Africa makes progress on VoIP

African countries are gradually opening up to legalizing VoIP (voice over Internet Protocol) services, with both consumers and businesses benefitting from the trend.

For example, Telkom Kenya last month launched a VoIP service that allows telephone users to make cheaper international calls, after the country’s Communications Commission released policy guidelines for the provision of VoIP services. In February, South Africa allowed holders of value-added network services and or enhanced-service licences to carry voice on their networks. Mauritius has also legalized the provision of VoIP services.

Although the bulk of the regulators on the continent have been reluctant to license operators other than their incumbent telecom providers, the incumbent operators are signing agreements with VoIP service providers to bring in traffic lost to the grey market. There is no data on users of the VoIP grey market, but analysts consider it substantial.

African regulators have been reluctant to legalize VoIP, based on a largely misguided attempt to protect the revenue base of the incumbent fixed-line, and in some cases, mobile telcos, according to Tracey Cohen, co-author of a report commissioned by the Commonwealth Telecommunications Organisation (CTO). The report is titled “An overview of VoIP regulation in Africa: policy responses and proposals.”

“So whilst many of the incumbents complain loudly of the impact of the technology, a significant number have adopted a ‘if you can’t beat them, join them’ attitude,” according to the report.

“In some cases they have passed on part of the savings made by lowering international rates but in other cases they have simply kept the savings,” the report elaborates.

The report estimates that somewhere between a fifth and a quarter of the African telco incumbents have signed agreements with VoIP carriers.

Meanwhile, more and more users on the African continent are turning to VoIP. Insight Research estimates that in 2011, 76 percent of all outbound traffic on the continent will be VoIP. This year, for example, Insight estimates that of the 8.2 billion minutes of outbound calling, 4.7 billion will ride over a VoIP network.

“Fifty percent of all African inbound is being lost to VoIP in 2005, and 57 percent of all outbound traffic in being lost to VoIP. Clearly VoIP is causing serious erosion to the traditional telephony market,” said Patti-Jean Conger, director of marketing and sales at Insight, via e-mail.

The CTO-sponsored report on VoIP stressed that “VoIP is a tool that African governments and regulators could use in a number of ways to address a wide range of pressing issues and it is therefore something that needs to be understood rather than feared.”

In the report, the authors reason that African countries can deploy VoIP to meet a number of different objectives, both social and economic.

The report cited two countries — Mauritius and South Africa — that are using VoIP to realize economic and social objectives.

VoIP is part of Mauritius’ strategy to drive a competitive regime in international calling and make the country an attractive BPO (business process outsourcing) destination. The government has allowed a number of organizations to compete with the incumbent telco, Mauritius Telecom. An element of this competition has come from licensed VoIP services.

South Africa, on the other hand, is using VoIP to deliver cheaper voice services to rural and under-served communities. In a 2001 amendment to the Telecommunications Act, the South African government introduced a class of licenses to operate in geographic areas where teledensity is less than 5 percent. The licensees are limited to small-business enterprises, precluding established operators from accessing this market segment.

These licensees are mandated to provide telecom services including VoIP, fixed-mobile and public telephone services.

In addition, the terms and conditions for VANS (value-added network service) licensees were revised and now include the right of a VANS provider to apply for numbering resources, spectrum and interconnection with any operator.

“Restrictions lifted suggest that VANS may also self-provide telecom facilities and no longer have to obtain them solely from Telkom and the Second Network Operator, when licensed,” Cohen said.

There are companies also targeting the corporate user. For instance, Internet Solutions, a subsidiary of Dimension Data Holdings, is offering a VOIS (Voice over Internet Solutions) package, billed as a full portfolio of converged voice and data services, including calling between branches of the same company; calls to customers of other ISPs (Internet service providers); national long distance calls; call to cellular phones; and international calling.

Meanwhile, Kenya’s new provisions allow registered telecom centers and cyber cafés connected to licensed ISPs to commercially provide VoIP services to end users. The ISPs are consequently obligated to file quarterly to Kenya’s Communication Commission, providing details on bandwidth utilization and how many terminals are connected.

This contrasts to what is happening elsewhere. In the West African country of Ghana, for example, Busyinternet Ghana — a cyber center in Accra — had plans to originate calls as part of its initial business plan. But the plan has been stymied.

“We were aware of the revenue potential and it fits in with our client base,” said Estelle Akofio-Sowah, managing director of Busyinternet. “According to the regulator VoIP was on the discussion table then, four years down the line, it’s still on discussion table,” she said.

According to Cohen, co-author of the CTO report, a range of users may be find VoIP particularly useful, though only early results are in for the moment.

“VoIP is suitable for any customer seeking to reduce the cost of landline and mobile calling, particularly for national and international long distance. Take-up appears to be largely corporate at present, outside of those using Internet cafes or skype-type products on their home PCs, where bandwidth allows,” Cohen said via e-mail.

There seems to be a trade-off between cost and quality, Cohen said. For many, VoIP at poor quality, with latency and jitter, is better than no call at all. For mission-critical voice communication in business, quality of service remains a critical issue. For those who can afford it, one tends to find that demand for international voice is inelastic, namely, it’s largely unresponsive to price drops or increases. From a regulatory point of view however, quality of service is extremely difficult to regulate, Cohen said, indicating that the market will drive this issue.

Many companies outside Africa think that VoIP is cheaper than regular phone service but also believe that it may not be worthwhile to replace old systems with VoIP, because of the up-front cost of doing so. In Africa however, there is a twist on the issue.

According to Cohen, the one unique issue to Africa and all developing countries is that VoIP deployment may depend less on users, and more on operators that may be building or upgrading systems and networks.