Can VoIP Replace “Legacy Voice” in Asia?

1. Can VoIP Replace “Legacy Voice” in Asia? Steven Rago Principal Analyst, iSuppli Corporation

2. Agenda • VoIP Overview • VoIP is not a single application • VoIP vs. Legacy PSTN Technolgoy • Requirements, Advantages & Issues • Advanced Feature • Successes in Asia • Broadband access ‘Foundation of Residential VoIP’ • Types of Broadband technologies • Broadband penetration in Asia • Can Broadband sustain growth • VoIP potential in Asia • VoIP drivers in Asia • Forecast residential VoIP • VoIP “DSP” Opportunities • Summary

3. VoIP Overview- not a single application VoIP ApplicationMarket • VoIP over Broadband…………..Residential xDSL, Cable, Ethernet first mile, WiMAX,… Competitive or supplementary service for traditional voice • VoIP PBX……………………………EnterpriseConvergence of voice and data in the enterprise • VoIP “IP Centrex”………………EnterprisePBX IP services offered by Service providers • VoIP Virtual Pvt. Networks…..EnterpriseEnterprise networks with converged voice and data, may be managed by the PTT, ILEC, IXC • VoIP Linking Switches…………Service ProviderLong haul transport of voice utilizing packet technology • VoIP Public Internet……………Residential (IP voice over Internet)Use voice over public internet services for long distance calling

4. Analog Telephone Analog Telephone Analog Telephone VoIP vs. Legacy PSTN Technolgoy SS 7 Network Analog Telephone Call Signaling Call Signaling Legacy PSTN Class 5 Circuit Switch Class 4 Circuit Switch Class 5 Circuit Switch VoIP-Requirements, Advantages & Issues Voice-IP Gateway Call signaling Broadband pipe IP Router Soft Switch residential Gateway IP Router residential Gateway IP Router Media Servers IP Router IP MPLS Network SIP phone

5. VoIP-Requirements, Advantages & Issues VoIP over Broadband Residential Service • Requirements: Always on Broadband connection Voice quality “better then cellular” Instant dial tone every time (non blocking) No dropped calls • Advantages: Less expensive to deploy Soft Switches vs. Circuit switch offices Statistically Multiplexed vs. TDM Richer suite of applications

6. VoIP-Requirements, Advantages & Issues • Issues: Quality of: Service!!!! Voice!!!! Line power Emergence call (ie 911) Security Country’s wire tape for law enforcement

7. VoIP Advanced Feature • Number portability Telephone number no longer tied to specific location • Single message center for both email and voice Can enhance with text to voice • Distinctive Ring and other features based upon IP address Multiple IP address can address one residential gateway • For enterprises: Enhances call center operations • Residential gateway can make decisions on how to direct outgoing call to PSTN circuit switched for high quality call to VoIP packet switched for low cost

8. VoIP - Successes in Asia • Japan’s Growth in fixed line VoIP subscribers BB Subs. VoIP Subs.

9. Broadband access ‘Foundation of Residential VoIP’ • Types of Broadband technologies • ADSL: • Fastest growing of Broadband access technologies • Offered by incumbent and competitive fix line service providers • 16-24 Mbps down stream at 3K feet • Voice over Ethernet (VoIP) over AAL-5 ATM • Cable Modem: • Dominate Broadband technology in NA • Defined standards for Toll quality Voice – VoIP • MSO in US offering VoIP over cable modem • FTTx-LAN: • Strong growth in China • Could become backbone for VoIP services • WiMAX: • Wireless broadband technology • Reach up to 15Km • Could become a candidate for VoIP services to rural areas

10. Broadband-Penetration in Asia Potential Strong Mkt for VoIP services Critical Mass

11. Can Broadband sustain growth? CAGR = 32%

12. VoIP Drivers in Asia • Asia is prime for VoIP Services • Expensive Local Phone Tariffs (metered services) • High cost of long distance services coupled with strong demand • Significant levels of broadband penetration • Low tele-density in many nations in the region • Success of VoIP in Japan • Minimal expectations for voice quality, availability,… • More competition among service providers then Europe or NA. • Absence of any major installed base of legacy phone equipment in many nations

13. Forecast residential VoIP VoIP Subscriber Growth in Asia wo Japan • …. CAGR ’03-’08 = 76%

14. VoIP “DSP” Opportunities Node in VoIP NetworkTechnology and function Soft Switch Generic Computer with Telephony Software (no DSPs in Soft Switch) Provides: Call control, Telephone number translation, Advance features, Service registration Voice/IP Gateway Either DSP technology or ASSP designed for multiple channels of to IP conversion Provides: Terminates/initiates signaling with Class 5 switch, Encodes and compress voice data, Generates IP packet, Latency compensation-Echo cancellation (major DSP function) SIP Telephone ASSPs that perform all the phone functionality including protocol stacks DSP is core in ASSP

15. Summary • Asia is a prime market for VoIP technology • China is expected to pass Japan as the number one market for residential VoIP by 2006 • Demand for soft switches and Gateways will become significant by mid 2005 • The market for SIP phones in the residential space will be minimum while residential broadband gateways will be significant • Not all is smooth for VoIP there are several hurdles to overcome, however iSuppli sees a bright future.