The introduction of the Internet protocol (IP) in many national and international networks over the past three years reflects a number of broad trends in the overall evolution of both global and national information infrastructures. One of these trends is the emergence of a much more vibrant market for long-distance and international calls. There is even a hint of the excitement and chaos of a real market-place with new buyers and sellers rapidly entering, new products and prices being offered monthly, if not daily.
Many countries ban IP telephony completely, yet IP calls can be made to almost any telephone in the world. Many public telecommunication operators (PTO) are establishing their own IP telephony services, and/or using IP-based networks as alternative transmission platforms. Whether all the traditional operators will be able to find a place in this new, "openair" market, remains to be seen. However, the "early and rapid adapters" stand the best chance of sustaining themselves in this new environment while the "wait and see" group may gradually witness their customers exiting and their traditional markets eroding.
Thailand, as a developing economy, provides an example of how traditional monopoly markets for long-distance and international calls are becoming contestable due to technological developments such as cellular mobile and more recently Internet telephony. According to the Telegraph and Telephone Act of 1934, the government has a statutory monopoly in the ownership and operation of a public telecommunications network. Thus, the two State-owned carriers namely, the Communications Authority of Thailand (CAT) and the Telephone Organization of Thailand (TOT) are monopolies in the local and international call services respectively.
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Thailand: IP Telephony and the Internet forms part of a series of telecommunication case studies produced under the New Initiatives Programme of the General Secretariat of the International Telecommunication Union (ITU). This case study was prepared by K. K. Gunawardana and William Withers of the ITU Regional Office in Bangkok, and Somkiat Tangkitvanich, of the Thailand Development Research Institute and directed by Ben A. Petrazzini, Policy Adviser, ITU Strategies and Policy Unit (Ben.Petrazzini@itu.int). Other cases, including studies on IP telephony in China, Colombia and Peru, can be found at www.itu.int/iptel. |
During the rapid expansion of the Thai economy in the early 1990s, it became evident that TOT and CAT alone could not expand their services to meet the surge in demand. To circumvent legal restrictions, a number of build-transfer-operate (BTO) concessions were granted to private companies. These concessions allow the State agencies (as concession providers) and the private companies (as investors of network construction and service providers) to share monopoly benefits by revenue or profit-sharing schemes. These concessions have led to a limited competition in the telecommunications market. Currently, concessions have been granted to two fixed-line telephone operators, five mobile phone operators, 18 Internet service providers, and more than 25 pager, VSAT, and other value-added service providers.
The State monopoly, together with the BTO scheme, constitutes a unique feature of the Thai telecommunication market. It is in this context that voice over the Internet protocol (VoIP) technologies offer a new dimension of competition.
Many countries ban IP telephony, yet IP calls can be made to almost any telephone in the
world
Photo: Clarent Corporation (ITU 000064)
CAT and TOT have both announced their intention to introduce IP-based voice services. In fact, CAT's new service, phoneNet, is competing with TOT's traditional international long-distance service. In turn, TOT's domestic VoIP service will compete with the domestic long-distance and international service offered by the two major cellular mobile operators: Advanced Info Service Plc. and Total Access Communications. Consequently, de facto rivalry has emerged in these two market segments in advance of them being formally liberalized in 2006, based on the World Trade Organization (WTO) commitments.
Although being designated as having a monopoly in the provision of international telecommunication services, CAT has not been fully protected from competition. In recent years, CAT has seen its revenue eroded by competition from international call-back and substitution of fax and voice calls by e-mail, and other Internet-based services. To regain its falling revenue, CAT launched phoneNet as a low-priced alternative to its basic international telephone service. The State agency has subcontracted Hatari Technology Co. Ltd. to market the service. In return, Hatari will earn 10 per cent on sales of the service up to Thailand Baht (THB)* 40 million and 15 per cent on sales of THB 100 million for five years.
The service now covers about 75 countries. To access the phone-to-phone service, users must first buy a calling card that will give them a 12-digit access code. There are two types of calling cards: silver and gold. The cards cost THB 5000 and 10 000, respectively. With the cards, users can make an international call from any phone, including mobile and public telephones.
TOT officially launched its VoIP service in October 2000 under the name Y-Tel 1234 to provide a cheap domestic long-distance call service. The service is part of the State agency's efforts to compete with mobile-phone services and is also in line with the government's policy of low-cost services in the provinces.
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* THB 43.6 converts approximately to 1 USD at the exchange rate of 24 October 2000. |
Users do not need cards or a subscription to use the service. All they have to do is to dial extra digits "1234" before dialling the destination number. The service is available to any telephone, including public telephones. Currently, however, only the TOT subscribers will be able to use the service.
Technically, the IP traffic will be passed to the public fixed-line network, unlike most VoIP services which use private networks. It appears that TOT is attempting to fully utilize its public line capacity. Concerning the quality of voice, TOT claims that the delay experienced by the users of Y-Tel 1234 is no more than 100 ms, a significant improvement over 250 ms delay of the satellite-based telephone service.
While VoIP services are usually offered as lower priced calling packages by new entrants in a liberalized market, in Thailand the services are provided by incumbent State agencies to protect their falling revenues. The services are currently monopolized by the agencies, but the situation is about to change. In fact, the year 2000 is a year of changes for the Thai telecommunication market.
Firstly, the law to establish the National Telecommunications Committee (NTC), an independent regulatory body, became effective in March 2000. Once established (now expected by the second quarter of 2001), NTC will replace the State agencies as the regulator.
At this stage, however, it is too early to assess the
degree of liberalization and the impact of the regulatory changes on the provision of VoIP and
other long-distance and international services. The draft Telecommunication Act, approved by the
Cabinet in the second quarter of 2000, provides little detail concerning the future market
structure except that CAT and TOT will be able to continue to provide their existing services.
The pace of liberalization, licensing conditions, and number of licences to be issued are all
subject to regulation by NTC. How much and how soon the Thai people will fully benefit from
entirely liberalized markets and ever-emerging technological innovations, such as VoIP services,
remains to be seen.
A policy strategy for developing countries?While IP telephony presents an opportunity to bring lower prices for distance calling to those consumers already connected to the information infrastructure, it offers little to the unconnected. However, the technology has immense potential to provide access at an investment cost some fivefold to eightfold less than that of a PSTN line. Therefore, national policy-makers in developing economies must also consider the implications of IP telephony in the context of their plans and objectives for bringing universal access to those parts of their nations which remain either not served or under-served by their information infrastructure. The following elements of a policy strategy for developing countries should be considered in the context of addressing both the introduction of IP telephony, as it is currently offered, as well as the full liberalization of the international long-distance market:
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This article appeared in ITU News in November 2000. The full case study is available here.