“I think I’m losing my voice” Voice telecommunications in the Internet era

1. “I think I’m losing my voice”Voice telecommunications inthe Internet era Taylor REYNOLDS OECD The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the OECD or its Membership.

2. My wife I want our old phone back So which phone am I supposed to call with when you’re travelling? The quality is SO low No one ever calls. The calls don’t skip anywhere when broadband is down Voice troubles “chez les Reynolds” • Taylor • VoIP is great! • It’s fantastic to have a US, CH and FR line at home • The prices are SO low • Calls from US are free • The calls skip over the French PSTN

3. How important is voice?Access growth 1997-2005

4. The telecom industry is still “voice” • Voice • Voice is at least 79% of total telecom revenues in all OECD countries • Of Verizon’s USD 75 billion in revenues - only 14% were from data • Mobile • OECD mobile revenues alone were 40% of total telecom revenues in 2005 • Mobile over of 50% of total revenues in 12 countries • Mobile revenue in Japan or US is larger than the GDP of 125 out of 213 countries covered by the World Bank

5. Big change #1:Growth of mobile

6. Traditional mobile vs 3G growth

7. Big change #2:Shift to VoIP • Proportion of VoIP revenues to total revenues declines • €10/month for 1 Mbit/s wholesale transit = 4 continuous phone conversations at 256 kbit/s (high quality). • France: Unlimited phone calls to France and 25 countries • VoIP is technically only authorization and directory • There is practically no marginal cost for a call. • XBOX, WII, PS3, XBOX360, PS2 do voice - next?

8. Policy issue: Numbering • We don’t call numbers. We call people (with a name) • There is no geography in the network. A call to an Orange VoIP-customer in The Netherlands is routed through Paris. (No more switches) • Name  PSTN-number  IP-number  Network identifier (seems redundant) • Numbers == billing? • Number portability and VoIP? • Then what is a number worth? To me a Paris-based “01” area code was worth EUR 100

9. Policy issue: Interconnection • From RPP to CPP to NPP (No Party Pays) • Interconnection is guaranteed money for all involved • There is essentially a terminating monopoly • Low impetus for change: Everybody gets their cut so why would participants be against it? • Unclear to end-user. Why does it cost 15 cents to connect to mobile and 0 cent to fixed? Same general idea, similar technology

10. Policy issue: VoIP and traffic prioritisation • Voice can be one of the biggest winners or losers with traffic prioritisation • Discriminatory traffic prioritisation can severely degrade VoIP traffic • Jitter • Lags • Encrypted transmissions are still subject to anti-competitive traffic shaping

11. Policy issue: Universal service • Regulating voice over the PSTN and voice over IP differently is not a long-term solution • Countries where VoIP has been regulated like PSTN voice have struggled with voice development (e.g. Korea) • At what point will universal service move from being a “voice line” to a “data line”?

12. Conclusions • Voice is still extremely important to telecommunication operators but they need to wean themselves off it • There are big changes in the industry • Mobile growth • VoIP • Consumers/operators/regulators are still figuring out how this will work • 10 years from now my children will laugh when I tell them I used to pay for phone calls

13. Merci beaucoup taylor.reynolds [ @ ] oecd.org