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The Evolution of VoIP

A look into how VoIP has proliferated into the global dominant platform it is today

Submitted by Bradley Susser

April 27, 2012

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Table of Contents

Summary.. ................................................................................................................................3-4

Introduction ..4-7

VoIP definition and Architecture ..............................................................................................8-11

VoIP Classification Scheme......................................................................................................11-12

Growth of Technologies & Companies Leveraging the VoIP Platform......................................12-21

Security Issues & Countermeasures 21-24

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Global Regulatory Frameworks...................................................................................................24-27

Conclusion.................................................................................................................. ...............28-30

References................................................................................................................. ...............31-34

Summary
The advent of the Internet has allowed many new technologies to leverage this medium, drive innovation and create a substantial revenue base for many organizations around the world. Nowhere is this more evident than in the telecommunications arena, in particular the area of Voice Over Internet Protocol (VoIP) which has changed the entire landscape of the industry in accelerating the migration over the last several years to VoIP services and in contrast has diminished the need for circuit switched telephony providers as quality of service has improved considerably. The UK regulator, OFCOM, even anticipates that all voice traffic will shift over to IP technology [OFCOM (no date)]. VoIP has not only allowed for organizations to thrive but has reduced costs not only for its providers but customers as well. Although these attributes are indisputable increasing competition among providers

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has forced many organizations to provide a diversification in their offerings by leap frogging off of VoIP in order to stay ahead of their advisories and remain viable businesses. This leads us to two opposing opinions on the outlook for many of the organizations within this realm. For example, Infonetics Research in its February 2012 report stated that global sales of telecom VoIP and IP Multimedia Subsystem (IMS) equipment jumped 15.8% in 4Q11 over 3Q11, to $690 million [Infonetics Research (Feb. 2012)]. Just one thing to note is that Infonetics labels IMS and VoIP separately but perceives them as being similar enough to depict them together. Moving further ahead the research firm indicated that for the full year, Latin America was the big standout, with a 34% increase in carrier VoIP and IMS equipment sales. Now here is the caveat. Infonetics for the full year saw the overall carrier VoIP and IMS market ending down 2.1% in 2011 over 2010 to $2.6 billion. In fact in March of 2012 Standard & Poors said it anticipates expansion in the cable VoIP sector to hit a wall and see an extensive fall off in months to come [ONeill (March 2012)]. We are more apt to agree with the former opinions that provide a more positive outlook and as you will be able to assess these downward numbers depicted in the prior sentences are just temporary and will increase significantly as the second leg of this evolutionary new medium continues to mature due to rapid technological advancements, innovation and the integration of emerging technologies that will add additional value by complimenting the VoIP sector as a whole. This paper doesnt dispute the fact that customers will continue to benefit significantly from VoIP as quality of service has improved while costs have continued to come down considerably rather our

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objective is to focus more on the viability of providers that encompass this sector of the market. We aim to first describe how VoIP has proliferated into the global dominant platform it is today, the infrastructure and definition of VoIP, VoIPs classification schemes, the growth of technologies leveraging the VoIP platform while disrupting traditional carriers business models, covering the topic of VoIP security, explaining the different regulatory frameworks around the globe and finally concluding with an opinion on the competitive landscape.

Introduction The telecommunications industry worldwide has gone through a number of transformations over the years primarily due to government and regulatory policies and initiatives. Due to the convergence and advancements in Information and communications technology (ICT) most sovereigns around the globe have come to the realization that government owned and monopolistic telcos are far less efficient than their privately run organizational counterparts. We would be remiss if we did not explain how this broad based school of thought came into being and furthermore helped in fueling the growth in VoIP. Lets take for example the telecommunications landscape of the United States in its historical context. AT&T which in the early 1900s had a monopoly on the United States telecommunications infrastructure placing local carriers in a no win situation by forcing them to concede to every demand at their bequest otherwise AT&T would disallow access to low cost carriers to

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interconnect to its vast network [Nuechterlein & Weiser (2005)]. This is a case whereby the government had to step in and give the perceived effect that in order to increase competition it would break up AT&T geographically into the baby bells. The bell companies would control different regions of the country keeping AT&T as a natural monopoly. This forced the baby bells to each stay within their own geographical boundaries and anyone choosing to place a long distance call had to still interconnect first with AT&T who would then reap the rewards due to its scale of economy. In other words without clear indication of bribery it was understood that AT&T could protect its monopoly status if they in turn did favors for the government such as passing the costs of rural customers that were significantly higher onto other businesses or urban areas and in turn matching their own interests with the political goals of regulators. In the early 1970s the FCC adopted rules allowing competition into the telecommunications equipment market which inevitably caused a domino effect. What we mean is that now local carriers were able to dramatically increase call volume, reduce prices because AT&T rates were through the roof and effectively build a rival network while earning large profits even with a small share of the total customer base. This lead to the growth of firms like MCI who provided business oriented long distance service through microwave technology and the growth of access services such as high speed links between local and long distance networks. At first AT&T tried to thwart competitive efforts by refusing

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access to its long distance lines or keeping those lines continuously busy forcing the government to step in and mandate non-discriminatory interconnections. Finally in 1996 congress abolished the natural monopoly of AT&T by disallowing exclusive franchises, ordered all telecommunications carriers to interconnect with any requesting carriers and declared all local and long distance markets open for competition. Contemporary technological convergence became more prevalent at the start of the 1980s and has expanded at a rapid rate ever since. In the telecommunications industry the first signs of convergence appeared through the introduction of digital switching. In the mid-1980s analog telephone systems were transformed into fully digital networks. Since the devices on each end of the data stream do not care what channel links them together, companies were no longer technologically confined to their own markets. Online computer services, voice telephony and broadcasting were no longer services offered on varying platforms but rather all these different media had now converged together into one operating platform. It is here the FCC believed these new ICTs did not have monopolistic tendencies and furthermore would fuel competition while keeping costs at bay for the average citizen. In other countries such as Colombia they too have adopted many policies that coincide with the United States which is why in February of 2012 Colombia won the award as the government with the most innovative telecommunication policies in the world [Ministerio de Tecnologas de la Informacin y

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las Comunicaciones (Feb. 2012). It won the "Government Leadership Award 2012" for the Live Digital Plan, at the Global Telecommunications Conference in Barcelona. The award was won based on clear principles that encourage private investment and healthy competition over the past year. Colombia went from 2.2 million Internet connections to about 5 million in the last year and a half and implemented measures that have allowed through public-private actions the massification of the Internet in such a way that broadband connections grew by 130% and computers in Colombia today have the lowest prices in the region. Clearly this is just one case but it is representative of many nations throughout the world and further affirmation that privatization, liberalization and increasing investments allow societies to access cutting edge technologies, increase telecommunications infrastructure to supply network access and enhance electrical infrastructure to make the ICTs function efficiently. Through this empirical research it is no wonder Infonetics stated that for FY2011, Latin America was the big standout, with a 34% increase in carrier VoIP and IMS equipment. Contemporary policies also raise doubts about the efficiency of state owned telecommunication entities as many once believed this could stifle competition. This has proved not to be the case which can be seen in the late 2011 financials of three Indian state owned telecommunications companies [Economic Times (Aug. 2011)]. In a release in late August of 2011 State-owned telecom companies

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BSNL, MTNL and ITI together incurred losses worth Rs 4,893 crore in 2009-10. The release goes on to say BSNL had submitted a proposal to the Department of Telecom (DoT) seeking financial help to operate commercially unviable services. It must be also said that although many sovereigns have taken an open market approach that unfortunately is not true of Africa as VoIP is still in its infancy stages. Dries Plasman of Voxbone, a market leader in providing worldwide geographical, tollfree and iNum telephone numbers, told TMCnet, First of all, the deregulation of the telecoms environment has yet to happen in most of the African countries [Schmelkin (April 2012)]. These battles have started, however because the incumbent operators are very powerful and protective of their territory the process of deregulation is very lengthy. Plasman also goes on to say A second limiting factor is the network, he added. Wired networks are not as capilar as in other parts of the world. This limits the use of fixed VoIP as a substitute for classical PSTN landlines. It must be noted that Africas GDP growth is expected to be 5.3 percent in 2012 and 5.6 percent in 2013 [Chuhan-Pole (Feb. 2012)] but that is mainly because commodities make up most of the continents revenues and the commodity markets could contract if Europe debts crisis and Chinas slowdown in growth continues to persist. Never the less, in order to diversify the economy its essential for Africa to take contemporary telecommunication initiatives such as the ones prescribed by Colombia and the U.S. to provide access to all its citizens which should

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increase job growth, enhance competition, lower costs and decrease information poverty. Furthermore Africas leadership should learn from the United States mistakes of the past and start making an effort to deregulate its telecommunications industry immediately. The content that encompasses the introductory paragraph shows that there is still an ample amount of market share for telco providers to exploit and that state owned entities are not one of the reasons that would cause the VoIP market to hit a wall as they are inept at keeping up with private carriers. This also provides additional proof and perhaps is a good explanation of why most sovereigns around the world have opened up their markets to private competitors. However in the preceding chapters to follow we will provide additional regulatory information on numerous government policies such as regulatory environments, deregulatory environments and those that impede competition. Furthermore you will also be presented with data that depicts the effect carriers like Skype have had on more traditional providers which have been on a downward trend since the early part of the decade backing up S&Ps claims that this medium may have in fact hit a wall in particular for incumbents. The question we address is why pure play VoIP providers and new entrants are thriving and turning the traditional telecommunications industry on its head while incumbents are faltering?

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VoIP definition and Architecture Before moving ahead we should begin by first defining what the term VoIP actually signifies. VoIP is technology that concurrently carries voice information in digital form using packet switching that leverages and moves over a corporate network based on the Internet protocol or the public Internet. In other words a VoIP phone call transfers data from one computer system to another and dismantles a voice message into data packets that may run along disparate routes before being put back together at their terminating destination [Curt M. White (2011)]. A gateway which is a processor next to the calls point of termination places the packets in the appropriate order via digitization, codec (compression/decompression) and encapsulation and guides them to the recipients telephone number or the IP address of the receiving computer. The quality and clarity of VoIP has improved significantly due to the expansion of network bandwidth, voice compression and packet reassembly algorithms implemented in CODECs (coder/decoder, which converts analog voice into digital data and back again, and may also compress and decompress the data for more efficient transmission), prioritization of voice over data transmission, header compression, intelligent routing and balancing of various compression and transmission parameters [Herman Labs (2009)]. Remember, the problem with incumbent technology is that it needs to be supported by a large amount of bandwidth for each call, and it can only support certain types of calls [Nokia (Oct. 2003)]. Furthermore, the hardware needed to run circuit-

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switched networks is extremely costly because voice and data services have to be transmitted over disparate wires and in turn need separate hardware to accommodate the two types of traffic hence VoIP is becoming the dominant platform in this space. Now that you know the definition of VoIP we will extrapolate with the categorization of signaling protocols that encompass the VoIP platform. First off we will discuss what are known as Session Control Protocols accountable for the formation, maintenance and tearing down of call sessions [Antoniou (June 2010)] They are also responsible for the intervention of session parameters such as codecs, tones, bandwidth capabilities, etc.. Two of the most well-known protocols used with VoIP are the H.323 standard and the Session Initiation Protocol (SIP). There are advantages and disadvantages among both protocols but Cisco believes incorporating them both on a single gateway is essential and they also state another integral part of dual-protocol deployment is the ability for H.323 gatekeepers and SIP proxies to interwork and share routing capabilities [Cisco (2002)]. In helping to compare the two technologies we have acquired what we deem to be an adequate representation of some differences between these two protocols. First we will begin with H.323 which was first deployed by ITU-T in 1996. H.323 was created to provide robustness and optimal interoperability for a wide range of applications encompassing multimedia communication over IP networks, including audio, video, and data conferencing [Packetizer (2012)]. H.323 is limited to multimedia conferencing, so the complexity of the

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system is constrained accordingly, it has defined a number of features to handle failure of intermediate network entities, it encodes messages in a compact binary format that is suitable for narrowband and broadband connections, it extends with non-standard features in such a way as to avoid conflicts between vendors, it interfaces between the endpoint and gatekeeper for address resolution and it has various authentication and encryption mechanisms. SIP introduced by The Internet Engineering Task Force in 1998, on the other hand many believe will become eventually the primary VoIP standard [Curt M. White (2011)]. SIP is designed to create, modify and terminate a voice session between two or more entities without any devices in the network getting involved however in practice other devices will be incorporated if special requirements with regards to network traffic are a necessity or the call must go through the PSTN. On the other hand some say SIP has a few interoperability problems as there are no strict guidelines as to what functionality any given device must support especially as SIP became more complex focusing on voice communication and then expanding to include video, application sharing, instant messaging, presence, etc. [Packetizer (2012)]. Furthermore SIP has not defined procedures for handling device failure, messages are encoded in ASCII text format unlike H.323 but sometimes messages get so large it can cause delays and packet loss however efforts have been made to binary encode SIP to alleviate this problem. While SIP has no address resolution protocol, per se, a SIP user agent may route its INVITE message through a proxy or

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redirect server in order to resolve addresses. Finally SIP as well does deploy authentication and encryption schemes. Contrary to Packetizer, according to Nokia complete deployments of H.323 requires a lot of overhead whereas SIP is a much more streamlined protocol, created precisely for IP telephony [Nokia (Oct. 2003)]. Smaller and more efficient than H.323, SIP takes advantage of existing protocols to handle certain parts of the process. For example, Media Gateway Control Protocol (MGCP) is used by SIP to establish a gateway connecting to the PSTN system. Simply put a gateway is a network feature that supports conversion between the audio signals transported on telephone circuits and data packets transmitted on the Internet or over other packet networks. IP Telephony architecture known as Soft Switch is based on SIP which enables carriers to provide IP to IP services, PSTN to PSTN services and IP to PSTN services which are services we describe in greater detail in the next paragraph. Further affirmation of Nokias assessment is described from Infonetics Research in April 2011 whereby the firm stated in a release that adoption of SIP trunking services (private switchboard VoIP that facilitates the connection of a private branch exchange (PBX) to the Internet) was the primary driver for enterprise Session Border Control (SBC) sales which is a device used by VoIP networks supporting voice and video connectivity (inclusive is providing security, call processing & traffic management capabilities)[Helmes (March 2006)] from the enterprise IP network to Service Provider SIP trunks,

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growing 220% worldwide in 2010 [Infonetics (April. 2011)] and in its latest 2012 report the research firm indicated SIP trunking service revenue jumped 128% in 2011 from the previous year, as businesses adopt SIP trunking [Infonetics (April. 2012)] . Whether you consider H.323 as more advantageous or SIP as the optimal protocol perhaps it makes sense to make use of both as each has their own positive and negative attributes. Now that we addressed Session Control Protocols we will briefly describe the Media Control Protocols. Media Control Protocols are accountable for the formation and the destruction of media connections. They are used to open and close media pin-holes on VoIP gateways and to process messages coming from those gateways. The Media Gateways are the VoIP elements that transmit media between the IP and PSTN networks. They are controlled by an entity that is called Media Gateway Controller. The latter uses a Media Control Protocol to control Media flows on the Gateway. The two main Media Control Protocols are MGCP and Megaco (H.248).

VoIP Classification Scheme Traditionally VoIP has been classified based on IP to IP services, PSTN to PSTN services and IP to PSTN services [Nuechterlein & Weiser (2005)]. IP to IP services is whats known as peer-to-peer voice telephony as both ends of a call must run on top of an IP (Internet Protocol) broadband platform. This is essentially makes use of computer to computer type applications. This was first developed by Jeff Pulver

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who offered his pulver.com instant messaging service that informed members when other subscribers were online and at what IP address a member can be reached. Pulver provided no transmission functionality so subscribers had to use their own broadband and this service could not call ordinary telephone numbers on a PSTN nor were they provided with their own phone numbers. These peer to peer applications can only link to other subscribers who have downloaded the software which may make use of a central server for voice communication or do not require a central server at all. Another example of one of the early IP to IP services is the original non public switched telephone network (PSTN) interconnected, version of Skype. PSTN to PSTN services which is known as phone to phone service from a callers vantage point is just like any other long distance call placed over the PSTN except when the originating local carrier of the call hands off the call to a long distance provider it converts the original signal into an IP packet that gets passed along to its IP backbone and on the terminating end of the call the packets are converted back to its traditional format used by circuit switched networks and then the call gets passed back to receivers local carrier. Incumbents such as AT&T are progressively utilizing IP technologies into their existing networks to minimize costs or enhance service/product offerings. In fact numerous wireless providers use an incumbents IP backbone for its backhaul link from cell towers to their switches. Finally there is IP to PSTN services which require a subscriber to obtain a broadband connection

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in order to place VoIP calls over this connection except in this scenario callers receive their own telephone numbers and can connect with anyone who is served by any circuit switched network. Some examples of IP to PSTN services are many of the cable companies, SIP and H.323based services, Vonage Holdings, Microsofts Skype Out (users by credit to make calls to other networks) and Skype In (users receive a phone number for off-net calls, voicemail, SMS and its Wi-Fi access product Skype Access), SIP and H.323-based services, such as Empathy, Linphone, Ekiga and the Google Talk service. Skype and its other formidable competitors are becoming so complex with their diversified VoIP models that perhaps categorizing these services is negligible and is perhaps one of the reasons why governments have found it difficult in regulating the industry or perhaps it is unnecessary to do so. It must be said though that the FCC does have some compliance standards that VoIP providers must adhere to. This is particularly true of those organizations that started out as a VoIP entity but broadened their business models into the area of regulated telephony unbeknownst to them creating state and federal licensing problems.

Growth of Technologies & Companies Leveraging the VoIP Platform In order to stay competitive in the VoIP arena many organizations over the years have offered an array of services bundled together to allow consumers to pay a single monthly fee as opposed to

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separate fees for each service offering. For example cable companies have been combining cable broadcasting, Internet and VoIP services at a single monthly fee while trying to attract additional customers and in turn these customers would receive these services at significant cost savings as opposed to purchasing each service separately. You may recall, in our opening summary we said S&P stated that VoIP could soon hit a wall but what we did not extrapolate on was that this would solely encompass cable operators. The rating agencys release exclaims cable operators, which for years have been piling up revenue from VoIP phone service while their telco competitors have watched their bottom line from landlines erode, may finally be in line to share the pain as economic pressure, rising prices and market saturation finally may be prompting consumers to hang up their landlines with cable, too. The culprit may not be the VoIP service, but the high-cost of pay-TV and the rising bill that has even the more stalwart consumers flinching. According to S&P 80 percent of U.S. households have a pay-TV service and shell out about $135 a month for it. Consumers may be looking to unbundle services to keep their entertainment intact. Perhaps cable companies were becoming too complacent with their business models as the release further goes on to say The likelihood that cables residential boom time has come to an end is that consumers are looking more to smartphones and other VoIP options. In contrast many pure-play VoIP providers have not been sitting idle but have continued to enhance

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innovation, leverage growing technologies to converge with their existing VoIP infrastructures and diversify their offerings helping to fuel subscriber growth while increasing both top and bottom line numbers. Analogous to the former sentence is just like in the areas of project management and IT Security Risk Assessment a VoIP carrier must have an ongoing analytic iterative process that never ends. Furthermore a growing number of new organizations are entering the VoIP market which could also significantly adversely impact cable operators earnings. According to Insight Research Corporation A new crop of hosted service providers will offer PBX-like voice services at lower Reoccurring costs and with minimal site equipment expense [Insight Research (March 2012)]. The chart depicted below shows how Skype is having a significant effect on VoIP traffic and why it has been adversely impacting traditional carriers. In other words this company has turned traditional carriers on their heads by changing the dynamics of the entire telecommunications industry. Furthermore it has revitalized the industry and indirectly attracted a new crop of organizations to enter into the VoIP arena. As you can see in 2009, 12% of all international voice traffic was on Skype. In the graph below, we can see that this growth rate remains steady near 15% annually. 27% of all the worlds voice traffic was via VoIP. However, the populations of developing countries remain some of the least connected in terms of global traffic and hence thats where the growth potential is enormous for those who differentiate

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themselves from the competition. Just one thing to note according to Skype Journal more than 41.5 million people were running Skype on April 23, 2012, an all-time high [Skype Journal (April 2012)]. Where Did the Growth Go?: The Skype Effect

Figure 1. TeleGeography A Division of PriMetrica, Inc

So what do these new diversified models that pure VoIP player carriers and new market entrants seem to be exploiting in the VoIP arena? Well rather than the traditional platforms like VoIP over PSTN, cable or DSL the convergence of mobile, Wi-Fi (VoWi-FI or VoWLAN), satellite, Voice 2.0 applications (includes cloud telephony), soft phones (software that enables a computer to perform as a telephone via VoIP usually comes with a headset or a hand-held device, and using the numbers on the

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keyboard to dial), embedded VoIP in online games, incorporated with SIP and H.323 based services are just a few of the emerging services that are being utilized. In addition many upstart companies and even incumbent VoIP players have been globally focusing on penetrating market share not just on individual consumers but the small, midsize and large business segments of the industry. Also you do not need to be a capital intensive company with enormous resources to start your own VoIP business due to the fact that competitors no longer need to own a network and bringing facilities-based providers into direct competition with service-based competitors has allowed easier barrier to entry. IPsmarx Technologies is one of several firms with numerous accolades that help entrepreneurs start their own VoIP companies by providing essential solutions such as soft switch solutions, a SIP based calling card platform and a multi-tenant IP-PBX platform with integrated billing to create viable businesses [IPsmarx (May 2011)]. Take for example the hosted service provider 8X8 which trades on the NASDAQ. The company has been focusing primarily on small to medium sized businesses, distributed enterprise organizations and government agencies by developing and marketing telecommunications services for Internet protocol, or IP, telephony and video applications as well as web-based conferencing, unified communications services (which bridges the gap between VoIP and other computer related communication technologies), managed hosting and cloud-based computing services which prior to the cloud many

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businesses took an on premise hardware approach [O'Neill (Jan. 2012)]. Infonetics reported demand for cloud-based services helped push hosted PBX and UC service revenue up 33% and seats up 44% in 2011 which is clearly evident when looking at 8X8 and although residential consumers revenues still surpass businesses, that trend may not last as the business segment is growing about twice as fast [Infonetics (April. 2012)]. As of December 31, 2011, the Company had more than 27,600 business customers. In offering further proof of the companys success through innovation and diversification in January of this year 8X8 reported revenue of $23.3 million in the third quarter of fiscal year 2012, a 31 percent increase from a year ago. It also topped analyst earnings estimates with a 73 percent Year over year increase to $2.6 million, or 4 cents per share. So lets talk about these technologies that are allowing VoIP providers to differentiate themselves from traditional carriers and in turn helping to significantly improve their balance sheets. We will begin with mobile VoIP which is a communication technology structure that the general public uses to transmit and receive phone calls with the Internet connection on a mobile device. This varies from standard cellular service as the call is not being placed through the voice network. Instead, the call is being transmitted over the network of a third party mobile VoIP service provider. Since the transmission of the call is placed over the Internet as opposed to making use of an ordinary cellular plan costs are reduced significantly and in addition the user is not charged long distance carrier fees. Two

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main methods of delivering VoIP to mobile devices is over-the-top (OTT), in which the voice calls travel over carrier-provided data networks and the other is via LTE (long-term evolution), a technology that lets carriers themselves deliver voice calls over IP links to the handset. Prominent OTT providers include Skype, fring, Line2, Nimbuzz, Rebtel, Truphone, Viber, Vopium and others [Infonetics (Oct. 2011)]. Verizon Wireless will introduce native mobile VoIP over LTE in 2012. In February of 2011 In-Stat forecasted that the transition of VOIP from fixed-line phones to more mobile phones will encourage spending in the space to rise to $6 billion by 2015 [Maisto (Feb. 2011)]. One of the main reasons for the anticipated numbers is that mobile VoIP is becoming more integrated with mobile applications and the convergence of social networking apps. In-Stat stated Europe, the Middle East and Africa will account for the largest portion of mobile VOIP revenues in 2014 at 39 percent, followed by Asia/Pacific at 32 percent, and North America accounting for 21 percent. TechNavio's reported in March of this year Mobile VoIP by 2014 could reach $5.3 billion in Europe, the Middle East and Africa and because carriers in those regions have high rates for mobile phone usage only a small portion of international voice traffic originates via cell phones. However as the VoIP infrastructure continues to be built out, along with the integration and growing popularity of mobile apps the opportunities for market penetration in these regions are tremendous [Technavio (March 2012)]. Furthermore mobile/smartphone phone sales

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and usage have soared over the last several years due to its multitude of features and ubiquitous nature therefore as these devices converge with VoIP the revenue streams that can be generated could be astronomical to say the least. Now you may ask yourself why someone would make use of the next medium we are about to discuss, if most people already own their own mobile phones. Well, organizations are increasingly merging employee cell phones with corporate telephony which leads us to Wi-Fi VoIP (VoWi-FI or VoWLAN). Wi-Fi VoIP makes use of the IEEE 802.11 set of standards connects calls from the voiceenabled wireless device to a WLAN access point via discrete data packets rather than an analog voice stream and then to a VoIP gateway or IP PBX [TechTarget (Aug. 2005)]. The call is transmitted to its intended destination within the private network or out onto the Internet or PSTN. If an organization has numerous staff members with voice-enabled wireless devices cost can be reduced considerably by permitting its users to generate calls inexpensively over an organizations VoIP Wi-Fi network and organizational leaders are capable of having a more centralized command to control and monitor its employees data. These phones would also work of course in Wi-Fi hot spots. The next medium that is primarily used by people in remote regions of the world such as the Military, television reporters or private maritime operators and can be advantageous in particular to developing countries is Satellite VoIP which many also predict will one day provide interoperability

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among satellite and mobile devices but for now if you have no other option it may be a viable solution. There are still some technical issues with regards to this technology especially due to the amount of time the data transmits to the satellite and back to earth causing poor quality of service such as delays known as latency brought about by slow network links, drop calls (packet loss which occurs when there is a large amount of traffic on the network) and sometimes degradation of voice quality caused by packet loss or jitter (irregular packet flow such as packet delays arriving at the receivers location) [Oishi (2005)]. However firms like Cisco are making strides in this area and once portable devices become optimally efficient this market could surpass all other devices that leverage the VoIP platform. These satellite issues have been witnessed quite often when a news correspondent is located in a remote region of the world perhaps reporting in more recent times from a war zone such as Iraq or Afghanistan. A news anchor will often times communicate with the reporter who is only capable of conducting an interview via satellite phone due to their locality as there is no other efficient modes of communication other than making use of satellite technology. In other words the area the news correspondents are reporting from lack any other type of appropriate telecommunications infrastructure. The reporter usually has one option which is to talk via a satellite device where it is clearly evident from the vantage point of the television viewer, as he/she watches the anchor on

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television ask the reporter a particular question that it takes the reporter around a quarter of a second or more to respond to the anchor. Often when calls are connected via VoIP Satellite they have packets per second constraints therefore Ciscos IP multiplexing schemes combines multiple VoIP packets from a single stream or multiple streams into a large packet, and then sends this large packet over the packets per second (pps)-constrained link to alleviate some of the problems talked about in the prior sentences [Cisco (2012)]. A demultiplexing process is then executed by another instance of the same product on the other end of the pps-constrained line. This in turn increases overall throughput over the constrained link. Companies in this marketplace include Net2Phone and Vonage who have partnered with large satellite companies such as the likes of Hughes Electronics and others. Currently VoiP in remote areas of the United States make use of geostationary satellites that have sufficient bandwidth avoiding the problems described above. For example VSAT Systems out of Ohio offers satellite VoIP service via a geo-stationary satellite for people who live in rural areas (VSAT Systems (No Date). The customers computer is connected to your network, which in turn is connected to the Internet by VSAT Systems. The subscribers computer sends a request for a transfer of data - both transmit and receive. That request is transmitted from the end user computer, through their home network, to the indoor satellite modem which has a port for the your indoor phone or the user can

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make use of a softphone which modulates the signal and passes it to the VSAT dish stationed right outside ones residence. The VSAT dish converts this signal to an RF signal and sends it to a satellite located in the geostationary orbit (A circular orbit positioned approximately 22k miles above Earth's equator with the exact point in time and direction as the rotation of the Earth) at the speed of light. The satellite via low Earth orbit (LEO) satellites in the geo-stationary orbit retrieves this signal and transmits it to one of the VSAT Systems teleports in Akron, Ohio. This illustrates the fact that although the packets of information travel tremendous distances via the space segment, the packets hop fewer networks due to the large reduction in the number of inter domain and intra domain routers giving an opportunity to minimize latency. The request then goes to VSAT Systems network operations center, which acquires the requested phone number from the web server, across the U.S. Internet backbone which is then delivered to the receiving party. This is a simplified description of VoIP satellite however there are numerous models being deployed through portable and stationary devices commercially and to the individual consumers but they go beyond the scope of what we are trying to address in this paper. Our purpose was just to give you a taste of how satellite VoIP is evolving and its ability to provide VoIP carriers with an additional revenue stream. Next we briefly discuss voice 2.0 applications. Web 2.0 applications by themselves which really were the foundation of voice 2.0 apps are second generation web tools as opposed to static web pages

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that allow for organizations and individuals to increase internet functionality through collaboration and information sharing such as making use of social networks, wikis, blogs, RSS, software mash-ups (software services allowing for people to mix and match content or software elements to formulate something new) and cloud computing. In the context of VoIP it is trends, technologies and applications used to bring IP telephony to the Web to create a new class of voice-enabled applications. In other words increasing cutting edge mash-ups integrated with this platform yield significant benefits both for individuals and organizations alike. In the case of enterprises VoIP calling features are Web and server based applications frequently used in call centers for XML call control functions, such as call hold, call transfer, conferencing and more [Lauricella, Michael (March 2008)] . Take for example firms that make use of customer relationship management applications for sales and marketing to track their communications with their clients as it makes logical sense to incorporate voice into the equation through integrated telephony features. Broadsofts BroadWorks VoIP platform used by many carriers in particular with CRMs offers such features as screen pops on inbound and outbound calls whereby the customers phone number is recognized through caller ID and the customers contact file opens on the operators computer screen. CRM users can use click-to-dial calling from within CRM contacts for more efficient dialing; firms can operate detailed reports on call usage by employees and track which

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customers are calling in most commonly; all information is auto-logged with the associated contact, including notes taken by the user; and a call control function answers calls, places callers on hold or transfers a caller to an administrator from within the CRM application. This is just one of many models that can be used in voice 2.0 applications to increase an organizations return on investment (ROI). Furthermore from an individuals perspective these applications allow individuals to send voice, data, video and instant messages via IP due to their ubiquitous nature. Also users will have a great deal more of control over whom they communicate with, how and when as opposed to a central authority. Companies such as Skype and Google Talk are Voice 2.0 applications with proprietary protocols and Extensible Messaging and Presence Protocol (XMPP). Finally cloud computing has become an enormous asset to many organizations and therefore it its not surprising that it has now being utilized by VoIP carriers worldwide and is a crucial component to those businesses as it has helped to garner considerable amounts of capital. Cloud offerings in the VoIP arena also allow VoIP players to minimize costs by not owning and operating their own infrastructure while allowing them to pay more attention to innovation and maximizing ones own revenues. Organizations in other industries also utilize cloud services to save money by not having to create their internal telecommunication networks that would require expensive adapters, server hardware, software and place additional stress on their own systems. From an individual standpoint people can use the

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cloud to place calls from their web browsers saving costs on added peripherals. In a press release issued by Voxbone, a private global VoIP network provider founded in 2005 with offices in Brussels, Los Angeles Mumbai and Singapore, on January 25, 2012 its CEO Rod Ullens stated We're seeing indications of accelerated adoption of cloud communications services in a number of areas that lead us to project major demand in wholesale VoIP services. As the technological bridge between cloud communications networks and traditional PSTN and mobile networks, Voxbone should have a great 2012 [Voxbone (Jan. 2012)]." Just to give you an indication of cloud computing in general Gartner Research stated Worldwide SaaS revenue driven primarily from cloud growth will jump 17.9 percent in 2012 to $14.4 billion, up from $12.3 billion in 2011, according to the analyst firm. The ramp up will continue through 2015, when SaaSbased revenue will reach $22.1 billion [McCarthy (March 2012)]. Now imagine what percentage of those numbers will fuel VoIP as providers such as Voxbone continue to offer services in the cloud. The company overall saw its full year top line 2011 numbers grow 19 percent, while minutes of use on its global network increased by 33 percent to 2.8 billion. Its diversified VoIP offerings, innovation and multi-cultural employee base has allowed Voxbone to penetrate market share from a multitude of countries around the globe. Currently the organization services 51 countries and plans to further exploit its market by adding an additional five to seven countries in Asia and South America to its network. This

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relatively small company is also an excellent example of how the telecommunications landscape is changing to make barriers of entry a lot easier for new participants to enter the VoIP realm while negatively impacting more traditional carriers.

Security Issues & Countermeasures As technology industries and even organizations continue to proliferate so too does the inherent risks associated with IT security. These are issues that need to be addressed on an ongoing basis in particular in the area of VoIP. One could not dispute the fact that wirelines are susceptible to attacks but when you are linked to the data network and share a multitude of the same software/hardware elements as well as infuse wireless (radio wave) technologies the number of vulnerabilities starts to increase considerably therefore before implementing a VoIP network one should mitigate these risks by identifying the various threats and vulnerabilities and further deploy the appropriate countermeasures. Attacks on VoIP systems such as Dnl of Srvc (DoS), evsdroppng, pckt spoofng, msqurdng, VoIP spm nd phshng, buffer overflow attacks and toll frud just to name a few are quite well known as these exploits are propagated in similar fashion throughout the entire ICT spectrum. The purpose of this section is not to define each one of these exploits as many in the ICT community already are quite familiar with these threats but rather create awareness and offer information on how to

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countermeasure these attacks which can adversely affect VoIP providers and customers alike. The thing that one must be made aware of is that VoIP does secure its networks by making use of a security protocol suite known as IPsec (IP Security) which includes encryption, authentication, integrity validation and anti-replay to provide secure access to corporate private networks however IPsec and the current range of corporate network edge Network Address and Port Translators (NAPTs) are not compatible with the Next Gen services provided by VoIP architectures [Newport Networks (2006)]. Having said that, although it is impossible to completely prevent an attack from happening it is essential to initiate the appropriate steps to mitigate any potential risks and deploy mechanisms that are lacking such as that in IPsecs protocol suite. We talked briefly in our VoIP definition and Architecture section that H.323 and SIP protocols do offer security measures but to expand upon them further H.323 rls on th H.235 stndrd that ddrsss scurty ssus ncludng uthntcton, ntgrty, prvcy, nd non-rpudton as well as a scur sockt lyr (SSL) for trnsport-lyr scurty whereby SIP uss ndto-nd nd hop-by-hop security mechanisms [B, Goode (Sept. 2002)]. Here are some additional measures that should be taken to safeguard your VoIP network. First off, Cisco suggest isolate VLANs (which are an effective closed circle of computers that disallow any other computer access to its facilities) for voice and data which helps prioritize voice over data and also keeps traffic on the voice

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network hidden from those linked to the data network; use monitoring tools and intrusion detection systems to identify break in attempts through traffic and log analysis [VoIP Lowdown (Dec. 2006)]; Gary Miliefsky, founder and CTO of NetClarity, suggests locking down IP and MAC addresses that permit access to the administrative interfaces of VoIP systems, and putting up another firewall in front of the SIP gateway; use multiple layers of encryption for call signaling and data packets that are sent out. The Secure Real Time Protocol (SRTP) which encrypts communication between endpoints and Transport Level Security (TLS) which encrypts the whole call process are two encryption mechanisms that many find useful; set up multiple nodes, gateways, servers, power sources, call routers and form an alliance with more than one provider to deal with potential network failures; formulate isolated firewalls so that traffic crossing VLAN boundaries is restricted only to applicable protocols; update patches on a regular basis; keep your IP PBXs in a domain separate from its other servers and restrict access; softphons are extremely vulnerable as they have full ccss to system resources and vital system information so hackers can take dvntg of the prvlgs of the user therefore minimize the use of softphones; perform security audits on a cyclical basis; allow only devices and users who are authenticated and privileged to acquire access to your network by limiting access to the Ethernet port; use IP phone vendors that offer digital certificate services to authenticate devices; protect gateways and the LANs

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behind them with a blend of an SPI firewall, application layer gateways (ALG), network address translation (NAT) tools and SIP support for VoIP soft clients; manage server traffic separately from VoIP signaling and call traffic; sort SIP traffic by looking for abnormal packets and traffic patterns that appear irregular; the application layer is the easiest to infiltrate so analyze call setup requests at the application layer and issue necessary security policies so that only those call setup requests that conform to them are accepted; Isolate voice traffic by blocking PC port access to the voice VLAN; use proxy servers to process data that comes in and goes out. Authentication and integrity are ensured when signaling messages travel between user agents and SIP proxies by integrating SSL tunnels with SIP proxies; run only applications that are necessary to provide and maintain VoIP services; configure applications against misuse by forming a list of granted caller destinations; affix endpoint security layers o keep out devices that are not authorized on your LAN or WLAN; administrators should set up rigorous entry criteria to inhibit access to devices that potentially pose as a danger; refrain from remote management and audits but when necessary use Secure Shell (SSH) or IPsec (IP Security) for the purpose; and use IPsec tunneling rather than IPsec transport as they differ in encryption modes that support secure exchange of packets at the IP layer. The use of IPsec transport encrypts only the data while hiding the source and destination IP addresses. This inhibits administrators from knowing who initiated the call

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when they examine traffic patterns. In affect by performing all the security countermeasures incorporated in the prior sentences you will optimize your network making it more robust while minimizing the potential of any attack to propagate. Remember attacks can cost an organization a significant amount of money particularly do to downtime, it can ruin ones reputation making a viable organization eventually insolvent and in addition there could be severe legal repercussions so it is essential to align best practices in the area of IT security with a VoIP platform.

Global Regulatory Frameworks In this section we look at where VoIP is gaining ground and the increase in governments around the worlds willingness to open its markets up to VoIP providers however we will not go into complete details of what comprises of each countries regulatory framework but rather just provide a brief overview of information on which regions and countries allow, tolerate or ban VoIP. In 2004, VoIP was legalized in 46 countries mainly in Europe, North America and Asia. VoIP was also broadly permitted in another 57 countries where there was no clear regulatory framework or licensing for VoIP [Biggs (Nov. 2009)]. Among these two categories just over half of all countries permitted VoIP in 2004 and towards the second half of 2009, the proportion of countries where VoIP was allowed rose to two thirds with 92 countries having legalized VoIP and 39 countries tolerating it. Meanwhile, the number of countries

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where VoIP was banned shrank from 80 in 2004 to 49 in 2009, or about a quarter of all countries for which data exist. In our introductory paragraph we described Colombia as winning the award for the most innovative telecommunication policies around the world whereby the country went from 2.2 million Internet connections to about 5 million in the last year and a half. Well it just so happens that the fastest growing regions for international VoIP traffic presented in an ITU 2009 white paper by economist Phillippa Biggs was Central America and South America. While the world has focused on China, Brazil and India on their improving economies and growing infrastructure they have failed to look at the region and culture that could outstrip them all, that being Latin America and the entire Spanish speaking population. One thing many people forget is that the Spanish language is second to one of the most widely spoken languages in the world so it is no surprise that VoIP traffic in Central America and South America are surpassing other regions of the globe. Below is a chart provided by Telegeography on International VoIP traffic and as you will see Central America and South America have the largest traffic increase out of all the regions that the chart comprises of. Although predated as the data reflects the years between 2005 and 2007 it does not deviate that considerably from todays regional trends.

Figure 2: Inbound International VoIP Traffic, Selected Regions, 2005-2007

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Source: TeleGeography Inc. (2008).

Many sovereigns differ in their definitions of VoIP which is one of the factors that determines what type of policies and regulations they choose to implement. We now take a closer look at some of the regions around the world and how VoIP is regulated. In Africa as of 2006, some 30 out of 42 African countries forbade the widespread use of VoIP by regulation or by law. By mid-2009, VoIP had been legalized in 13 Sub-Saharan African countries with four additional countries tolerating VoIP and 24 outright banning it. The number of African countries where VoIP could be regarded as open to private operators had nearly doubled, rising to about 20 (including North African countries) but there is still much work to be done in deregulating and providing an efficient VoIP infrastructure. There is however

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an unlicensed grey market for VoIP but many operators are not yet passing on the full cost savings from VoIP to their subscribers and many of these grey market participants have had some African countries filter their services, confiscate their equipment and in some cases jail the owners of these services. After Africa, Arab nations came in second as being narrow minded and the least liberalized when it comes to VoIP. By mid-2009 VoIP had been legalized in Algeria, Bahrain, Egypt, Palestine and Jordan with Qatar, Lebanon, Mauritania and Saudi Arabia just tolerating this platform. In contrast 12 countries were still not fully open to the use of VoIP with nine of them banning it completely. This data in total covered 22 Arab economies. The Asia Pacific region is probably one of the most diversified parts of the world when it comes to VoIP regulation especially as it comprises of a vast mixture of developed countries and those that are underdeveloped. Inclusive is the benefits of the digital economy not being justly shared, giving rise to a digital divide among this region of the world. By mid-2009, two-thirds of Asia Pacific governments allowed or tolerated VoIP. Eighteen countries had legalized the use of VoIP, with eight tolerating its use outside of their regulatory frameworks. In contrast 9 sovereigns preserved outright bans on VoIP with another 4 markets remaining closed to the use of VoIP (China, Myanmar, Nepal and Tonga). This data contains 39 countries that encompass the Asia Pacific region. In the Americas region by 2009 VoIP had been legalized in many Latin American countries where in total three quarters of the

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35 economies that were incorporated in this data legalized or tolerated the platform. Licensing was required for operators offering VoIP in Colombia, the Dominican Republic, Ecuador, Mexico, Peru and Venezuela, although those licensing restrictions were not enforced in many countries. VoIP for consumer use remained officially illegal in Antigua and Barbuda, Costa Rica, Cuba, Paraguay, Guyana and Nicaragua but as we have described numerous times above this region of the world has experienced the largest traffic increase out of all the regions and we believe there is considerable room for additional growth. In the Caribbean many incumbents first resisted and fought their governments but eventually market liberalization, the increase in mobile services and the market entry of competitors with significant capital and aggressive roll-out plans have changed the telecommunications landscape in this region allowing for easier barriers to entry. The last regions we will be discussing are Europe and Commonwealth of Independent States (CIS) which are all the former republics of Russia except the Baltic States. Most European countries have always accepted and liberalized VoIP although they do differ somewhat in their definitions and regulatory treatments. Only in Belarus does VoIP continue to remain opposed to in country traffic. All in all countries worldwide are beginning to take a more pro positive stance towards VoIP as noted in the empirical data above therefore as market liberalization continues on its path towards growth many VoIP providers will have an even greater chance to exploit

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this arena with the growing ability to penetrate an increasing amount of market share. Below we provide an additional Graph from ITU News that was distributed in September 2009 on worldwide regulation of VoIP from the periods 2004 to 2009

Figure 3 Worldwide regulation of VoIP (20042009)

Note Closed means countries where wholesale VoIP is permitted, but retail VoIP is banned, as well as those countries where only the incumbent is licensed to provide VoIP. Source: IDATE From ITU News (September 2009)

Conclusion The primary objective of this paper was to demonstrate how the entire competitive landscape of the telecommunications industry has been turned upside down through the advent of VoIP and to provide a brief description of its architecture. We believe that eventually there will be no need for circuit-switched telephone networks and that VoIP will be the dominant platform just making use of IP

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to IP telephony. This is becoming more evident due to the growing number of sovereigns increasing willingness to embrace VoIP as they are beginning to foresee the benefits this platform will yield in improving their economies through increasing competition by allowing for new entrants easier barriers to entry particularly due to hosted VoIP services, improved innovation, greater efficiency and significant cost savings for carriers, firms in other areas of industry and consumers alike. As noted above traditional carriers are seeing a number of new VoIP providers eating into their profit margins because they have unified their communication technologies by incorporating and integrating voice 2.0 applications, mobile technology, satellite technology and leveraging cloud computing whether it be for enterprise based customers or individual consumers to increasingly grow both top and bottom line numbers. In contrast many of the more traditional carriers including the cable companies have remained too complacent with their current business models over the last decade and not being proactive enough in areas of innovation and diversification allowing VoIP pure players and new entrants to erode many incumbents market shares while adversely affecting their bottom lines. It must be said that incumbents over the last couple of years have finally come to grips with the fact that their VoIP counterparts are passing them by therefore they have been in more recent times taking the appropriate initiatives to make use of their resources that enable them to acquire many VoIP technologies and

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organizations. Furthermore we see at least half of the worlds population currently live in urban areas and that number should increase substantially in the years to come. Therefore VoIP providers can exploit emerging market economies as more countries continue to liberalize VoIP and focus on minimizing information poverty by putting in place policies and regulations that allow the underprivileged and those in rural areas to access communication technologies (ICTs) such as affordable access to core information resources, continue to develop telecommunications infrastructure to supply network access, optimize electrical infrastructure to make the ICTs function efficiently and maintain a skilled workforce so that ICT infrastructure will keep all the technology working without any disruptions. In offering additional proof on the positive impact emerging economies can have on VoIP carriers, IHS iSuppli's for example reported that in April of this year the developing regions of the world will be the biggest source for new broadband activity in 2012 [Ratliff (April 2012)]. The release also goes on to say Broadband telecommunication services in particular will increase most rapidly this year in the MEA region, where subscribers are projected to grow by as much as 38 percent. Asia and Latin America will also be strong areas with double-digit growth in 2012, compared to the single-digit expansion rates forecast for the relatively saturated broadband markets of Europe and especially North America. Although some of the statistical data varies as to the MEA region and Latin America in their growth

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prospects they are minimal and one should just focus on the fact that both regions of the world will offer vast opportunities for VoIP to continue to blossom in the many years to come. This all being said VoIP providers and new entrants must not fall into the trap of their predecessors by becoming too complacent and egocentric but rather being proactive in continuing to always innovate and diversify their offerings on an ongoing basis as well as making sure that their networks remain robust and secure by implementing best practices. Inclusive is providing the ability for consumers too access emergency services and keeping abreast or up to date with the laws and regulations as they differ around the globe. For example the FCC has taken steps to require that providers of VoIP services that use the PSTN including wireless networks, to originate and terminate calls meet enhanced 911 obligations and are required to report network outages, so the commission can monitor and maintain a resilient service [Kerr (Feb. 2012). They have also required carriers to safeguard customers personal information or there can be severe legal repercussions. Some of these measures seem fair as they will increase consumer confidence but the FCC and other regulators around the globe must take due care to not implement to many regulatory obligations as it can stifle growth in an industry that has thrived primarily because there has not been excessive regulation in this area. Moving on, If a proactive model is applied along with some of the aforementioned advantages talked about above in particular

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increasing penetration into emerging markets as they continue to mature than certain VoIP organizations will be well rewarded. Remember as markets mature they eventually reach a certain plateau only to make way for new innovations that will revitalize and capitalize an array of industries around the world. VoIP is doing just that!

References

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Technavio (March 7, 2012). Title: Report: The Mobile VoIP Market in the EMEA Region to Reach US$5.3 Billion By 2014 published by VoIP Monitor. http://www.voipmonitor.net/2012/03/07/Report+The+Mobile+VoIP+Market+In+The+ EMEA+Region+To+Reach+US53+Billion+By+2014.aspx TechTarget (No Date). Title: SIP trunking (Session Initiation Protocol trunking) http://searchunifiedcommunications.techtarget.com/definition/SIP-trunking Techtarget (August 2005). Title: VoWLAN (Voice over WLAN) published by TechTarget http://searchmobilecomputing.techtarget.com/definition/VoWLAN Teleography (2012). Graph: Where Did the Growth Go?: The Skype Effect published by TeleGeography A Division of PriMetrica, Inc. http://www.telegeography.com/research-services/telegeography-reportdatabase/index.html VoIP Lowdown (December 1, 2006). Title: 25 Ways to Secure your VoIP Network published by m-indya http://www.m-indya.com/shownews.php?newsid=2576 Voxbone (January 25, 2012). Title: Voxbone Sees Continued VoIP Growth After Strong 2011published by Voxbone http://www.voxbone.com/pressRelease.jsf? id=313 VSAT Systems (No Date). Title: How broadband satellite Internet works published by VSAT Systems http://www.vsat-systems.com/satellite-internet/how-it-works.html White, Curt M. (2011). Title: Data communications and computer networks 6E pp 333-336