Finland, Norway, Australia, Japan, Canada, Korea, Singapore and Hong Kong, so their VoIP regulatory frameworks are the market allowed that relatively match the variable combinations of the analysis results. And it can also be understood that in such countries where the telecom markets and the Internet markets are fully competitive and the IT developing levels are very high and the people have extensive democratic rights, there are no reasons for absolute prohibiting the newly emerging VoIP with great advantages [4]. Although the Internet markets are insufficiently competitive and the IT developing levels are relatively low in some other counties in the cases such as South Africa, Egypt and Mexico, their telecom markets are fully competitive and the key point is that the degree of free speech is very high, which cause these countries to implement the VoIP market allowed policy. 3.2 No regulatory framework In the condition of no VoIP regulatory framework, the competitive degree of the telecom markets and the competitive degree of the Internet markets and the developing levels of IT are all very low in Brazil, Angola, Qatar and Argentina four countries, but the degree of free speech is relatively high, and the four factors are intermediate. So we believe this condition makes the governments in a dilemma with the VoIP regulatory framework and no framework there. 31

4 3.2 Market closed For the VoIP markets closed, the degree of free speech in Ghana, China, Myanmar and Turkmenistan are relatively low, but the competitive degree of the telecom markets and the competitive degree of the Internet markets and the developing levels of IT are rather low. We think the comprehensive function makes these countries consider too much to protect the interests of the domestic traditional telecom operators and the interest demands of the people cannot be accepted by these governments, so the VoIP is only a kind of service provided by large state-owned operators. The degree of free speech in Russia, Nepal, Tonga and Bolivia are higher than in Ghana and China, but the competitive degree of telecom markets and the competitive degree of the Internet markets and the developing levels of IT are all very low, and even if the interest demands can be accepted by these governments, due to the restriction of the macro environment, the VoIP regulatory framework could only be market closed. 3.3 Market banned In the condition of market banned, four factor values of White Russia and Brazil are very low, so their VoIP regulatory frameworks are market banned to prevent the VoIP impacts on their domestic telecom markets and their Internet markets. On the other hand, in the case that the degree of free speech is very low; the interest demands of the people cannot be completely expressed, so the government will neglect the factor of the people s interests so as to implement the VoIP market banned policy when they consider making policies. But the market banned policy will also prevent the development of the telecom industry, the Internet market and the level of IT and reduce the social welfare of that country. Furthermore, the degree of free speech in Costarica, Israel, UAE and Paraguay are considerably high, but yet the VoIP market banned policies are adopted there. In the light of the fact table, we can find that it is because of their uncompetitive telecom markets and the backwardness of their telecom industries and Internet markets, though the people s interest demands can be greatly accepted, the backwardness of their telecom industries and IT has caused the VoIP regulatory framework is the market banned. By analyzing different combinations of various factors determining the VoIP regulatory frameworks, we can draw some conclusions as follows: first, the VoIP regulatory policies are mainly affected by the combined conditions of the competition of telecom markets and the competition of the Internet markets and the developing levels of IT. In the combined condition of uncompetitive telecom markets and uncompetitive Internet markets and low developing levels of IT, the VoIP regulatory framework tends to be the market closed or market banned; second, in the combined condition of the extensive free speech and the completely competitive Internet markets and the high developing levels of IT or the extensive free speech and the completely competitive telecom markets, the VoIP regulatory framework is likely to be market allowed or no framework. Furthermore, when the citizens rights of free speech are relatively restricted, the VoIP regulatory framework tends to be the market closed or market banned policy, but the policy will not be market allowed or no framework. That is, the restricted the right of free speech is the sufficient condition of the market closed or market banned policy. However, when the VoIP regulatory framework is market allowed or no framework, the right of free speech is necessarily extensive, that is, the extensive free speech is the necessary condition of the VoIP regulation of the market allowed or no framework. 4. Analysis of VoIP regulatory framework in China 4.1 Advantages and flaws in existing regulatory framework Currently, China s government has adopted the VoIP market closed policy, which is only allowing several basic domestic telecom operators to step up their VoIP business activities. And some software such as Skype and UU Call has nearly failed to operate at home. The China s existing VoIP regulatory framework can achieve three main goals: first, it can prevent China Telecom, China Mobile and China Unicom, the three major telecom operators in China, from the influence of interest separating and avoid the telecom market fluctuations and a great influence on the cumulative investment of the 32

5 traditional telecom operators infrastructure because of the large sunk costs; second, because it is by means of the Internet that the VoIP has developed, the market closed policy can maintain the networks healthy developments; third, since the security problem of the Internet has become more serious, this regulatory framework can avoided such risks of the customers privacy and interest being damaged and even the national security being threatened to some extent. On the other hand, however, the VoIP market closed policy has still caused a series of problems. For example, first, the fact that the China s telecom industry is heavily monopolized by the three major telecom operators cannot create a sufficient competitive situation so that China s telecom industry has been stunted and the customers acquiring deserved interest is not facilitated; second, the market closed policy has stunted the Internet s development and will not facilitate the development of new technologies and businesses; third, the security problems will not be a reason of controlling the Internet, since most of them have been solved appropriately with the growth of the safety technologies; fourth, because of low charges and convenient operations of the VoIP, the VoIP market closed will certainly damage the welfare of the whole society. 4.2 Suggestions for improving VoIP regulatory framework (1) Establishing Competitive Mechanism of Telecom Market: Since the China s telecom industry is completely controlled by China Telecom, China Mobile and China Unicom, other telecom operators are not allowed to enter the market and even if they could enter, they would not have any competitive power. Therefore, the government can promote competition through two ways, one is rapidly improving related telecommunication acts, reforming current the telecommunication management system, separating State Communication Administration Bureau and enterprise functions and promoting the establishment of telecom industry competition mechanism; the other is allowing other telecom operators to enter domestic telecom market to break up monopolies of the current 3 telecom operators in favor of full competition [5]. (2) Deregulating the Internet: The China s Internet market is growing so rapidly that the population of the Internet users has achieved 360 million and ranked the first in the world in But because the competition extent of the Internet service is still not very high, deregulating the Internet market and allowing more Internet service providers to enter domestic market to compete freely. This will greatly promote the Internet s growth. Besides, speeding up the Internet popularization across the country, especially in the remote regions, will meet the conditions of the high competition extent of the Internet under the VoIP market allowed. (3) Speeding up IT: Since the index of the developing level of the China s information and communication technology (ICT) is only 3.11 in the ITU s report The ICT Development Index ranking 73 in over 150 countries, it is necessary to speed up China s information technology and push IT rapidly to meet the national increasing demand for information. China should accelerate the infrastructure construction of IT and complete the information security system to advance the national information consumption and meet the conditions of the VoIP market allowed (4) Increasing Citizen s Right of Free Speech: The right of free speech mentioned here emphasizes mostly what the regulators should consider, for example, the government restricts news release, book publishing and the Internet information to some extent and corresponding regulatory policies are still implemented. From the analysis above, we understand relatively extensive rights of free speech are necessary conditions of the VoIP market development. Therefore, it is necessary to expand citizen s rights of free speech. The information that is not false or imperils the interest of national security should be deregulated and ensure it to fully transmit. 5. Conclusion Nowadays the VoIP has been gradually replacing traditional telephones, so the research of the VoIP regulatory framework is still a key problem in the field of the communications technology. This paper studied the problem how different regulatory frameworks had developed, discussed the main factors that currently determined the VoIP regulatory framework from the point of broader view such as technology, market and political structure of a state and systematically explained the cause of current regulatory framework formation. 33

6 From macroeconomic perspective, we selected four factors including the competition degree of the telecom market, the competition degree of the Internet market, the level of the IT application and the degree of free speech that affect the VoIP regulatory frameworks and assigned values to these variables. Through the qualitative comparative analysis, this paper reaches the following two conclusions: (1) The competition degree of the telecom market, the competition degree of the Internet market and the levels of IT application are main factors that affect the VoIP regulatory framework making. When three factors are relatively low, the VoIP regulatory framework tends to adopt the policies of market closed and market banned. On the contrary, when they are very high, it tends to be market allowed and no framework. (2) After we originally put the factors at the political level into the analysis results, we find the low degree of free speech is the sufficient condition of the VoIP market closed or market banned. So the high degree of free speech is the necessary condition. 6. References [1] Biggs P, VoIP: Enemy or Ally?[R]. ITU GRS 2009 Discussion Paper, [2] ITU, Developments of Next Generation Networks (NGN): country case studies[r], [3] WANG Hongmei, Political Challenges of Telecom Globalization[N]. People s Post and Telecom, no.4, [4] Public Consultation, Regulation of VoIP Services[R] _pageid=58&_dad=portal30&_schema=portal30 [5] Wang Xueqing, Yin Wenquan, The Goal, Object and Policy[J]. Reform,no. 3, pp.35 41,

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