Next Generation IP Wholesale Solutions BT Global IP Exchange IP Interoperability Opening up new markets A whitepaper created by Innovation Observatory
Foreword The telecoms world is in transition to IP driven by customer demand, new capabilities and potential cost savings. The initial step in making the change is primarily to support voice calls, both nationally and internationally. However, this is just the start; once communication providers have an IP capability then more advanced services are possible, enabled by a secure IP of connected players. It goes without saying that this applies to all types of communication provider, be they small to large, Fixed to Reseller to, and Over the Top players. This paper looks at a number of market opportunities that can accompany and complement the roll-out of IP voice. Introduction: New Service Opportunities New services are emerging within operators own s, or in the Internet domain (i.e. over-the-top services) that have the potential to generate additional turnover if they can be extended across borders to become nationwide or international services. Examples include: High-definition (HD) voice calling Videocalling These services can deliver much-needed revenues for fixed and mobile operators, ISPs, and over-the-top content and application providers. However, they are currently available only in limited islands, with little interworking between different providers services, and limited interworking between managed s and over-the-top Internet applications. If interworking can be enabled, then as much as 3.5 billion in extra service revenues might be accessible globally by the end of 2015, and more beyond. However, there are challenges in delivering international or even national cross- interworking. These markets are very young in terms of their maturity; traffic volumes are currently low; and the services that are available use a variety of different protocols or variants of protocols. In order to create interoperable cross- services, operators and service providers must make significant investments to enable each interconnect route. They must enter legal, commercial and technical negotiations, invest in gateways, and manage configuration of multiple signalling and routing systems. They must do this in the context of potentially low monetary value to be gained from each communication provider relationship, in the expectation that traffic volumes will grow in the longer term. In fact it does not make economic sense in the current lifecycle of these services for each operator and service provider to develop its own global of interconnect and interworking agreements to enable service interworking. However, a specialist wholesale intermediary can aggregate calls between all communication providers, and more easily cover the costs of the investments needed to open up new routes for new services. An intermediary who can provide cross- connectivity (e.g. IP to PSTN or mobile ) seamless signalling protocol and inter-codec conversion cross-border connectivity quality of service (rather than best efforts )* and cost competitiveness can therefore help operators and over-the-top communication providers to open up new geographic and service markets. Indeed the choice of the right interoperability partner, will help a communication provider to develop long-term revenues from the provision of dynamic intelligently-routed communications. These communications can include voice, video, SMS, picture and instant messaging, file transfer, and conferencing. They can be delivered anywhere in the world, to any suitable device, and interwork with social s and other online communities. This paper discusses the potential for some of the services discussed above (high-definition voice and video calling), and the revenues that service providers can find by enabling cross-domain service interworking. It also considers the qualities a third-party interoperability provider must exhibit in order to maximise the revenue opportunity for its customers. The early implementations of SIP/IP interconnect solutions designed around the use of the public internet as a transport mechanism failed to deliver on the promise of higher-quality services, and they are missing many of the features taken for granted in the TDM world. But this early failure will not undermine the future of SIP/IP interconnect services. Higher-quality interconnects will define the leaders in this new model who will compete based on service differentiators, end-user experience and price mechanisms.
High-Definition (HD) Voice High-definition voice services offer an improved experience for end users, with a clearer sound, than traditional voice services. HD voice services have been launched recently in a number of ing environments. operators started to offer HD services to their customers during 2010. Orange, for instance, launched HD voice in a number of its s. At the time of writing (March 2011), services were available at no extra cost to residential and business subscribers with compatible handsets in Armenia, Belgium (via Mobistar), Egypt (via Mobinil), France (SFR), Luxembourg, Moldova, Spain and the UK. Other mobile operators to have launched HD voice include Megafon (Russia), and Tata DOCOMO (India), TIM (Italy), Vipnet (Croatia) and WIND (Canada). Services were also being prepared for launch in Switzerland and the Dominican Republic. Typically mobile HD services are only available to customers on the same national, and only where the end user has an HDcapable device. In the Internet sphere, a variety of companies have introduced HD services. Skype offers an HD codec for Skype-to-Skype calls (though the HD capability is lost for Skype-in and Skype-out services). Google has bought HD voice codec provider GIPS. Nimbuzz offers an HD voice application for Apple ios and Android devices. In the enterprise environment, hosted IP PB providers offer services that can use HD-capable phones from Polycom and others. And device manufacturers are targeting their wideband audio products at SIP-based VoIP services. As HD-capable devices become more widespread, awareness is expected to become the primary driver of HD voice adoption. Increased awareness and use of HD voice will lead over time to a general dissatisfaction with standard-definition voice. Early evidence of this comes from Orange, which conducted a survey among its early HD users. 86% of respondents to the survey said that the availability of HD voice would be one of their selection criteria for future mobile phone purchases, and 76% of them said they would change mobile devices to obtain HD voice. Business users will be swift to come to expect HD voice; they will increasingly want HD voice when they roam, and when they call internationally. The business market will also drive use of HD voice conferencing, essentially an extension of the HD calling market, except that multiple callers are involved. A nascent HD audioconferencing market already exists, with a range of HD conferencing communication providers. Most dial-in audio conferencing is expected to evolve to include an HD offer. These early communication providers route calls over the Internet or over private IP s either as part of a web conference or as a standalone audio conference. Take-up of mobile HD voice for business and residential users is likely to be much more speedy than in fixed s as operators can handle it end-to-end with no transcoding issues (mobile uses the ARM-WB codec from end to end), and can roll it out rapidly as handsets are replaced. Orange, for instance, offers the service as a free upgrade for anyone on its with a compatible device. Skype offers it for free. However, as national cross-, international and roaming HD voice calls emerge, there will be an opportunity for communication providers to charge a small premium for services. They will have to cover the cost of ensuring interoperability, and some segments of customers will be willing to pay a reasonable charge for high-quality international calls particularly for business purposes. Wider availability of HD capable devices Drivers Increasing familiarity with improved quality Dissatisfaction with non-hd voice quality Demand for HD voice Currently low device penetration Barriers Figure 1: Market enablers and barriers for HD voice services
Market opportunities The HD voice market is just at the start of the adoption curve ultimately HD services are expected to be the de facto standard. In the long run all voice services will be high-definition services. In the short term, however, islands of service have emerged, and as Figure 2 demonstrates calling between those islands is either problematic or not possible at all. 1 Internet Calls generated by over-the-top HD voice services can theoretically be routed to anyone on the Internet but the software used to enable the HD calls may not be present on the called target device. 2 Managed IP Additionally, HD calls generated by over-the-top services cannot break out to HD-capable mobile phones. Figure 2: HD voice without interworking 1 2 Interworking Managed IP Internet Services established on private managed IP s may be able to reach services on other private managed IP s, or on the Internet, but will not always use the same codecs and so may not be interoperable. Worse, there may be no mechanism for the different IP end points to identify and locate one another and hence to know that an HD call is even possible. HD calls originating on one mobile cannot yet reach people with HD capable devices on other operators mobile s and certainly cannot reach devices on IP s. There is a significant opportunity for communication providers to drive extra revenues by enabling crossing of all these sorts of national and international HD calls, and to enable HD voice roaming. Example scenarios in which service interworking can expand the addressable market are shown in Figure 3. Figure 3: HD voice with interworking
GBP Millions Over-the-top communication providers have an opportunity to introduce HD voice-in and voice-out services for their customers. Calls can break-out to mobile s for termination on HD-capable devices without losing their HD characteristics. They also have the opportunity to offer on-net HD voice services delivered over managed s. This enables the qualities of the HD service to be supported by transmission facilities capable of ensuring quality of service. Customers in some segments of the market would be prepared to pay a small premium for this quality. operators have the opportunity to deliver and charge for cross- national and international and roaming HD calls. They also have the opportunity to enable HD calls to be made to end users on managed IP s, and to people using over-the-top services. Fixed operators can enable HD voice calling from IP CPE on managed IP s to IP CPE on third-party managed s. Additionally, they can provide the service to IP devices on non-hosted IP PBs, to mobile end points, and to devices equipped for over-the-top services. Innovation Observatory estimates that globally, these three groups of communication providers can access extra retail revenues of as much as 1.5 billion by 2015. At that point penetration and usage of HD-capable devices will still be growing rapidly each year suggesting tremendous room for further growth (see Figure 4). 1,600 1,400 1,200 1,000 800 600 400 200 0 Potential global retail revenues from cross - HD voice services 2012 2013 2014 2015 Figure 4: Potential global retail revenues from cross- HD voice services Videocalling Videocalling has been available on 3G s for several years (as a circuit-switched service) but services are not widely used. According to research published by UK regulator Ofcom, as few as 3% of all mobile end users in the UK make a video call at least once per week. This is not atypical in the global context. users in the US are amongst the biggest users, with 6% making mobile video calls at least once per week. It is estimated that less than 1% of all 3G calls are video calls. A variety of factors lie behind the low usage levels. For a start, services are expensive. In the UK call prices range from 15p per minute on-net, to 50p per minute for cross-net national calls and as much as 1.50 per minute for international calls. Other factors include penetration of capable devices (a video call only works when both parties to the call have video-capable phones), lack of interoperability between all s, the social awkwardness people feel when making video calls (much less of an issue for younger people), services being awkward to set up (although time delay issues have been solved), and poor video quality. However, while mobile videocalling has been slow to take off, videocalling from PCs has been rising steadily. Skype has got people used to making video calls. It reports that nearly 40% of all call minutes going over its are now video calls. The high usage of videocalling on Skype shows that behavioural barriers and attitudes can be overcome. At the same time, a number of other elements are falling into place that will help spread the use of videocalling: 1. Over-the-top fixed and mobile videocalling services are widely available for instance from Apple, Fring, Oovoo and others. 2. smart phones and tablets are increasingly equipped with videocalling capability. 3. operators hope to use videocalling as a driver for additional traffic on their LTE s for instance Verizon has plans to put Skype and videocalling on selected LTE devices from mid-2011. 4. Home-based devices such as Internet-enabled TVs are becoming more popular. Some of these are equipped for VoIP calls (for instance, through partnership with Skype), and with the addition of a webcam, for video calls. Television sets with integrated cameras are also available now. Meanwhile Internet-enabled gaming platforms can also be equipped with camera accessories. TVs and games consoles will bring Internet services and videocalling capabilities into the living room over the next few years. 5. Demographic factors are making video calls more attractive. Families are spread geographically, and in many cases all around the world. People are also travelling extensively for leisure purposes videocalling is a new way of keeping in touch. 6. The use of desktop and mobile devices, as well as Internetenabled TVs, for videoconferencing (essentially a sub-set of videocalling) is an area that is ripe for growth. These personal impromptu videoconferencing solutions offer an extension of the videocalling concept to include multiple participants. The service is currently positioned as a premium version of videocalling, and as such is likely to trail person-to-person videocalling in terms of service usage. But the market is expected to grow.
The drivers, enablers and barriers to market growth are very similar to those for videocalling. Key differences are the extra incentives enterprises face and the need to cut costs in a tight economic environment (videoconferencing can negate the need to travel so often). They also need to improve organisational sustainability (by replacing regular travel with videoconferencing organisations hope to reduce their carbon emissions). Remote working may also prove a driver: people in advanced economies increasingly work from home or other remote locations. 7. Finally, familiarity with videocalling will lead to the development of new applications for the technology. We can expect to see videocalling emerge in a variety of contexts where best-efforts service will not do, and where people are prepared to pay a small premium for high-quality, resilient videocalling especially over WiFi or mobile s. Examples include use of videocalling for educational purposes and in the health sector, rescue and security services, and the petrochemical industries. Videocalling is not just a consumer market. Enterprise and public-sector organisations have the potential to be major users of services. There are still barriers to overcome before videocalling becomes a mass market habit. However, the combination of enablers and drivers now apparent in the market gives great cause for optimism that videocalling is about to emerge as an important means of communication. Low-cost service availability Rise in service capable device penetration Cost of devices and cost of services Increasing broadband speed and penetration Spread of WiFi (in devices and s) Difficulty of interservice interoperability Familiarity with service More international travel by consumers Demand for videocalling services Poor user experience Family spread Increased home working Videocalling not habitual behaviour Enterprise desire to cut travel and carbon footprint New enterprise applications Difficulty of service use Drivers (growing in influence) Barriers (declining in influence) Figure 5: Market enablers and barriers for videocalling services
Market Opportunities As with HD voice, one major barrier to the growth of the videocalling market is widespread service interoperability. At the moment communication providers are looking at the opportunity to deliver over-the-top services, which stay within the Internet domain; or to provide on-net services which don t leave their own managed s. videocalling can be delivered between mobile phones on the same, and sometimes between mobile s where the same standards (and implementations) are being used. Videoconferencing, telepresence and videocalling services can be delivered over managed s, but ad hoc break-out to other devices is problematic - particularly where quality of service needs to be supported. Broadband access Internet Managed video conferencing Figure 6: Videocalling without interworking Broadband access Interworking Internet Over-the-top videocalling services can typically interwork with other devices using the same application, but there are many applications, and interworking between them is limited. However, there are wider opportunities that can be exploited through the interconnection of the different service domains, including mobile s, managed videoconferencing s, and over-the-top Internet environments. Managed video conferencing As Figure 7 shows, there is also an opportunity for fixed broadband providers to enter the market. Figure 7: Videocalling with interworking
GBP Millions For mobile operators, there is the potential to drive videocalling and conferencing between mobile s (for instance to enable completion of international mobile video calls between s of different types, and to facilitate video service roaming). Managed videoconferencing providers can use a third party to provide one-stop access and interconnection to a variety of s, to offer employees ad hoc and roaming access to enterprise videoconferencing calls. Fixed broadband providers should look to Internet-enabled TVs and potentially to games platforms as a means of delivering premium videocalling services to their customers. They are in the position to offer managed videocalling and videoconferencing end-to-end between their own s and other fixed broadband providers s* or even to mobile operators s. They can assure a high quality of experience that customers will appreciate for long calls with friends, relatives, work colleagues and customers. At the moment the lack of interoperability between managed s has given impetus to over-the-top communication providers interworking will enable operators to regain some of the market. Meanwhile over-the-top communication providers (including social operators as well as OTT VoIP and videocall providers) should look to drive extra money from their videocalling and videoconferencing services in three ways: They should enable video call break-out for termination on mobile video-call-capable devices not carrying their own client software (the video equivalent of Skype s Skype-Out service). They should also look at the potential of a video break-in service (for instance, to enable calls originated on mobile s to terminate on OTT services the video equivalent of Skype-In). Finally, they should consider introducing person-toperson videocalling services where calls are routed via managed IP transit, offering a higher quality of service (with the OTT provider charging a small fee for the service and enabling it to start monetising more customer traffic). Innovation Observatory estimates that globally, these groups of communication providers can access extra retail revenues of as much as 2 billion by 2015. Usage of videocalling services is forecast to be growing strongly at that time meaning the revenue opportunity is even larger if we look further out than that (see Figure 8). 2,500 2,000 1,500 1,000 500 - Potential global retail revenues from cross - videocalling services 2012 2013 2014 2015 Figure 8: Potential global retail revenue from cross- videocalling services IP Interoperability opening up new markets
Consumer drivers Service provider challenges Benefits of using a third party interoperability provider With all of the services discussed in this paper, full cross- service provision is critical, but is some way away. Opening up the market and driving revenues will require the support of a thirdparty interoperability provider both in the early days when traffic volumes and interoperability complexities on any given route are too much for every operator to manage independently, and once the market matures and economies of scale and price pressures still work in favour of outsourcing the task of managing them to a specialist. A strong multi-service interoperability provider will deliver numerous critical service elements: A neutral access hub, so sensitive data can be shared, and complex financial relationships established, in an environment of trust Management of many relationships through a single access point and relationship. The hub must give access to the maximum possible number of interconnect partners Simplicity of engagement: interworking services must be delivered in the most efficient and cost-effective fashion End-to-end quality of service: the key to unlocking the value of inter-domain HD voice and video services is to ensure quality of experience superior to that found on the unmanaged Internet. This is as true for over-the-top providers and social providers as it is for mobile and fixed operators Highly automated processes enabling effective conversion or transcoding for the audience, and interworking across key service and types A successful interoperability service provider will enable service providers to access the key geographical markets, on the primary routes, for a range of intelligently routed services, without the need to make expensive capex investments. It will enable communication between over-the-top, fixed and mobile s. It will help service providers tap into new revenue streams and develop a stronger relationship with their customers. IP Interoperability from BT BT s Global IP Exchange service provides the seamless connection between service providers. Any platform, switch, protocol or application can connect with any other via BT* and* of course* with BT s own s. The service uses industry standards set by the i3 forum and GSMA. BT ensures Interoperability with all other connected parties so customers do not need to support all the necessary protocols and codecs themselves. Global IP Exchange is in effect a hub, where service providers connect via a Direct Connection, a TeleHouse, over the Internet, or over a secure IP connection (MPLS). Voice calls are managed in conjunction with a centralised numbering database enabling connections to be IP end-to-end where possible, or if not to break out (or from) the PSTN. The numbering database is an essential enabler for advanced services, such as those described in this paper. Whilst BT provides the interconnection between service providers it does not provide the advanced service itself. However, it will take on the burden of ensuring that the permutations of differing standards, protocols, and codecs are dealt with to allow connections to be made end-to-end. This Hub approach enables IP connection between all service providers and their end users, but simplified through one commercial relationship and one connection. Consumers would like: Ease of use Service simplicity Things that just work Preference for integrated comms platform with single address book across services (e.g. IM, email, voice and video calls) Demand for neutral wholesale interoperability provider Maintaining interconnect agreements for multiple services between platforms and suppliers at both application and levels Challenge of providing a good quality, reliable connection, intelligently across s Social ing sites have platforms supporting IM, email, image and video sharing, but need to monetize their user bases Retail turf wars with traditional telcos over who provides the unified address book and owns the customer relationship Over-the-top drivers Figure 9: Market enablers and barriers for third-party interoperability services
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