Internet Telephony

Background and Perspectives

Arrangements for the Public Call for Comments

The emerging offer of Voice over IP (VoIP) services may prove to be a catalyst in restructuring the telecommunications market. Quite apart from the discussions currently surrounding it, VoIP is part of the broad-based evolution in communication technology, which, in the long run, may lead to the convergence of voice and data services, and bring into question the separation of the legal frameworks governing them.

In order to ensure that this new component can be integrated smoothly into the French regulatory framework, the telecommunications regulatory authority (ART) wishes to begin gathering information to enable an in-depth study of the matter.

ART invites users and all market parties to contribute to this study by sharing their understanding of:
- the scope and substance of these developments,
- the new prospects that they open up, in technical, economic, social and regulatory terms, 
- the provisions that could be adopted by the public authorities to ensure that these services contribute to flexibility in the telecommunications market.

Perceptions of the medium and long-terms stakes involved in VoIP vary, which is why ART is launching a wide debate to gather the observations and views of users and market parties in all the sectors concerned - telecommunications, computing, services and multimedia.

To facilitate the analysis of the responses received, each main issue is presented briefly, followed by a non-exclusive list of numbered questions.  Respondents may express their views on one or several themes, and also on related issues that are not mentioned in this document.

As the responses received by ART may be published, contributors are invited to specify if any of the information provided should be kept confidential.  Information that is subject to business secrecy should be submitted in a separate annex marked "confidential".

Responses should reach ART via e-mail, fax or post by noon on 23 April 1999 at the following address:

- via e-mail, with the subject heading “Response to the Call for Comments on Internet Telephony”:
com@com.art-telecom.fr

- by post: 
Autorité de régulation des télécommunications 
Service technique
7 square Max Hymans
75730 Paris Cedex 15
France

- by fax: 
Autorité de régulation des télécommunications 
Service technique
		Fax: 33 1 40 47 71 90

- Responses containing confidential information should only be sent by post or by courier.

- Responses sent by post or by fax should also be provided in electronic form on disk.

For further information, please contact:

Sylvie Poussines	Tel: 33 1 40 47 71 42 
sylvie.poussines@art-telecom.fr
Didier Chauveau	Tel: 33 1 40 47 71 25
didier.chauveau@art-telecom.fr

This document can be downloaded from ART's web site at:  http://www.art-telecom.fr

CONTENTS

ARRANGEMENTs FOR THE PUBLIC CALL FOR COMMENTs	
I - VOICE OVER IP SERVICES: TECHNICAL architecture, Equipment	
Question 1 : Architecture, Equipment, Standardisation	
Question 2 : Quality	
Question 3 : Networks	
Question 4 : Terminal Equipment	
II - EconomiC IMPACT	
Question 5 : Value Chain and Market Parties	
Question 6 : Costs and Pricing Structure	
III - Services AND marKETs	
Question 7 :Service Offerings, Marketing	
Question 8 : The Market	
IV- rEgULATORY ISSUEs 	
IV.1 - insertion in the regulatory framework and licences - coherence with international regulations	
Question 9 : Legal Issues concerning Internet Telephony	
Question 10 : Licences	
Question 11 : International Context	
IV.2 - Numbering	
Question 12 : Numbering - Directories	
IV.3 - Interconnection and interfaces	
Question 13 : Interconnection, Interfaces	
IV.4 - Other regulatory issues	
Question 14 : Other Regulatory Issues	
ANNEX 1	
ANNEX 2	
ANNEX 3	

The term “Internet Telephony” is frequently applied to a wide range of services that use Internet Protocols and technology for voice transmission over various types of infrastructure:  private networks, "long distance" public telephone networks, IP backbones, and in the medium term, purposely-built IP networks, etc.

Implementing technical architectures that are capable of supporting mixed service offerings raises the question of fixed-mobile convergence and a variety of related problems that are common currency, for the most part, for those working in telecommunications services and networks today.

I - Voice Over IP Services: Technical Architecture, Equipment

At present, most Voice over IP services use:
- PSTN/IP gateways, which convert voice data into "voice over IP";
- specific functions and protocols (H323, gatekeepers, etc.) enabling the transmission of voice packets over the IP network, which may be private (backbone owned by a network operator) or trunked ("public" Internet).

Most of these services fall within the scope of one of the following scenarios, each of which corresponds to a type of public service that may fully or partially replace public or voice telephony (see diagrams in annex): 
Scenario 1 : “Computer to Computer”
Scenario 2 : “Computer to Phone” or “Phone to Computer”
Scenario 3 : “Phone to Phone”

At this stage a number of questions are pending, notably those concerning: 
1 - the different types of services offered (architecture, equipment, standardisation);
2 - the associated quality of service (QoS);
3 - the underlying networks; 
3 - the interoperability and capacity of terminal equipment to integrate network functions.

In the medium term, the introduction of UMTS and the arrival of the next generation of satellite networks will enable bypass of the local loop and the provision of a specific IP connection, without requiring circuit switching.  This will be a turning point for competition and regulation.

Question 1:  Architecture, Equipment, Standardisation 

1.1 - What type of Voice over IP services are there and what are the features of each service? How do they enable a telephone service to be provided over the Internet ? What architectures and techniques are used?
1.2 - What equipment is used ? Are the interfaces standardised or proprietary? What is the regime for industrial property rights ?

Question 2:  Quality

2.1 - How is voice transmission quality of service (QoS) measured, for each type of service, and which indicators and criteria are used?
2.2 - What is the current level of QoS in terms of speech quality, availability etc. ? 
2.3 - Are there any standards that guarantee interoperability and quality of service?  If so, which standards?  What is the status of these standards?

Question 3 : Networks

3.1 - What kind of networks will be used?  Existing networks or new networks?
3.2 - What type of infrastructure is used ?
3.3 - How are mobile and fixed switched networks used to provide IP telephony?
3.4 -Which network components are required to offer Internet telephony to the general public, and to businesses ?
3.5 - What is the future of Voice over IP ? substitution of existing networks, integration into current networks?

Question 4 : Terminal Equipment 

4.1 - Is a new generation of telephone terminals, adapters, equipment and specific software required for the provision of Internet telephony services?
4.2 - Is this equipment proprietary or can it be used with all networks and services? 
4.3 - Which technical specifications and standards are attached to this equipment? Are they available? Are they stable enough to meet interoperability and quality of service requirements?
4.4 - What are the requirements in terms of interoperability, quality of service, connection, and accessibility with the switched telephone network? 

II - Economic Impact

While new entrants were the first to provide Internet telephony, traditional telecommunications players (manufacturers and operators) have now made significant advances in terms of equipment and service offerings.  A new economic model and specific value chain have emerged. 

Although it is difficult to evaluate the short and medium-term economic effects of IP telephony, it could prove to have a significant impact:
•	As a substitute for telephony, the use of IP technologies enables: 
- optimal use of bandwidth due to voice compression - a near six-fold improvement compared with traditional voice telephony;
- consumer choice of quality/low price calls;
•	 As an integral part of a multimedia service offering:
IP technologies may be used, for instance, in electronic commerce, to make calls from web pages;
•	As a means of federating networks (particularly corporate);
•	In the longer term, VoIP provided as an integral component in multimedia offers provided via purposely-built IP connections will enable the bypass of the local loop PSTN.

Furthermore, the countries that terminate calls will not receive the settlement rates that apply in the accounting rate system, which means that there will be a loss of revenue for the terminating countries.

Each service offering may have its own specific pricing structure.

Question 5 : Value Chain and Market Parties

5.1 - Which value chain corresponds to each service offering ?  What impact does it have on the cost of the final service ?  How will it develop ?
5.2 - Are the market parties involved in VoIP  from the telecommunications market or from related markets? What is the added value of each of these players in the value chain? 
5.3 - Is there a compensation or settlement mechanism between the various players? How could this mechanism best be described? 
5.4 - How is this problem dealt with in other countries ?
5.5 - At what level would the harmonisation of these mechanisms be useful ?
5.6 - Are the mechanisms described here sustainable?  What system could be used to replace them, within what timescale?
5.7 - What impact could telephony have on Internet economics ?

Question 6 : Cost and Pricing Structure

6.1 - What is the pricing structure ?  What criteria is this based on ?
6.2 - What is the relationship between the pricing structure and the value chain(s) ?  
6.3 - Are prices cost-oriented ?
6.4 - What is current practice in other countries, with regard to the cost and pricing of Internet services?

III - Services and Markets 

The Voice over IP offering enables the provision of a variety of services, which can be divided into several categories: 

- provision of a service that can replace traditional voice telephony, initially on the transmission segment only and later for transmission and the entire local loop;
- integrated component of a public multimedia service offering;
- integrated component of an offering over corporate networks (multimedia or not).

Question 7 : Service Offerings, Marketing 

7.1 -Which services could be associated with the Voice over IP offer defined in 1?
7.2 - What is the position of these service offerings in relation to the public telephone service provided over the fixed or mobile network? Are there any restrictions or specific usage conditions ? 
7.3 - Do you associate the development of Internet telephony services with a)the development of other telecommunications services ? b) increased ease of usage ? c) progress in terminal equipment?
7.4 - How are Voice over IP services marketed? 
7.5 - What developments, in terms of services and the corresponding offers, could result from the introduction and general use of a) resource reservation protocols? b) the IPV6 protocol? 

Question 8 : The Market

8.1 	-What effects could Internet telephony have on the following voice markets:
a) corporate, b) general public, c) national d) international ? Does VoIP constitute a single market segment or several?  What are the main trends of development in theVoIP market ?
8.2 - What is the market for the different offers described in 1 ? Which factors hinder/contribute to growth, are barriers to entry ?
8.3 - Do you think that subsidies could be applied to the terminals in this market ?
8.4 -How will the development of Internet telephony compare with the development of all other national and international Internet services ?
8.5 - How will consumers benefit ? 

 
IV- Regulatory Issues

IV.1 - Insertion in the Regulatory Framework and Licences.  Coherence with International Regulations

Commission Directive 90/388/EEC on competition in telecommunications services markets recalls the five criteria that constitute voice telephony. These are very similar to the criteria laid down in the definition of the public telephone service, in article L.32-7 of the French posts and telecommunications code.

The European Commission's notice of 10 January 1998 specifies the status of voice on the Internet for scenario 1(Computer to Computer), by concluding that, based on the criteria defined in the directive, it is not voice telephony.  It leaves the other service offerings (scenarios 2 and 3) open to interpretation. 

Such technical considerations are becoming irrelevant as progress is made in terms of interoperability, voice latency, etc. 

Under the posts and telecommunications code telecommunications activities may be provided freely, subject to the licensing and declaration procedures provided under the legal regime for networks and services.

In brief, French legislation has set out a regulatory framework that provides for the following cases:
- operation of a public telecommunications network
===> Subject to a licence under article L.33-1;
- provision of a public telephone service
===> Subject to a licence under article L.34-1;
- provision of other public telecommunications services
===> No licence necessary, according to the provisions of article L.34-2.

These legal categories are based on practical service models, which may be considered to be technology-independent.  When IP technology is used to carry voice traffic, service models identical to those for traditional telephony can be identified.

At first Internet telephony appeared as a disruptive factor on the market, for both telecommunications operators and for existing regulations. 

It now appears as a technological strategy, enabling operators, in certain cases, to reduce costs while giving customers the opportunity to choose between quality of service and low prices.

It is important therefore to study the fundamentals of Internet telephony services in relation to those of voice telephony.  It is not sufficient to restrict the analysis to the comparison of the criteria used to define Internet telephony and voice telephony.  It is also important to consider what these offers are targeting and the extent to which they can substitute one another, regardless of the underlying technology.

Finally, it is vital to study Internet telephony within the wider context of international Internet development and to consider which rules should be proposed and how these could be applied while maintaining coherence between the various regulatory systems.

	While the development of IP technologies may present the opportunity for convergence between services, infrastructures and regulations, within the context of communications globalisation, the United States have long since opted for minimum Internet regulation. We need to consider whether European regulators and operators wish to set out a European framework for Internet, rather than the adopt completely deregulated model which best suits the most powerful operators on the global market, which have the capacity to make the most of a regulation-free environment.

Question 9 : Legal Issues concerning Internet Telephony

9.1 - Can “Internet telephony services” be defined, other than in relation to the definition of the public telephone service ? Which  a) architecture  b) offerings (in 1) does the definition of Internet telephony correspond to ?
9.2 - Are there any provisions of the posts and telecommunications code that constitute regulatory barriers to the development of the VoIP service as defined above ?
9.3 - Thus defined, does the “Internet telephone service” fall within the scope of the public telephone service, as set out in the posts and telecommunications code? Should it  contribute to universal service charges?
9.4 - Does the “ Internet telephone service” require a more specific definition than that given in the posts and telecommunications code ?

Question 10 : Licences

10.1 - With regard to licensing, what is the position of the various potential players identified in the value chains ? 
10.2 - Do these players use new or existing infrastructure ? What is the status of these different infrastructures with regard to the posts and telecommunications code ? 
10.3 - Which provisions, from the technical, economic and regulatory clauses of the schedule of conditions attached to public telecommunications operators’ licences may not apply to Internet telephony as it has been defined? 

Question 11 : International Context

11.1 -  Which provisions should be proposed within European and international fora, to ensure that Internet telephony develops within a framework that is acceptable and beneficial to all users? What form should these provisions take ? Which forum is the most appropriate ? 
11.2 -How capable are Europeans of influencing the implementation of such a framework?

IV.2 - Numbering

Telephone numbering is managed by national regulatory authorities.  Some global services (relatively few for the moment) have been assigned specific resources from the ITU. According to the different types of techniques and the different offerings:

Question 12 : Numbering - Directories
12.1 -Does Internet Telephony require specific E.164 numbering resources from the national numbering plan?  Is this plan sufficient ?  
12.2 - In order to support the development of competition how can the portability of E.164 numbers a) between the various players (telephone operators, Internet access providers) and b) between various domains, be guaranteed ?
12.3 - Is E.164 numbering adapted to Internet Telephony? What alternatives do you suggest?
12.4 - What relation can be established between naming and addressing schemes?
12.5 - What criteria apply to the publication of a list of subscribers to an Internet Telephony service ?
12.6 - What architecture and management structures are appropriate for the directories for conversion of E.164- IP addresses ?

IV.3 - Interconnection and Interfaces

Voice over IP calls can be established, with hybrid access and transmission media, over networks based on IP technology or circuit switching.

Question 13 : Interconnection, Interfaces

13.1 - How is connection established between the different “ networks ” and different players that may carry Internet telephony traffic? What type of traffic can be identified, a) according to the origin (purposely-built IP, standard terminal, etc.), b) type, etc. ? Is IP voice traffic specifically identifiable  ? 
13.2 - What interfaces are used in this interconnection ? Are they proprietary, standardised ? Is specific equipment used for this connection ?Who owns it ? 
13.3 - Which mechanisms enable distribution of the associated costs ?

IV.4 - Other Regulatory Issues

Question 14 : Other Regulatory Issues

14.1 - Universal Service: What is the relation between Internet telephony and universal service? Should a contribution be required from  each category of players ?What contributions should be expected from each category of players ?

14.2 - Emergency Calls: How can the carriage of emergency calls be guaranteed ? Which players will be responsible for them ?What will they cost ? 

14.3 - Confidentiality and Neutrality: How will services such as calling line identification, call restriction, malicious call identification be provided, for each of the service offerings  ? Will there be special arrangements for these services ? Are there standards? What guarantees of confidentiality of conveyed calls is there ?

14.4 - Call Confidentiality: How, for each offering, can legal interception be guaranteed, as required by the law of 10 July 1991? By which player, or in which part of the chain ?

14.5 -Geographic location of the subscriber: In a “ Computer to Phone ” scenario, how can the subscriber be located from the IP address ?            

ANNEX 1

Architectures

ANNEX 2

Voice Telephony Criteria

Directive 90/388/EEC

- Annexe 2 : 

“ Public telephone service ” means the commercial provision to the public of a service consisting in the conveyance of direct, real-time voice telephony between public switched telephone network for mobile and fixed users."

ANNEX 3

Public Telephone Service Criteria: 

Article L.36-7 of the posts and telecommunications code

- Annexe 3 :

“ Voice telephony ”  means the commercial provision for the public of the direct transport and switching of speech in real-time between public switched network termination points, enabling any user to use equipment connected to such a network termination point in order to communicate with another termination point.