NTC bans Internet telephony by ISPs for 5 years

Traditional telephone companies have won in their bid to prevent Internet service providers (ISPs) from engaging in Internet telephony, in particular voice-over-the Internet, a technology that allows users to make a phone call using the Internet and is said to have resulted in huge potential losses to the former.

According to the National Telecommunications Commission, only licensed voice carriers, or telephone companies, will be allowed for a period of five years to offer VoIP.

The new policy will thereby prohibit ISPs from engaging in VoIP. There are about 160 ISPs operating in the country.

Right now, ISPs are offerring IP telephony which allows users to escape paying international long distance charges when they make the international calls through the Internet.

IP telephony provides an alternative means of originating, transmitting, and terminating voice and data transmissions that would otherwise be carried by the public switched telephone networks (PSTN).

According to the NTC which will be issuing a circular outlining its Internet telephony policy, the five-year period will allow the telephone companies adequate time to recoup their investments, after which the Internet telephony business will be deregulated.

"The technology (Internet telephony) is coming and we cannot avoid it. However, as a matter of policy, we can only allow licensed voice carriers to engage in it for five years because of the huge investments they have already put into their networks," NTC commissioner Eliseo Rio said.

It is said the local telephone companies are losing hundreds of millions of pesos in potential revenues when the Internet is used to make the international calls. Despite the fact that the quality of transmission of voice over the Web is still poor, consumers are willing to bear this in return for avoiding paying long distance charges.

Telephone companies and ISPs have reached an impasse over a plan to make VoIP a win-win business for both, in particular over how much ISPs are supposed to pay telephone companies when the former uses the latter’s networks to engage in Internet telephony.

Rio said government would not come into the picture if IP telephony was limited to just sending voice messages from one personal computer to the other. "What we are avoiding is the practice of diverting the call from the PC to the telephone network (called PC-to-phone), thereby avoiding long distance charges," he said.

Because of PC-to-phone over IP, Internet users with multi-media PC are able to call any phone or fax user at reduced telephone charges because they do not have to pay the long distance charge. Some ISPs are also offering "free" Internet telephony calls to the United States and other countries, the cost of which the ISPs are able to recoup due to banner advertisements.

There is also the phone-to-phone over the IP, which allows two phones to communicate without passing through the circuit-switched based network (the ones used by traditional telephone companies). At present, this is the biggest segment of the IP telephony market in terms of revenue and minutes of international call traffic.

During last year’s meeting of the International Telecommunications Union (ITU) Council, some counselors said IP telephony would become a key technology in the coming convergence between circuit-switched and packet-switched networks, but others saw the danger it posted to the revenue stream of incumbent public telecommunication operators.

In many countries such as the Philippines, it is now possible, using a standard telephone, to call almost any other telephone in the world by means of IP telephony. These calls, however, are mainly carried outside of the PSTN, and hence outside the regulatory and financial structures which have grown up around it.

It is estimated that the total volume of VoIP traffic carried over international networks last year reached about four billion minutes, or about three percent of the global total, last year. This is expected to increase to 5.5 percent this year.

Many major international PTOs however are migrating their international traffic into IP platforms. For instance, Cable & Wireless is spending more than $2 billion on a global IP network. It plans to use VoIP to deliver some 900 billion minutes of calls in the year 2006 compared with just 675 million in 1999. The company estimated that VoIP technology will allow it to carry calls at a quarter of the cost of doing so over a conventional, circuit-switched network.

Even the Philippine Long Distance Telephone Co. (PLDT) is going wireless and is spending a lot of money to build global networks based around IP on which voice service can be provided alongside data.