Monday, August 21, 2006

3rd African VoIP forum Presentation on Regulatory Challenges and Achievements in the VoIP Arena

By Engr. Ernest C. A. Ndukwe FNSE, OFR
Executive Vice Chairman Nigerian Communications Commission

Voice Over Internet Protocol is a generic term used for the conveyance of voice, fax and related services, partially or wholly over packet-switched, IP based networks.

According to the Chairman of the US Federal Communications Commission, Michael Powel, VoIP “is probably the most significant paradigm shift in the entire history of modern communications, since the invention of the telephone.”

VoIP is one example of a cross-sector convergence technology that utilizes packet-switched networks (often, the Internet) to make voice telephone calls. By sharing bandwidth with other data or Internet applications, VoIP Providers offer these telephone calls at often cheaper rates than conventional telephony.

The emergence of voice over packet switches
VoIP services began to be offered in direct competition to public switched service between the mid-1990s and the peak of the “dotcom bubble” in 2000, using privately owned IP-based networks in addition to the public internet.

Companies such as DialPad, Genecity, iBasis ITXC, Net2Phone or VocalTec, provided these new VoIP services, allowing users to make low-cost calls to and from ordinary telephones. The asset values of these companies collapsed with the global economic slowdown that began in 2000. Some of the companies were acquired by traditional Public Telecommunication Operators (PTO) which were busy developing their own IP-based networks. This phase saw regulators in developed countries being lobbied to exempt Internet Services from regulation.

In most developing countries, VoIP continued to be restricted or prohibited. At the beginning of Internet telephony services in the early-to mid 1990s, the public Internet was generally used to provide these services. Companies such as Free World Dial-up, Firetalk and PhoneFree flourished during this period. Many of these companies promoted PC-to-PC applications that did not compete directly with public switched telephony providers. Some of these applications were inconvenient to use because they did not involve the use of normal telephones.

Regulatory pressures to prohibit these services came mainly from monopoly PTOs in high price locations who felt they were losing money through price arbitrage.

Today, the market offers what might be termed “Voice Over Broadband” (VOB) widening the appeal for VoIP. Broadband networks have become popular. And broadband Internet access continues to grow worldwide. At the start of 2004, there were more than 102 million broadband subscribers in about 100 countries where broadband services were available. Users who have broadband access to the Internet generally experience fewer quality-of-service lapses than those who, in earlier days, experimented with IP telephony over slow-speed dial up access.

Achievements in the VoIP Arena
Traditionally, voice service could not be separated from the wires that carried it and the industry has been highly regulated to date. On the other hand, the Internet has generally enjoyed light regulations, defined by the US Congress as a “no-regulation zone”. However, the voice service that was hitherto provided under “heavy regulations” is now available regulation-free in some jurisdictions, still restricted in many jurisdictions, while many others are still undecided.

The low level of access to telephone in under-developed and developing countries of Africa and elsewhere has been attributed to a number of factors including the state of infrastructure, which inhibits adoption and adaptation of emerging technologies; the low earning power of the people, arising from low GDP per capita; restrictive regulatory regimes, etc.

The search for technological solutions that would alleviate the myriad of problems facing many countries and regions in terms of their abilities to provide adequate communications facilities have tended to support the adoption and adaptation of the use of Internet-based telephony. However, the use of voice over Internet Protocol (VoIP) has been largely illegal in most countries in Africa and many under-developed telecommunications markets. But in recent years, attempts are being made by a new breed of telecommunications regulators to open up the use of VoIP. In other words, a number of countries in the under-developed and developing categories, including African countries, are easing the regulatory restrictions to achieve faster deployment of telephony at lower costs.

Now, Regulatory concerns are less about whether or not to allow VoIP, but rather about how to regulate it. The following are some examples of the situations in some selected regions and countries.

The US:
For a long time, the country was undecided on whether or not to regulate VoIP.

The uncertainty was further given credence by Michael Powell, the Chairman of the Federal Communications Commission (FCC), who singled out VoIP as a “killer application for legal policy change” because it pits two different regulatory modes against each other and forces governments to choose which will prevail. The two models being a highly-regulated “common carrier” environment of cable TV and telephone service, and a lightly-regulated world of the Internet.

However, in September 2004 the FCC finally took a decision on VoIP by placing regulatory shield around it. In so doing, the FCC ruled that VoIP communications should be treated the same as other applications on the Internet.

While VoIP is regulated for incumbent operators, the new entrants are, however, free of such regulations. VoIP is treated like any other local service, meaning that those incumbents in the position to handle VoIP with broadband would have to file tariffs and wait for CRTC approval.[1]

The EU:
The EU is observed to have been ahead of the US in its definitions of VoIP regulation. Based on a presentation at the 1st International CICT Conference (Copenhagen, November 5, 2004) it could be averred that the EU intends to pursue a “light regulatory touch” with a view to harmonizing all issues relating to VoIP regulations.

South American Countries:
In Brazil, there is no specific legislation for VoIP services. The Brazilian telecommunications regulator, Anatel, considers VoIP a service or simply a value-added service, based on the definition established by the country’s General Telecommunications Law (GTL) of 1997.

Whereas Cuba and Ecuador prohibits VoIP networks, countries like Peru and Argentina allow voice/fax over the Internet but not on IP networks.

Observations on specific country instances in the continent show the following:
(i) In South Africa, legislations prior to 2005 limit the use of VoIP, and this had been generally recognized as one of the factors that stifled advances in telecommunications in the country.

However, following changes to the Telecommunications Act, with effect from February 1, 2005, providers of value-added network services (VANS) were allowed to carry voice traffic using any protocol.

In arriving at this new regulatory milestone, the Minister indicated that “because of technological developments, there is no longer any difference in the transmission of voice, video and data; therefore, it is no longer necessary to prohibit the provision of voice by VANS”.

At the moment, the provision of VoIP services in RSA is only allowed in areas where less than 5% of the population has access to a telephone. Such restriction was perceived to be a means of encouraging companies to provide telephone service to these outlying areas, and thereby rectify the imbalance in technology access between modern, urban hubs and under-serviced and rural communities. Nonetheless, the illegal use of VoIP had been growing in the RSA, even in different spheres of government.

The Government has, therefore, recognized that removing restrictions and allowing competition to thrive in the communications sector will lead to greater choice, lower prices and the proliferation of innovative services, which will in turn benefit the development needs of under-serviced and rural communities, where communications services are prohibitively expensive, while also meeting the corporate needs of businesses wanting to enter the value-added network market.

(ii) In Egypt, the use of VoIP is restricted. However, the monopoly carrier, Egypt Telecom, has only adopted its use in the face of a myriad of illegal providers denting its long distance and international revenues. VoIP is subject to government control and monopoly in order to protect Telecom Egypt’s revenue.

However, Telecom Egypt is promoting and developing the market for the use of VoIP through a platform to be used by private operators on a revenue-sharing arrangement. At the moment, not less than 10 companies provide VoIP Service in Egypt.

Apart from these arrangements, the Government has approved a co-operation between Trans Global Communications and Telecom Egypt to provide VoIP services.

(iii) In Uganda, VoIP as a technology is not prohibited. However, any provision of VoIP or related services has to be done in a franchise or other agreement with either of the National Operators, i.e. Uganda Telecom Limited or MTN Uganda Limited, during the Exclusivity Period.

(iv) In several other African countries, the adoption and use of VoIP, as in the developed world, has been moderated largely by factors such as the subsisting legal frameworks, the level of available infrastructure in relation to the ability for technological integration, as well as the extent to which competition is open for international services.

Implications & Challenges for regulation
Viewed from various perspectives, it is obvious that there are a number of challenges in the evolution and achievements in the VoIP arena for the regulation of both voice and data services. Amongst these challenges are:

(a) Facilitating adequate infrastructure for last-mile delivery of voice services;
(b) Deconstructing existing licence conditions to accommodate the expected changes in network interfaces, including the key issue of interconnection;
(c) Ensuring optimisation of spectrum utilisation, network efficiency and quality of service, especially amongst network operators and service providers;
(d) Preventing unauthorised usage (e.g. for criminal and other illegal activities);
(e) Ensuring payments for interconnections and traffic exchanges;
(f) Recognising the different shades of VoIP business models and enacting/enforcing relevant rules for the different players.

Other Issues of Importance
§ What kinds of social regulations should apply?
- Access to emergency services
- Number portability
- Access to directory services/ability for users to be in a directory
- Lawful Interception
- Network resilience
§ What kind of telephone numbers should be allocated?
- Geographic/non-geographic/new categories?
§ Does it matter if service providers are outside your territory?
§ If emergency service is provided, what quality is needed?
§ What rules and prices should be applied to interconnect?

Perhaps it is in recognition of these challenges that participants at the end of the First African VoIP Forum, held in Nairobi over 14-15 December 2004, issued a statement welcoming the regulatory changes being introduced in a few African countries to liberalise the use of VoIP, and calls on regulators in other African countries to follow the example set by the pioneering countries in order to drive down telephony costs and stimulate the growth of networks across the continent.

The Forum observed that, in spite of the dramatic growth of mobile telephony in the continent, “there continues to be a telephone famine in Africa which VoIP can help to address”. Equally, the Forum noted that, “even in those countries where VoIP is allowed, in most cases monopolies have been maintained in international traffic, thus preventing the benefits of low-cost international VoIP from having an impact on the market, which would stimulate international contacts and trade and increase traffic substantially”.

The Forum also “noted that increased deployment of IP networks, coupled with the growth of Internet Exchange Points in the region, will considerably enhance the retention of traffic within the continent and thus mitigate the costs of extra-continental transits”, which will “contribute greatly to retention of revenues by African operators and service providers, thus promoting indigenous entrepreneurship and wealth”.

Consequently, the Forum “encourages regulators to open up the markets by licensing multiple international gateways to increase competition and multiply service offerings”. I agree with these submissions.

The Nigerian Experience
Nigerian recognizes VoIP as a technology. Nigeria has not restricted the use of IP. Nigeria welcomes the use of VoIP and encourages telecommunications operator to deploy it where applicable.

In consonance with its commitment to facilitating fair, transparent, effective and efficient regulation, vis-à-vis global trends and best practices, the Nigerian Communications Commission sought to determine appropriate policies for the regulation of the Voice over Internet Protocol (VoIP) within the Nigerian telecommunications environment.

To achieve this objective, the Commission engaged the services of Consultants to review international best practices and advise the Commission accordingly, taking cognisance of the peculiarities of the domestic market. This was followed with an industry consultation through a Workshop to appraise industry participants and obtain their inputs to the development of relevant policies.

While noting the state of maturity of the telecommunications market in Nigeria, vis-à-vis global trends in service and technological development, the Commission was convinced that a sure way to promote universal access to telecommunications services, at this stage of the industry’s development is to evolve a policy framework that recognises the issues relating to VoIP as an engine for the development of telephony in the country.


[1] Ellen Muraskin, Canada sizes up VoIP Regulation, 2004,

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