January 30th, 2005

IP Telephony in Asia

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Once in a while, I would get call or email from friends who wanted to do a ‘Vonage for Asia’ and ask me what I think. By “Vonage of Asia”, the general idea revolves around an ITSP (IP Telephony Service Provider) providing flat-rate unlimited calls across Asia (or a variant of that).

Well, the first and foremost problem is the lack of harmonization of regulatory framework across Asia. This means licensing, getting phone numbers, negiotate interconnections, implementing emergency services, wiretapping, universal service obligation would be very different across each economy where unlike US or EU. And this does not include the lack of understanding of such new services (many still trying to understand Internet) among the regulators and also the lack of open market1.

So other then requesting for a licensing, you need to educate the regulators and fight the incumbent rejecting you at the same time (and repeat that for each economy). The latter could also call up and have coffee with the IT/Communication Minister anytime whereas you likely not to enjoy similar privilege. Many countries are still close market. This means providing Internet is a job for the incumbent with very few alternatives. Even in countries which is supposingly wired up, I heard stories about poor quality of copper wires or lack of maintence – POTS barely work and you are lucky to get 28.8kbps. There are also story of a building 50m from the switch box with 5km long copper wire because they have over budgetted2 so say bye bye to DSL.

Backbone would also be a nightmare if you are gung ho to “give better voice quality” via your own network. Due to close-market regulation and competitions on other routes, a STM-1 from Singapore-Philipine for example would cost 2x as much as Singapore-US. Malaysia-Thailand which are connected by land would cost 2x to 3x more then say Malaysia-Hong Kong (sea route are often cheaper then land even at greater distance).

This is not for the faint hearted or a young cash-striped start-up.

But having said these, well, Asia also have some highest Broadband pentration countries in the world. Broadband is one of the basic requirement for IP Telephony service to boom and so this represent an immediate market for one willing to explore.

Asia also represent 250M Internet Users or 32% of the internet population with huge room for growth considered we have nearly 4b people here (thanks to china and india), ie 60% of the world population. This means a huge long-term potential for a pan-asia player.

Although Asia have many close-market, close-market means incumbents that means cost inefficiency and hence expensive telephony. That’s means one who has successful open up the market would see a huge pin-up demand for better and cheaper telephony from consumer. The impressive growth of Yahoo! BB is a good example.

In short, this play has lots of potential but one needs to know what you getting into here. It isn’t a simple ‘take what I see successful in oversea and repeat here’.

ps: Several operators already started experimenting with introducing IP Telephony in Asia. For example, AT&T Callvantage already doing its trial across several countries.

1 After a speech on ENUM & IP Telephony last year at a regulatory forum, one comes up to me and ask me how can they stop these from happening. Sorry, no, it is going to be as furtile as trying to stop Internet.

2 Those who works for large companies or government would appreciate the concept of ‘budget’ and also ‘budget penalty’. While comes with good intend, it resulted in “it is better to use all up then to get reduced budget next year” wastage.

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