Status and Perspective of IP Telephony in Korea 2007. 3. 19~20 Choon Kyu Kim (cgkim@kt.co.kr) BcN,, KT Telephony over IP, Algeria, 19-20 March 2007. 1
Contents Background VoIP market Worldwide/Japan PSTN/VoIP Market in Korea VoIP impact on PSTN/Broadband in KT IP-PBX in SME Regulation The incumbent s challenges Telephony over IP, Algeria, 19-20 March 2007. 2
Dialpad Service Background by Serome Technology Co. (end of 1990s) Free IP Telephony Service PC-to-PC, PC-to-Phone Since Dialpad service, IP Telephony market has grown as a differentiated niche market Lots of IP Telephony Service Providers(ITSPs) emerged ITSPs don t make Profit enough Teleco Networks evolve to IP-based Networks rapidly in Korea due to BcN(Broadband Convergence Network) Project Telephony over IP, Algeria, 19-20 March 2007. 3
Background (Cont.) Slow Deployment of IP Telephony Service in Korea Unstable Voice Quality No E.164 Number for receiving Call from PTSN and Mobile Unauthorized use of other E.164 Numbers such as 030, 050, and Private Numbers Number Allocation for receiving Call is Fundamental Requirement to promote IP Telephony Service Identification Number 050 for IP Telephony in Japan Regulation is required to allocate E.164 Number to IP Telephony Service Telephony over IP, Algeria, 19-20 March 2007. 4
Background (Cont.) Phase 1 ( ~ 2002 ) PSTN Internet IP Network PSTN PC to PC VoIP Free Advertising Toll Bypassing Cheap international call Phase 2 ( 2002 ~ 2010 ) GW/GK GW/GK PSTN IP Network IP Network IP Network GW/GK PSTN GW/GK Phone to Phone VoIP New category of IP telephony Gateway necessary VoIP + PSTN By network connection Assign VoIP number Phase 3 ( 2010 ~ ) IP Network MoIP (Multimedia over IP) Mainly multimedia traffic BcN based ALL IP Network video related revenue IP Phone IP Phone Telephony over IP, Algeria, 19-20 March 2007. 5
Communications global value migration 100% Share of overall value (in %) 80% 60% 40% 20% Wireless Wireline Traditional Carriers Wireline Non-Traditional Carriers ISPs Cable / Satellite 0% 1990 1995 2000 2005 * Source: Mercer Value Migration Database Exponential value in-flow in Wireless, Cable/Satellite and ISP industry More 50% value out-flow in Wireline-traditional Carriers during recent 5 years Telephony over IP, Algeria, 19-20 March 2007. 6
VoIP market - Worldwide VoIP subscribers in Korea : 4.4% of Broadband subscribers Market size : 1.1% of PSTN (2005) Worldwide VoIP forecast : annual 40 % growth until 2008 Worldwide Broadband/VoIP market Worldwide VoIP Market forecast BB Subscribers VoIP subscribers 3,000 2,000 1,000 10,000 200 400 600 3,170 USA 110(3.5%) 1,763 JAP 530(30.1%) BB subscribers 250M $60,800M VoIP revinue(m$) 100,000 75,000 1,192 KOR 52(4.4%) 130M $16,000M 50,000 570 510 FR UK 22(3.9%) 5(1.0%) VoIP Revenues 25,000 450 GER 11(2.4%) 2004 2005 2006 2007 2008 ( ITFACTS, Bitkom (2004,4Q) ( IDC 2004) Telephony over IP, Algeria, 19-20 March 2007. 7
VoIP market - Japan Active VoIP Market 2004 : sales $1.7 billion (7% of overall PSTN sales), subscribers 5.3 M 2007 : sales $7.2 billion (30% of overall PSTN sales), subscribers 23 M (IDC Japan, 2004) Supporting Factors Market : VoIP bundling with Broadband Rate : Cheaper VoIP rate without city limit Policy : Early decision of the game of the rule 2002 : VoIP introduction/assigned the receiving number 2003 : VoIP-PSTN interconnection and rate Broadband/VoIP growth VoIP growth after 050 2,000 1,500 Subscribers (10,000) BB 1,364 1,763 (Receiving number) 5.3M 1,000 500 284 780 142 398 530 VoIP 1.52M 2001 2002 2003 2004 02.09 04.12 Telephony over IP, Algeria, 19-20 March 2007. 8
PSTN market in Korea Subscribers(unit: 1,000) 23,000 21,930 23,099 21,000 15,000 Hanaro Telecom(6.6%) LG Dacom(0.2%) 10,000 5,000 0 3.62 3.37 0.22 0.74-2.61-0.03 2000 2001 2002 2003 2004 2005 2006.11 Num of Subscriber CAGR (Percentage) KT(93.2%) Source : MIC (Ministry of Information and Communication) 2006.11 Source : MIC (Ministry of Information and Communication) 2006.11 Telephony over IP, Algeria, 19-20 March 2007. 9
Market Forecast of IP Telephony in Korea IP Telephony : expected to grow 60% per year and reach $767 mil. in 2008 PSTN Market : expected to decrease 5% per year and reach $5,400 mil. in 2008 (Unit: Million dollor) Type 2004 2005 2006 2007 2008 CAGR IP Tel. 103 188 349 561 767 66.3% PSTN 6,595 6,369 6,092 5,744 5,382-4.9% (DATA: IDC, 2004) Telephony over IP, Algeria, 19-20 March 2007. 10
Impact on PSTN Market in Korea Price Reduction followed by added competition will increase Consumer Surplus Substitution for existing PSTN Market IP Telephony Revenue is expected to take up 12.5% of the Fixed-Voice Market in 2008 98.5% 97.1% 94.6% 91.1% 87.5% 1.5% 2.9% 5.4% 8.9% 12.5% 2004 2005 2006 2007 2008 (DATA: IDC, 2004) PST N Vo I P Telephony over IP, Algeria, 19-20 March 2007. 11
VoIP Market - Korea Annual growth rate of 2001~2004 : 77% (Wholesale : 33%, retail: 154%) Wholesale market led by Hanaro Telecom KT and Hanaro share 1/3 each in 2004 Retail market major incumbents lead the market instead start-ups enterprise : samsung networks, anyuser.net household : Hanaro telecom VoIP wholesale/retail market trends business 789 retail 430 386 wholesale 204 250 164 182 48 463 326 2001 2002 2003 2004 residential ( \100 Million ) Telephony over IP, Algeria, 19-20 March 2007. 12 etc 42.0% 3 Samsung Networks 36.5% KT 9.9% 1 Anyuser.net 2 11.6% Enterprise
VoIP impact on PSTN in KT VoIP will be the major factor of PSTN sales decrease after 2006 Share of VoIP revenue in terms of the PSTN revenue : 12% in 2008 PSTN revenue (KT) VoIP transitions 58,881 224 3,053 55.604 408 5,021 ( \100 Million ) 50,177 VoIP 1 Major business customer Enterprises with heavy telephone traffic VoIP ARPU > PSTN ARPU (Business part) \ 31,000 \ 28,459 Others 2002(E) 2003(E) 2004(E) 2 Bundling service by Hanaro Telecom Total 2003 2004 224 Residential 2003 2004 68 212 Business 2003 2004 156 194 Hanaro takes most residential subscribers Prepaid cards In this case, ARPU \ 10,836 (VoIP) vs. \ 18,319 (PSTN) 408 Telephony over IP, Algeria, 19-20 March 2007. 13
VoIP impact on Broadband in KT Broadband market share forecast in 2008 is 46~48 % (Million subscribers) Without VoIP 2006.10 Subscribers Market share 2004 KT Subscriber s 6.08 Market share 51% 2008 KT Hanaro SO LGP Subscribers 6.7 3.6 1.75 0.7 Market share 52% 28% 14% 6% KT Hanaro SO LGP 6.3 3.6 2.2 0.7 45.5% 26% 16% 7.4% Assumptions / Impact Hanaro SO LGP 4.03 0.86-34% 7% - With VoIP 2008 KT Hanaro SO LGP Subscribers 6.1~6.3 3.3~3.5 2~2.2 0.95~1.15 Market share 48~50% 26~28% 15~17% 7~9% Assume 1 million new broadband subscribers until 2008 New subscribers transition to cheaper VoIP bundle market Subscribers transition : 0.5M Transition rate : 7 ~ 8 % Telephony over IP, Algeria, 19-20 March 2007. 14
PBX replacement forecast IP-PBX in SME Within 6 months 4% Within 6~12 m onths 18% Within1-2 years 12% Within 2-3 years 8% After 3 years 1% No plan 58% ( Cisco Analysis, 2003) Legacy PBX replacement : 10 ~ 20% / year Coexist IP enabled PBX Expect rapid IP-PBX market transition Telephony over IP, Algeria, 19-20 March 2007. 15
IP-PBX in SME IP-PBX sales decrease revenue by 30% PBX/IP-PBX sales cross in 2005 Need new application services PBX sales drop from 2004 PBX/IP-PBX sales cross in 2005 100% PBX sales 2001 2002 2003 2004 2005? 2006 2007 2010 Year? ( 2002년 Ovum ) 100% PBX sales 2001 2002 2003 2004 2005 2006 200% 2007 2010 IP- PBX sales 70% Year new revenue ( 2002년 Ovum ) Telephony over IP, Algeria, 19-20 March 2007. 16
IP-PBX Market trends IP-PBX in SME high Centrex ASP IP Hosted Centrex IPCC VPN Managed Carriers control Tie Line Key System Toll Bypass IP Key System PBX ACD IPCC IP-PBX IP-PBX low Added services high ~ 2002(PBX) 2003~2005(IP enabled PBX) 2006 ~(IP-PBX) Telephony over IP, Algeria, 19-20 March 2007. 17
Regulation Purpose of the Regulation Prepare IP Telephony Regulation for Smooth Transition to IPbased Networks Avoid ambiguous interpretations Create New Opportunities for the Telecommunications Industry Encouraging Incumbents to provide Innovative Services and Upgrade Networks Induce Fair Competition and provision of Enhanced Services (QoS, Innovation) Prepare Pro-Competitive Environment by improving related Regulations (e.g. Entry regulation, Number allocation, Minimum QoS, etc.) Create Positive Effects on related Industries e.g. Equipment, S/W, Digital contents, etc. Telephony over IP, Algeria, 19-20 March 2007. 18
Regulation Definition & Licensing Clarify Legal Definition of IP Telephony a Telecommunication Service which transmits (send or receive) Voice through IP Networks using Telecommunications Equipment, without dividing Call Areas (Local, Long distance) Except for PC-to-PC Call Classified as a Value-Added Service Entry Regulation (Licensing Conditions) A Facility-based ITSP needs to obtain License Required to own IP Network (National Backbone Network, Subscriber Line) and Equipment (Server, G/W, G/K, etc.) A Service-based ITSP based ITSP dose not need a License Registration required Telephony over IP, Algeria, 19-20 March 2007. 19
Status of ITSP Licensing 9 Facility-based ITSPs (nationwide) Licensed (12. 2006) KT Hanaro Telecom. LG DACOM 8 Service-based ITSPs (nationwide) registered More than 100 service-based IPSPs (reginal providers) Telephony over IP, Algeria, 19-20 March 2007. 20
Regulation Number Allocation Allocate 070 Prefix and Eight-digit numbers for IP Telephony 070-XXXX-YYYY Minimum QoS Requirements for 070 Number R-Value 70 (ITU-T E.107 E-model) End-to-end delay 150ms Call success ratio 95% Different numbers Facility-based ITSP : ABxx-yyyy Service-based ITSP : ABCx-yyyy Service-based ITSP who owns VoIP Network Equipments such as G/W and G/K, has two options Numbers from MIC (ABCx-yyyy) / Own POIs (Point of Interconnections) Request connection to Facility-based ITSP and resell numbers (ABxxyyyy) Telephony over IP, Algeria, 19-20 March 2007. 21
Regulation Interconnection Direct Interconnection Principle Facility-based ITSP should directly interconnect with PSTN and Mobile Networks Construction of POI(Point of Interconnection) Min. Number of POI with PSTN and Mobile Networks are required Facility-based ITSP 40-60 POIs with PSTN & Mobile Networks Service-based ITSP who received 070 Numbers directly from MIC 12 POIs with PSTN and 1 POI with Mobile Networks Service-based ITSP who received 070 Numbers from Facility-based ITSP No POI is required Telephony over IP, Algeria, 19-20 March 2007. 22
Regulation Interconnection (Cont.) Payment Settlement for Call Interconnection between Facility-based Service Providers IP Phone-to-PSTN (or Mobile) ITSP pays for the Interconnection Charge to the Called Network Operator 1.7/min for PSTN and 3.9/min for Mobile X-to-IP Phone The Caller (PSTN, Mobile) pays for the IP Telephony Equipment Interconnection Charge to the called ITSP 0.44/min for G/K and 0.08/min for G/W Interconnection Charge for IP Telephony Equipment (Between Facility-based Service Providers) G/K US 0.44/min (\4.65/min) 80% of local switch interconnection charge G/W US 0.08/min (\0.84/min) 80% of toll switch interconnection charge Telephony over IP, Algeria, 19-20 March 2007. 23
Regulation Interconnection (Cont.) Payment Settlement for Internet Access between Facility-based Service Providers IP-Network Access Fee An ITSP who does not own IP-network has to pay Access Fee for the use of Subscriber Line and Backbone Network to the IP-Network Owner US $1.42/Month (\1,500/Month) 5% of Average Broadband Internet Service Charge Interconnection Charge for Service-based ITSP is determined by Private Agreement between Telecommunications Service Providers No Regulation on Retail Charge ITSPs determine their Retail Charges Telephony over IP, Algeria, 19-20 March 2007. 24
Status in summary KT participated in market transition aggressively Wholesale / enterprise mainly Major in residential market Secondary many (Hanaro, Dacom) Expand wire line market with bundling Cable TV Service Providers are preparing 070 IP Telephony Service Cable Phone TPS : Cable TV, Internet, IP Telephony Major Portal Sites based Messenger Service Daum Communications Corp. : Skype Messenger NHN Corp. : Naver Phone (with DACOM) Yahoo Korea : Yahoo Voice Messenger 7.0 Telephony over IP, Algeria, 19-20 March 2007. 25
The incumbent s challenges retaining of subscribers maintaining profitability and retaining customer loyalty Segmentation, Branding, & service bundles making rich services for ARPU increase Voice applications VoIP enabled IT applications Integrated service of voice and the internet (web) Telephony over IP, Algeria, 19-20 March 2007. 26
The incumbent s challenges WiFi + VoIP = Powerful Wireless VoIP Solution A Killer App. Of VoIP VoIP over Wireless Ethernet Wireless VoIP for Local Area : Residential, Enterprise, Hot Spot A Key Technology for Voice/Data/Wired/Wireless convergence (QPS) Telephony over IP, Algeria, 19-20 March 2007. 27
The incumbent s challenges Personalized & Differentiated Services Convergence services with multi-windows Managed Function /Platform Personalization QoS Broad BW Security Manged Network HomeNetwork RGW FTTH WiBro BcN Telephony over IP, Algeria, 19-20 March 2007. 28
Work in progress NGN as the next generation IT infrastructure (BcN) Enable converged multimedia services at any time, any places. Aim 50 ~ 100 Mbps broadband access to 20 m. subscribers by 2010 Replace PSTN voice Telephone with S/W and access gateway Decided to adapt IMS in parallel Accommodate both PSTN and IP Subscribers Provide voice /video telephony as default and other application services Standdard-based terminal equipment Business model for BcN Enhancement of the platform to fulfill the service requirement Telephony over IP, Algeria, 19-20 March 2007. 29
Thank you for your attention cgkim@kt.co.kr 82-2-526-5760 Telephony over IP, Algeria, 19-20 March 2007. 30