Start-up VoIP applications may trip telcos

Companies such as Tel Aviv’s-based Fringland Ltd, Holland-based Nimbuzz B.V. and the London-based Software Cellular Network Ltd are testing new software applications that allow users to bypass the operators’ phone billing software and route voice calls over their mobile Internet connections.

While traditional instant messaging (IM) companies have scaled-down versions of their software running on mobile phones, they either do not support voice calling or are not available for all phones.

For example, Yahoo and MSN, which have mobile versions of their messaging software, do not support voice calling and Skype, which last year launched a mobile messenger that supports voice calls, runs only on the Windows Mobile and PalmSource operating systems, not on Java or Symbian systems used by most phone vendors.

Also, unlike traditional IM software, the new applications identify the users by their phone numbers, making it possible to place voice calls over Internet using traditional phone numbers.

And unlike the traditional networks, the new messengers work by requiring the user to register his phone number with them and use the phone numbers to make and route calls. As a result, unlike in a traditional IM framework, a caller can make such calls without having to know the Yahoo or Skype ID.

The new companies take advantage of the reluctance of telecom companies to move away from the old, switch-based communication technology into the more modern ‘packet’ or internet protocol (IP) communication. Fring, one of the start-ups, says its founders were “tired of watching telecom industries benefit from the introduction of VoIP within their own domains yet refrain from passing these benefits on to consumers". VoIP is short for voice over internet protocol services—jargon for internet phone calls.

Indeed, telecom firms today carry nearly all their bulk voice traffic using IP technology, but are yet to introduce the same technology to the ‘last mile’ from the telephone exchange or mobile base-station to the consumer. IP cuts down on infrastructure requirement (and associated costs) of carrying voice traffic by sending multiple conversations on the same line, instead of reserving one line for each conversation.

While the mainstream telecom companies are reluctant to introduce IP technology on the last mile, small start-up companies such as Fringland, Nimbuzz and Software Cellular have launched trial versions of software that do just that.

Such applications, downloaded from Internet, convert the phone’s voice traffic into Internet ‘packet-based’ traffic and send them over the user’s data connection. The voice traffic is then carried over Internet and terminated on the recipient’s phone. The technology bypasses the traditional switch or ‘circuit-based’ architecture and billing systems of telecom companies, resulting in cheaper calls for the end-consumer.

Anthony van de Veen, sales account director for Nimbuzz, says the response so far has been beyond the firm’s expectations, six months after its product was put up for beta-testing. “We have not had any marketing activity till now, but we still have around one million downloads so far... and, we have seen a high level of interest from India and Pakistan," he says.

However, India still does not have the high-speed third generation wireless network required to run such applications, but has an intermediate data-enabled networks in bigger cities and towns. While such applications require a data-speed of around 10 kilobits per second, the GSM and CDMA networks in the bigger cities and towns in India deliver around 30-50kbps per user during off-peak hours, but stumbles to 2-5kbps during peak office-hours.

“I use it to talk to my friends in the US in the morning," says Vinu Thomas, a Bangalore-based software programmer for a Web services company who has all the three applications on his phone. “The speed becomes too low during the day and I cannot use it till late night again." Like Thomas, other users, too, are attracted to Fring-like IP-based services for the cheap calls they afford. Under a typical wireless data plan, a 1 gigabyte (GB) data package costs between Rs500 and Rs700 a month. With a data consumption of 10kbps, a 1GB package is enough to make calls for eight hours a day, 30 days a month, anywhere in the world.

“It is definitely a risk to the operators, but the impact will be gradual as more and more people start using 3G services," says Damien Chew, telecom analyst with the London office of ING Equity Markets. He says smaller operators have tried to benefit by delivering cheap IP-based voice services, but most of the big ones have either ignored or sometimes tried to block the service. “Now, operators are either offering their own voice-over-IP packages, like the Hutchison group in the UK, or they are actively trying to block such services from their networks," Chew says. Europe’s T Mobile, he add, offers wireless data packages that ban use of VoIP services.

A senior executive with a prominent Indian operator said that though the technology to block such calls are fairly mature, such a measure legally may result in controversy. “I don’t think the law allows us to block one form of data traffic over the Internet," he said, preferring not to be named due to his employer’s media policy. The number of data enabled phones is very limited, with just around 5% of the GSM users making use of data extensively, he said.

The problems and controversies, however, don’t seem to deter the new companies, most of whom are less than a year old. “Several major telcos have disabled (or hidden) the internet settings from Wi-Fi handsets they distribute to discourage VoIP services," says Roy Timor Rousso, vice-president in charge of product marketing at Fringland. “But Fring operates fully on these handsets... We have not encountered any hiccups beyond not having answers for all users waiting for Fring to support their handset."

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