AND THEY'RE OFF: AFRICA'S FIRST LEGAL VOIP SERVICES SET A CRACKING PACE
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.