Net telephony players must dare to be different

Singapore's new VoIP providers must differentiate themselves, or face the cut, say industry analysts.

SINGAPORE--Internet telephony players in the island-state must differentiate themselves from existing telcos to survive in the market, an analyst has warned.

In September, three new market players--SuperInternet, China Motion and MediaRing subsidiary I2U--together with former incumbent SingTel, successfully obtained phone numbers that are tied to VoIP (voice over Internet Protocol) services. These numbers begin with '3', as opposed to '6' for fixed-lines and '9' for cellular lines in Singapore.

The new entrants to Singapore's telco market spells good news for consumers, offering more choices for voice services, said Law Choong Ming, associate consultant from Frost & Sullivan's ICT practice. But he also warned that the new kids of the block must find new ways to compete with existing voice service offerings already available from providers such as SingTel and StarHub.

Law noted that VoIP services require broadband Internet access, which is offered by SingTel and StarHub over copper phone line and cable network, respectively. Traditional voice services are already available on those connections, he added.

For example, SingTel's ADSL (Asynchronous Digital Subscriber Line) service runs on copper lines already tied to a phone number, while StarHub has a voice service delivered over its cable network.

Law said: "I don’t see how the new players can offer compelling services to pull customers away from SingTel and StarHub. The new players have to offer something special or different."

In a mature VoIP market such as the United States, he said, VoIP services allow users to make and receive calls anywhere in the world with a single phone number. In addition, some service providers such as Vonage, offer secondary virtual numbers in multiple geographies that ring back to a subscriber's main Vonage line, wherever the subscriber is located.

Law also suggested offering IP services such as the use of 'e-numbers' (ENUM), that serve as a single point of contact for voice calls, voicemails, e-mail and faxes.

Just after the level '3' numbers were allocated, Singapore's Infocomm Development Authority (IDA) invited fixed-line, mobile and VoIP service providers to start testing e-number services.

IDA said in September that its has appointed its subsidiary, the Singapore Network Information Centre (SGNIC), to conduct an ENUM pilot trial. SGNIC administers Internet domain names in Singapore.

According to the authority, the pilot will last for six months, after which SGNIC will assess if the trial needs to be extended or decide if ENUM will be launched in Singapore.

Another strategy that could work out for VoIP players is product bundling, suggested Ovum senior analyst Mark Main. "The appeal of VoIP is obvious and the example of Yahoo Broadband in Japan shows how compelling it can be when combined in a broadband package," he said.

The majority of Yahoo Broadband’s 2.5 million broadband customers have also subscribed to its Internet telephony service, Main said. "They are now benefiting from free unlimited calls to other Yahoo Broadband customers and cheap long-distance calls to other destinations both in Japan, and internationally," he added.

With existing telcos playing in the same game as new VoIP service providers, and in a competitive Singapore telco market, the going may be tough for the new players.

Law noted that price could just be the only competitive advantage for the new players.

"There is definitely a demand for voice (services) among consumers. Everyone wants cheap voice calls," he said, though he acknowledged that competing on price may be tough, because they may not have the economies of scale which the bigger players do.

There is more to VoIP than cheap calls, however.

Main noted that VoIP service providers could offer other services over broadband networks through partnerships with other service providers, to deliver attractive gaming, messaging and voice packages.

"This would allow them to target their offerings more narrowly at small businesses and specific segments of the consumer market, for example," he said.

Singapore-based ISP SuperInternet, for instance, has plans to entice business users and consumers with broadband packages that include Internet phone calls, said its CEO Benjamin Tan.

Khaw Kheng Joo, CEO of Singapore communications services provider MediaRing, said it is too early to tell if VoIP will boom in Singapore.

"VoIP has been quite successful in the United States and Japan. We are hopeful we will be able to eventually put together a successful program here," he said.

SuperInternet's Tan noted that before a successful rollout can take place, some kinks have to be ironed out.

He revealed that the new VoIP players are finding it hard to establish interconnection agreements with existing telcos quick to protect their turfs. Such agreements are necessary so that VoIP users can make and receive calls to and from subscribers on other telco networks.

Among the difficulties faced by SuperInternet and MediaRing, are slow responses from existing telcos to establish interconnection contracts, and the prohibitively high cost of doing so.

Said Khaw: "Currently, we will focus on getting the interconnection agreement done. Without the interconnection capability with the other telcos in town, the number will be rendered useless. As soon as the interconnection agreement is established, we will start offering the number to our current Global Talk (VoIP) customers."

Tan said SuperInternet is currently in talks with SingTel to establish an interconnection deal, but he declined to comment on the status of the discussion as he is bounded by a non-disclosure agreement with SingTel.

"Establishing similar agreements with overseas telcos--for SuperInternet--is much easier than doing likewise at home (in Singapore)", he said.

On the possibility that the onslaught of wireless broadband could boost demand of VoIP services, such as VoIP over WiMax, Law said: "It might happen, but I don't foresee it to be anytime soon."

He noted that the convergence of WiMax and VoIP will only be successful if operators provide island-wide wireless broadband coverage. "And I'm not sure if they are willing to do that. It will also take some time for the handsets to be ready."

Ovum's Main summed up the prospect of VoIP best.

"VoIP is rather like an iceberg at the moment," he said. "Significant development is going on somewhat unseen and the market is fragmented, but the latter has the potential to both develop and coalesce quickly and be a major threat."

"It would be a folly (for anyone) to ignore a lurking presence under the surface--icebergs have been known to sink many a ship."