The VoIP factor

For the best part of a decade, pioneers of voice over IP (Internet protocol) have been saying that the technology is dangerous and disruptive to the business of telecoms companies – fixed line and mobile operators alike. Now the actions of some telcos seem to confirm this: they are trying to find ways to block third-party voice calls from using their data networks. This practice has sent analysts and regulators scurrying to their reference books: Is it legal to block some packets and not others? Is it really technically feasible? If it is, could VoIP providers simply find workarounds?

One thing is clear: with billions of dollars of voice call revenue, especially on mobile networks, at stake, these questions are likely to be asked a lot in the coming years. Smaller VoIP operators hope grabbing just a small fraction of these revenues will glean profits.

Because VoIP chops voice messages into digital packets, it can be routed as data over almost any network, making Internet-based calls, regardless of distance, virtually free. VoIP calls' initial problems with 'jitter' have been solved by recent improvements in quality of service and bandwidth availability.

Most fixed-line telecoms companies have acknowledged the threat to their voice revenues and are developing new strategies based on introducing a range of advanced billable IP services. But others are taking a more defensive approach. Earlier this year, the FCC fined a North Carolina telecoms company, Madison River Communication, for blocking VoIP calls over its network and banned it from the practice. VoIP operators in the US say that cable companies are also blocking VoIP traffic.

In Europe, the issue is set to move onto wireless networks, where licence agreements between the user and the operator may allow operators to ban VoIP calls – except, perhaps, from approved suppliers. Mobile operators have even more to defend: their voice calls are highly profitable and none has published BT-like plans that envisage a slowdown in call revenue.

Present GPRS and 3G data networks suffer from too much latency to support voice calls reliably. But when a new upgrade, HSDPA, is introduced across Europe in 2006 and 2007, VoIP calls will be feasible – even exceeding GSM call quality, according to network equipment supplier Lucent.

Several mobile operators are considering banning VoIP traffic. The French operator SFR, partly operated by Vodafone, says it will block VoIP, along with other services that could affect revenues or network performance. And, according to Ovum, the market analyst firm, Vodafone Germany also plans to ban VoIP in 2007.

So far, no regulator has been called on to assess the legality of these measures, since they have not been implemented. The crudest technical method to halt VoIP traffic is to block its IP ports, but this would certainly face legal challenges; in any case, VoIP operators are likely to find ways of virtualising or rapidly changing IP addresses.

Another method would be to analyse the characteristics of the voice traffic as it passed through the routers. But this could accidentally catch other traffic, such as video conferencing.

Would a big global operator such as Vodafone really go ahead and ban services from these small third parties? In off-the-record briefings, executives at rival companies think not. They suggest the big telcos will test regulators' reactions and try to unsettle corporate buyers, who will then feel more secure buying from approved operators.

Ultimately, bans are unlikely. With data rates on mobile networks at present as high or higher than voice tariffs, it is not in any operator's interest to attempt to control all the applications on their networks. Even when call revenues inevitably fall, market forces will apply: many customers could switch to operators that support an ecosystem of third-party service providers.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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