The Gloomy State of VoIP in India

Desi Valli

IP telephony or Internet Telephony basically uses Voice over Internet Protocol (“VoIP”) Telephony as its technology to communicate between two or more points. VoIP technology helps in translating analog voice signals to digital packets and vice-versa, between the originating and receiving ends. Since the transport is of IP packets, it is enough to use the Internet or other data links for transmission of Voice, instead of deploying dedicated telecom networks.

After several months of deliberations, on 1st April, 2002, the Department of Telecom (DOT) finally permitted Internet Service Providers (“ISPs”) to offer Internet Telephony services. Earlier regulatory framework did not permit Internet Telephony, except in Closed User Groups (CUGs). At that time, I was the technical head of my previous company (Net4). We worked day & night to be the first service provider to launch Internet Telephony services on 12th of April, under the brand “Phonewala”. We prepared license applications, paper-works, technology and launch events within 20 days. We dominated the market for more than a decade however interests drifted away as there were no more developments in the regulatory framework beyond the initial framework by the GoI.

Though the GoI allowed ISPs to offer VoIP services, the regulations set out by DoT meant that Internet Service Providers (ISPs) were allowed to offer following services:

  1. From Net-connected PC to any other Net-connected PC (within or outside India); AND
  2. Net-connected PC to telephone (PC in India and phone abroad, not in India); AND
  3. IP based H.323/SIP Terminals connected directly to ISP nodes to similar Terminals; within or outside India.

This throttled license model to offer VoIP in India was against the interests of both Internet Service Providers & consumers, in an extreme sense, and it destroyed the growth of VoIP in India. While in most countries adoption of VoIP resulted in growth in communication services, in India, VoIP is still struggling to find itself a serious role.

Here is a look at some of the constraints created by the department, which practically thwarted the opportunities for many innovations out of India:

  1. Voice communication from anywhere to anywhere by means of dialing a telephone number (PSTN/ISDN/PLMN) as defined in National Numbering Plan is not permitted;
  2. Originating the voice communication service from a Telephone in India is not permitted;
  3. Terminating the voice communication to a Telephone within India is not permitted;
  4. Establishing connection to any Public Switched Network in India and/or establishing a gateway between the Internet & PSTN/ISDN/PLMN in India, is not permitted;
  5. Use of dial up lines with outward dialing facility from nodes is not permitted;
  6. Interconnectivity is not permitted between ISPs who are permitted to offer Internet Telephony Services and the ISPs who are not permitted to offer Internet Telephony Services.

In such a crippled environment both technology innovations and business models weren’t appreciable for anyone. Even today all the above activities are possible to be provided by a fully licensed telecom service provider, such as UASL. Though unrestricted VoIP was allowed for Unified Access Service Providers and Cellular Mobile Service Providers in March 2006, the telcos never promoted this service for fear of losing their lucrative voice service revenue.

During the similar time period globally there were many innovations that lead to the birth of messaging service providers like Yahoo, MSN adding VoIP services, dedicated VoIP platforms like Skype, which revolutionized the markets. These could have happened in India too, provided such archaic policies weren’t imposed upon providers.

As per the initial guidelines, ISPs were not required to pay any additional license fee, since PC-to-phone was defined as a value-added application service. Telcos were complaining through the years that VoIP would create an unjustified advantage to the independent ISPs who paid very low license fees, and it is necessary to maintain a level playing field. Later in 2006, after various telecom service providers objected to considering VoIP as a value added application service, DOT introduced revenue sharing license fee to all such VoIP service providers, initially to the tune of 6% & later at an increased fee of 8%. This was in line with the licence fees of other telecom services, hence at that stage there weren’t enough reasons for not allowing VoIP services to interconnect with TDM networks. In fact by allowing VoIP, competition in other technology based voice services are likely to increase, thus benefiting the consumers with lower prices.

The primary reason for this muddled license policy is that the “Internet” is considered as a platform for browsing and recently e-commerce is accepted by force of market dynamics. However most fail to accept that apart from browsing, there are very many “applications” like Internet Telephony, Messaging Services, IPTV, Voice Chatting, Server based Video Conferencing, Gaming, E-mail etc. Many more applications are being developed and would be available through the Internet as the innovation is limitless in this borderless world. Again and again, we are refusing to accept VoIP as a part of an application, rather wanting to term “voice” as part of “telecommunication”.

Now let’s look into an analogy. Worldwide most power distribution businesses are either licensed or regulated, including India. The users pay a monthly fee based on their consumption of power. Nowhere do we see a regulatory model on what is to be used and what is not to be used. No policy could control whether a washing machine or microwave could be used or not. Similarly, the Internet (access) is a licensed and regulated service in India, but it is facetious to say that there should be regulations upon regulations on the purpose for which the Internet shall be used.

In 2012, the Indian Government approved VoIP services under the National Telecom Policy 2012. By this time Broadband Wireless Access Aka BWA license is issued to many telecom operators, who otherwise may not be able to provide voice telephony services without VoIP technologies. While the convergence of technologies is happening between Telecom & Internet, the NTP talks of separating the network providers from the service providers. But, it does recommend to either license or regulate service providers, whilst worldwide most services are not under the purview of a regulatory entity.

In traditional telephony services when the user makes a call, the origination and destination points are established with dedicated links or frequency in case of wireless. This required infrastructure is thus determined by the number of concurrent calls expected out of the network. These humungous networks cannot be deployed by a single operator; hence there is a need for committed unilateral or bilateral interconnection agreements established between operators. In the case of VoIP there is no need of any dedicated interconnection requirement, if it is between two VoIP calls. However, there shall be a need for interconnection with telecom players if unrestricted VoIP is to be enabled. This is more of an opportunity for telcos to gain higher revenue, rather than considering it as a threat and looking at it with suspicion.

With the arrival of NGN and the Internet becoming a defacto network throughout the world, there is a strong indication that VoIP will either become a substitute or even the alternative for current technologies. Regulators are not in any position to stop VoIP as a technology or to a larger extent even to control. The regulatory model on application services over the Internet is highly impractical, considering the speed at which technologies are evolving. Regulators should play a significant role in determining the use of natural resources like spectrum or even play a pivotal role in getting land access for deploying fibre optics networks. But their role in determining the kind of applications to be used within a data network is an unworldly approach. Before it is out of their hands completely, it is beneficial for regulators to officially make the services available with no formats of restrictions for any player, including application services providers.

By Desi S Valli: Desi is currently the Founder & CEO of Netree. Before this position, he held the position of COO/CTO at Net4 which pioneered in VoIP services in India. He was the secretary ISPAI and the EC member spearheading many policy related initiatives.



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“Thinking Aloud” reflects the emerging trends and varied outlook of the rapidly evolving internet and communication sector. An IAMAI publication, this is a part of the market education initiative of the association.

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