Internet Telephony (VoIP) in India

On 22nd June 2016, TRAI has released a consultation paper on Internet Telephony. The objective of the consultation paper is to promote internet telephony (VoIP) in the country. In March 2006, the UASL operators were permitted to do VoIP. Compared to PSTN, VoIP is efficient and better in cost structure but still has not taken off in India. Why? What are the technological, regulatory and business challenges? This note is an attempt to investigate these issues.

The Technology : Conventional vs Internet Telephony

The conventional voice calls are circuit switched. They are set up as nailed up dedicated connections between the communicating users. Unlike VoIP, these calls (conventional voice) are managed and prioritized by the network when they share the same pipe used for carrying internet traffic. VoIP calls, on the other hand, are carried on the principle of "best effort" and therefore have to compete with normal internet traffic. Hence, the user of a VoIP call might experience intermittently breaks (loss of speech) in case the internet traffic is very high or the pipe carrying it is too thin. With the improvement in coding and internet speeds, the quality of VoIP call will significantly improve if not at par with network managed voice calls.

Since the conventional voice runs on different types of networks (GSM, CDMA, 3G, LTE) these networks need to interconnect with each other to enable communication between users of different technologies. For that purpose, these calls are transcoded to legacy PSTN (public switched telephone network) calls using media gateways before interconnecting to the network of a different technology. Whereas VoIP calls can be carried in the most native form (without transcoding) even while it traverses networks of diverse technologies provided its users are connected to the internet. This makes the VoIP calls seamless, simple and efficient compared to the conventional voice calls. However, VoIP calls would also require similar transcoding (to legacy PSTN like the convention voice calls) if the user at either end is not connected to the internet.

The Regulation : Conventional vs Internet Telephony 

Conventional voice can be offered only by the UASL (Unified Access Service Licensees). In March 2006, the UASL providers were also allowed to offer internet telephony, but it did not take off. Why? As the mobile internet enabled by GPRS & EDGE technologies did not offer adequate speeds to carry VoIP in the native form. The fixed line broadband users were few, and the VoIP calls originating from them would have required transcoding to connect to a mobile user - making it inefficient and suboptimal. In August 2007, all ISPs were permitted to offer Internet telephony but they were not allowed to interconnect with the conventional voice networks. The ISPs could only offer PC to PC calling and international calls with no restriction on terminating device types.               

In 18th Aug 2008, TRAI recommended rules to govern the VoIP calls between an ISP and a UASL. These included rules of interconnection, allocation of 10 digit numbers by DoT to identify VoIP users, IUC (Interconnect usage charges) rates etc. DoT did not accept these recommendations, and therefore VoIP calls between an ISP and a UASL did not take off.

The Regulation : IUC (Interconnect Usage Charges)

Unlike conventional voice calls which are billed on a per-minute basis, VoIP calls can be billed both on a per-minute basis OR on a per-MB (Mega Byte) basis. The current IUC rates in India are on a per-minute basis. Since interconnection is the key and therefore to enable VoIP in India it important to understand why the interconnect charges are levied and what is the history behind it.

The Telecommunication Interconnection Usage Charges (IUC) regulation become effective in India from 1st May 2003 after the introduction of CPP (Calling Party Pay) regime in India. The reason the regulations were necessary as the service provider of the called party (for an off-net call) was not allowed to charge the receiving subscriber. Since a substantial proportion of the calls were off-net incoming, the service provider had no way to recover the work done (cost incurred) in carrying the incoming calls. In the absence of the CPP regime, the operator would have the flexibility of charging the subscriber of the incoming call to recover the cost. Even without the CPP regime, some form of regulatory intervention would have been required to prevent the market leaders abusing its dominance position by charging arbitrary rates for incoming calls. Since 2003, TRAI had been revising the IUC rates for termination incoming calls based on incremental cost structure prevalent in the market at that time. The last revision was done on 23rd Feb 2015 and the IUC rate for wireless to wireless incoming calls (within India) was set at 14 paise per minute. The rates were set to "Zero" for calls originating from a wireline network and terminating in a wireless network and vice-versa. For the International incoming call to both wireless and wireline, the rate was set at 53 paise per minute. The ceiling for charges for carrying NLDO traffic (from one Licensed Service Area to other) was set at 35 paise per minute, and for transit traffic (if calling and called party networks are not connected directly, but uses an intermediate network to route calls), the maximum charge is set at 15 paise per minute.

Setting IUC rates for terminating VoIP calls can be very complicated. As the VoIP calls can be charged both on a per-minute or per-MB basis, or a combination of the two. Also, the VoIP calls running on the internet may not follow the same flow structure as is being followed by the conventional voice. A conventional voice call flowing from one LSA (Licensed Service Area) to the other LSA has to route through the NLDO (National Long Distance Operator). For routing internet traffic between LSAs, no such restriction exists. It may be noted that in the 18th Aug 2008 recommendation TRAI assumed that the VoIP calls terminating in the PSTN/Mobile networks will be charged on a per-minute basis and none of the issues flagged in the current consultation paper related to IUC were discussed.

The Business : Conventional vs Internet Telephony

The foundation of any business is dependent upon the product/services sold and its pricing strategy. The conventional voice calls are priced on a per-minute basis. The current rate for conventional voice is approximately 60 paise per minute (for outgoing calls minus interconnect). The VoIP call at a data transmission rate of 20 kbps and a data pricing rate of 25 paisa per-MB will translate into a per minute rate of 4.8 paise (assuming both calling and called party is paying for data usage). This rate can be driven further down if a better voice coder is used. Hence, charging VoIP calls on a per-MB basis will disturb the current IUC regime and will prevent the operator from recovering its network costs. Thus in the interim (in the presence of significant proportion of investments in legacy networks) one would have no choice but to price VoIP calls on a per minute basis to prevent destabilizing the existing business structure of the operators. This will enable seamless integration of the VoIP calls with the existing IUC regime. However, to prevent loss of business to the NLDO and transit operators one needs to figure out strategies to deal with transit and inter LSA VoIP traffic.

Conclusion 

Though Internet Telephony has the potential of decreasing the cost structure of the operators by improving operating efficiencies, but these calls in the interim have to interwork and ride on the existing legacy networks which have to support legacy devices. Till the networks get totally overhauled with adequate broadband speeds and most of the user devices become "internet capable" it may not be possible to drastically alter the existing regulatory structure and the IUC regime. But it possible to refine it to support Internet Telephony so that the consumers are not deprived of the fruits of technology advancements. 

(Views expressed are of my own and do not reflect that of my employer)