Cable Tech

Japan Dominates VOIP Over DSL

Voice-over-broadband services may be one of the hottest topics in telecom right now, but according to specialist research firm Point Topic Ltd., there are just 5 million people in the whole world signed up to such services (see Report: Yahoo Japan Dominates VOIP).

And most of them are in Japan, courtesy of Softbank's Yahoo Broadband service. At the end of June 2004, more than 4 million Yahoo Broadband customers, about 94 percent of its total DSL base, were using its packetized voice service.

That's in stark contrast to nearly all the other 1,000 or so voice-over-broadband service providers, which, according to Point Topic, have hardly any customers.

So, other than Yahoo Broadband, which operators have notched up some early gains? The table below shows that three of the other top five players are in Europe -- Sweden's Bredbandsbolaget AB (B2), France's Free, and Italy's FastWeb SpA -- with only Vonage Holdings Corp. and Cablevision Systems Corp. (NYSE: CVC) flying the flag for North America.

Table 1: 2Q04 Subscriber Numbers for Six Leading VOIP Operators
Operator Subscriber numbers Date
B2 (Sweden) 50,000 July 2004
Cablevision (USA) 115,050 June 30, 2004
FastWeb (Italy) 300,000 September 2004
Free (France) 330,000 June 30, 2004
Vonage (USA) 200,000 July 2004
Yahoo Broadband (Japan) 4,038,000 June 30, 2004
Total 5,033,050
Source: Point Topic Ltd.

But what about Korea? Despite having the greatest broadband penetration rates in the world (nearly 30 percent of all households), and some outrageous access speeds (some up to 100 Mbit/s), it seems that voice over broadband is not in evidence. Yet.

Point Topic's John Bosnell says market regulation has held back Korea's voice-over-broadband market to date, but with the country's regulator recently announcing a VOIP numbering scheme, it seems poised to take off. In addition, the current lack of flat-rate telephony tariffs make Korea "an attractive market for VOIP providers. I would certainly expect to see some Korean operators included the next time we do this list."

Elsewhere, Bosnell expects to see further growth in the U.S. as the major cable operators and traditional carriers build on their current VOIP offerings, while he expects Vonage to continue expanding its customer base.

He also expects Free, a growing thorn in France Telecom SA's (NYSE: FTE) side, to continue its impressive growth (see Iliad Ramps Up Broadband to the Homer). Bosnell says voice over broadband has been driven by "operators that have embraced local loop unbundling, and priced their services very low. If their prices are sustainable, then France should also see good growth in 2005."

Free's success has come from offering VOIP as part of a triple-play package, along with video and Internet access, and it's as part of those sorts of bundles that Bosnell sees the service taking off, especially as it becomes easier and cheaper for service providers to add packetized voice capabilities to their existing systems.

He warns, though, that not every country offers the right conditions for growth. Each national market "has different regulation, historical telephony tariffs, and other factors that can mean the difference between VOIP being a roaring consumer success and being a niche product for enthusiasts or very heavy telephone users."

— Ray Le Maistre, International News Editor, Light Reading

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particle_man 12/5/2012 | 1:00:24 AM
re: Japan Dominates VOIP Over DSL I have a single wire coming into my house which carries both DSL and high quality voice traffic.
Why would I care whether my voice uplink is carried over IP? And why would I redo my home infrastructure so that it connects through a less reliable link?

Is saving money the driver, or is there something else? Phone service already seems pretty cheap (maybe not in Japan). Maybe tax savings? How much are we talking about in savings here?
lastmile 12/5/2012 | 1:00:23 AM
re: Japan Dominates VOIP Over DSL I am here to help.
The difference in cost between POTS and VOIP (for unlimited local and ld) is approximately $15/M. If you add junk fees like taxes the difference is $20.86. This figure multiplied by 12 equals $250.32/year.
Even though VOIP is a less reliable link, saving money the driver.
Ever since people got used to cellular quality no one cares about the better voice quality that POTS offers. VOIP quality is a wee bit better than cell phones.
Ask a local business and they would prefer VOIP because the savings are even greater.
You do not need to redo your home infrastructure for VOIP. Every new cordless system needs just one jack for multiple phones.
I am using a VOIP provider for my home and surprisingly "everyone" is happy.

cuttyhunk 12/5/2012 | 1:00:22 AM
re: Japan Dominates VOIP Over DSL Do these numbers include the cost of the broadband connection itself?
materialgirl 12/5/2012 | 1:00:21 AM
re: Japan Dominates VOIP Over DSL In this situation, it appears that the broadband connection is a sunk cost, since the user has one already. VoIP cost savings can be used to defray part of that DSL price tag.

Using VoIP as a poor man's POTS misses the point, doesn't it? What about add-on possibilities like presence or unified messaging?
rjmcmahon 12/5/2012 | 1:00:21 AM
re: Japan Dominates VOIP Over DSL Do these numbers include the cost of the broadband connection itself?

Also, a residential cost analysis should probably assume the consumer has a cellular phone with x minutes of free LD. I've noticed my extended family members have switched over to cellular networks almost entirely for LD calls. They all have DSL/Cable MODEM for always-on and shared internet access. Unfortunately, none have taken an interest in VoIP to date.
rjmcmahon 12/5/2012 | 1:00:19 AM
re: Japan Dominates VOIP Over DSL VoIP cost savings can be used to defray part of that DSL price tag.

Typically, the local phone company forces a consumer to buy a DS0 with their DSL. Therefore both DSL and the first DS0 are sunk costs. Line number two is typically a cell phone (or one per family member). Line 3 and above is probably the remaining market for VoIP. My guess - not many residences need more than one landline, the promised features such as unified messages don't really close the deal for the average consumer, and the RBOC bundling of DS0/features prohibits real competition via VoIP in the residential local loop.

It seems like a small business that buys a small PBX/key systems would take advantage of VoIP. What are the market penetration numbers there?
paolo.franzoi 12/5/2012 | 1:00:17 AM
re: Japan Dominates VOIP Over DSL
First off the article is about Japan, where only broadband connections are being ordered by most young singles and couples. So, the offering of VoIP is an upsell.

Second, to upset rj....if they deploy DSLAMs without POTS then theoretically the RBOC can avoid UNE-L just like they can by providing deep fiber (For greenfields only).

The actual competition is voice over cable..with its promise to disconnect primary voice lines. VoIP over DSL is a good counter to that (no need to deploy POTS equipment for these installations).

issey 12/5/2012 | 1:00:15 AM
re: Japan Dominates VOIP Over DSL Where do you get your data from, whether they are ordered mostly by young singles & couples ?
Around 4 years ago when Broadband DSL started, peak traffic was from around midnight to around 2am. Over the past 4 years peak traffic has been gradually shifting to the left i.e. earlier now it is clearly around 11pm. Japan now has well over 10 million DSL subs, what does this show, as penetration further increases, it will show a more unified sample of usage behaviour, and not be dominated by ealier adoptors such as geeks etc..
Anyway I am sure demographic breakdowns are available if you ask Softbank & NTT nicely !
jonathanrichardson 12/5/2012 | 1:00:13 AM
re: Japan Dominates VOIP Over DSL In Japan POTS is still a monopoly like AT&T was prior to 1984. Prices set by the government are higher than in the U.S., and to establish service every customer has to pay a deposit equivelant to hundreds of dollars which is held for the entire length of service.
issey 12/5/2012 | 1:00:10 AM
re: Japan Dominates VOIP Over DSL Even though people have a POTS service, the key to VoIP being successful, is because it costs very little to add VOIP to the TRIO DSL modem, and calls are free within YBB network which covers all of Japan..
Competition in Japan is very intense in Japan.. between all providers..
050-xxxx numbers are now alloocated to VoIP services..
The figures from Point do not include NTTs own VoIP services... so I would put the figure near 5 milion for Japan..
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