Movement at last?

Since the ministerial determinations of September 2004, there has been a tremendous amount of hype around voice over IP (VOIP), mainly around the potential cost savings. While VOIP can (sometimes) provide cost savings when used over a LAN or WAN infrastructure, most of the excitement has been around the promise that organisations can finally cut Telkom out of the loop and connect with anyone they choose without using the incumbent's infrastructure.

To make VOIP truly functional, operators (fixed-line, mobile and VAN/ISP) need to interconnect with one another. As per ITWeb's VOIP feature in February 2007, most of the local operators, VANS and ISPs had sorted out interconnects.

As at December 2007, this hadn't changed much; interconnect agreements were further down the line and testing was even further away, but the line used in last year's feature, "the bulk of the major carriers and VANS either have finalised or are in the process of finalising agreements" still holds true. MTN is, apparently, holding up the process by insisting on putting what Internet Solutions voice product manager Greg Hatfield calls "onerous clauses" into its agreements.

The hold-ups? A lack of resources on Telkom's part was listed last year, MTN's onerous requirements mentioned this year and the sheer volume of VANS to interconnect with also features high on the list.

Gateway Communications SA MD Mike van den Bergh says negotiating interconnection agreements is a time-consuming and onerous task. "We're interconnected with 100 carriers. Each agreement had to be separately negotiated and separately managed, the rates change all the time and quality is variable."

Mention VOIP to anyone and the high cost of bandwidth is sure to be mentioned soon after. While some of the players interviewed for this feature stated that bandwidth cost was not a deal-breaker, it is certainly still cause for concern.

Says Huge Telecom CEO Anton Potgieter: "In South Africa, the cost of bandwidth is still very expensive. Regardless of the price decreases announced by Telkom over the past months, there is still a long way for prices to fall. That said, there is a definite place for VOIP when it comes to reducing the per-minute charge of a voice call to international and inter-branch destinations and, to some extent, even national calls. We see clients successfully using VOIP solutions to save up to 50% on the cost of some international calls and, of course, inter-branch calls are virtually free.

"Some providers will build the cost of the bandwidth into the call-rate, in which case you may see savings of around 25% to qualifying call destinations. In other cases, the bandwidth is priced separately and then you need to subtract this from your savings to get an actual savings figure."

Says Glen Ansell, CEO of i5 Group: "The bandwidth issue can be a potential deal breaker depending on the number of international, regional or branch office calls that go through one's organisation per day. This is not a straightforward 'yes' or 'no' answer. One needs to go into an extensive analysis phase to try to identify the opportunity cost of going VOIP. Often the right solution is to go with a hybrid solution as the call volumes may not justify the bandwidth costs.

"It is not only the bandwidth costs that need to be taken into account," he states, "but also the quality of bandwidth or, more to the point, whether quality of service is available on the line and, secondly, the lack of bandwidth in the country. Due to the fact that one relies so heavily on telephony in an organisation, one cannot afford downtime. Adding bandwidth as a dependency to one's solution brings a different type of risk to the fore."

A further real issue around bandwidth is, of course, latency. High-latency connections are useless for voice, which is why Skype over home connections doesn't always work very well.

Says Brandon Rochat, Expand Networks' director for Africa: "Latency kills any kind of traffic flowing through a network, especially voice, resulting in people who sound like Darth Vader. Traditional data lines in South Africa are pretty good, but up in Africa, you get very old equipment, with lots of hops between sites and huge latency. At last count, if you had anything around 150 to 300-millisecond latency, you were going to start having problems with voice quality. In Africa, this is common."

While some companies are finding it worthwhile to invest in more bandwidth to enable high-quality, uncluttered links to carry VOIP calls, others are still adopting a wait-and-see approach or being put off by the high cost of the handsets. Companies should evaluate requirements on a case-by-case basis, starting with the good old audit - or SWOT analysis - and work from there.

In the meantime, Cape Town-based ISP, Cybersmart, is introducing a consumer VOIP service, while MTN Network Solutions (MTN NS) is launching a fixed-line VOIP solution. Says Cybersmart MD Laurie Fialkov: "We want to bundle voice with ADSL to customers as part of the service we provide."

He says the company has had 087 numbers allocated to it and has interconnects in place with Telkom, among others, including a US provider for international interconnections.

Telkom is offering phase-two interconnection agreements, Fialkov says, whereby it will interconnect traffic between providers like Cybersmart and all of the operators with whom it has phase-one agreements, for a small fee, of course. Fialkov says the company will be taking advantage of this offer and is testing the interconnections at the moment.

MTN NS, on the other hand, is introducing a fixed-line solution for corporates. Says MTN NS product development head Mike Fairon: "We are launching a fixed VOIP platform [that] will do local calls, national calls and international calls. This fixed platform allows for fixed-line to fixed-line calls only. We will later expand to fixed-to-mobile."

The company has been testing the platform for over a year now. Fairon claims that MTN NS has the ability to interconnect with all the mobile operators, and Telkom, and that the pilot is working fine. Fairon says Centracell is piloting as a reseller and has some big listed companies on the platform.

MTN NS will be taking the product to market through its internal sales force and a reseller sales channel. Implementation, fulfilment, maintenance, service and upgrades will all be done by MTN NS, and all traffic will run over its network, he says. "In this way, we'll be able to offer a level of quality and service level agreements that few VANS or ISPs are able to offer."

While costing had not, at the time of writing in December 2007, been finalised, Fairon says Telkom was both astute and strategic in setting its interconnect rates. Telkom charges for local calls (28c peak, 21c off-peak) and national (44c peak, 22c off-peak) separately, and for peak and off-peak calls. "This is very important when you look at how you offer customers a cost-saving when looking at fixed-to-fixed calls," Fairon notes.

Roman Hogh, product development manager at MWeb Business, notes that VOIP is a numbers game. Providers are taking losses on minutes now in the hope of driving volumes, which will drive profits, into the future.

We want to bundle voice with ADSL to customers as part of the service we provide.

Laurie Fialkov, MD, Cybersmart

The end-game is long term and South Africa can only reap the benefits as bandwidth becomes more readily and cheaply available, competition in the sector heats up and the technology continues to mature.

This will drive adoption, which drives volume, which drives cost-reduction. And so the cycle continues.

It is something of a slow and frustrating process for companies and individuals who have, for years, been frustrated by Telkom's stranglehold and government's inactivity.

One day, we will all have our dream of cheap, readily available telecommunications services (you thought I was going to say the death of Telkom, didn't you?) to suit all pockets and preferences. At the rate things are moving, that day is not too far off.