The African Internet

1
The African Internet Telecom Summit (Banjul,
The Gambia, June 5-9, 2000)

• Topic Internet Telephony Opportunities in Africa
  Gambia Telecom
• Presented by
• Yaw Osei Amoako, Ph.D.
• ITXC Corporation
• Regional Director - Africa

2
Agenda

• Overview of Internet telephony
• What, Why How (Phone to Phone)?
• History of Internet Telephony
• Internet Telephony Revenue Growth Vs.
• Switched Telephony Revenue Growth
• Birth of New Communications Network
• Telecommunications Market in Africa
• ITXC Corporation The Story Behind
• GAMTEL Internet Telephony Opportunities
• ISPs Internet Telephony Opportunities
• Show me the Money (US)
• Next Step Where do packets come from How to
  become an Affiliate of ITXC

3
Big What? Mistakes

• No Corporate MIS Manager will allow his/her
  companys email to go over the Internet. ATT
  Executive, 1994
• People will never give their credit card numbers
  on the Internet. Common Wisdom, 1996
• Voice over the Internet will never work Press
  Coverage in 1998

4
What is Internet Telephony or VoIP?

• Point to Point use of IP to carry and route
  two-way voice communications over data network.
• VoIP uses the real-time protocol (RTP) to help
  ensure that packets get delivered in a timely way
  - thus avoiding delay, the biggest single concern
  for network managers trying to maintain good
  voice quality.

5
Why Internet Telephony?

• IP uses the available capacity in a more
  technically efficient manner.
• PSTN call occupies a duplex (2-way) circuit for
  the entire duration of the call, including the
  pauses between words or between replies.
• PSTN is optimized for voice transmission sampled
  in 8 bit bytes, 8,000 times a second, for an
  aggregate rate of 64 kbit/s.
• IP call could theoretically be routed over
  different circuits, each of which would be
  occupied for a few thousandths of a second at a
  time, as packets are routed across the network to
  be reassembled at the distant end.
• Technically efficient network provides greater
  capacity utilization for IP calls.
• IP is engineered to meet average loads, and the
  typical utilization over an extended time period
  is around 60-70 of network capacity and with
  built in redundancy, calls do not fail.
• PSTN is engineered to meet the business peak hour
  and thus network components are in use for,
  perhaps, less than 20 of time. Overloaded PSTN
  cause call attempts to fail.
• Internet Telephony has the potential to
  significantly reduce the cost of long distance
  voice communication

6
Implications of IP Telephony for African Countries

• Originating Calls
• African countries customers are much more price
  sensitive.
• African Telcos are not responsive to new
  technology.
• Low-cost IP telephony will kick-start the growing
  Internet market
• Traffic generated is likely to be incremental,
  i.e., it would not necessarily substitute for
  calls that would otherwise have been made
  directly on the PSTN, because they would have
  been too expensive.
• If substitution occurs, it is likely to be
  discounted services, such call-back or prepaid
  services, not necessarily the Telcos core
  business.
• Reduction of Telcos commitments to making
  international settlements payments to foreign
  Telcos.

7
Why is Voice Over the Internet Better?

• Infrastructure costs much less
• No need for 500,000 switches
• One network for both voice/fax and data
• One network management team
• Compression is 6 times better than PSTN
• Allows for speed to market
• Allows for better margins
• Has no single points of failure
• Requires no long term commitments

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14 Cities in 16 Days
CHINA
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(No Transcript)
10
Short History of Internet Telephony Grandma To
Grandma
11
Projected Size of Internet or IP Telephony
IndustryThe Increase in IP-Based Voice
Communications Worldwide
Source International Data Corporation
12
IP Telephony Revenue Vs. Worldwide
Telecommunications Revenue
13
IP Telephony Voice-Enabled E-Commerce Revenue
14
Current State of IP Telephony Market

• Reseller market today
• Phone-to-Phone market for international calls
• PC-to-phone - free, flat rate, charged
• 400 million min./ month and growing by 25 a
  month
• Enhanced services
• Unified messaging
• International toll-free
• Calls to call center from web site
• Calling from Portal
• Many countries are deregulating or planning to
  deregulate their communications industries

15
Birth Of A New Communications Network

• The Old Way
• Converts sound into electrical signals and shoots
  them across a copper network. Its simple and
  works well, but its expensive. The switches
  that direct traffic across the network cost
  million of dollars. And each call uses an entire
  circuit. Thats like every car on the highway
  getting its own lane. The result Switched
  Long-distance calls cost more per minute compared
  to IP calls per minute.

• The New Way
• Internet technology is much cheaper than
  traditional phone gear. Thats because its
  digital routers, which direct traffic on the Net,
  cost tens of thousands of dollars, not millions.
  Whats more, each piece of data shares a line
  with data from other calls, just as cars share a
  highway lane. Parts of the same conversation
  often travel different paths, taking whatever
  route is available. The result Long-distance IP
  calls cost less compared to switched calls.

16
Circuit Switch Vs. Packet Switch

• Circuit switched networks, the modern telephone
  network, allocate a full end-to-end circuit for
  the duration of a call regardless of whether the
  parties are speaking or silent using a 64K
  dedicated circuit. Since the bandwidth remains
  constant, the cost of a phone call on the PSTN is
  based on distance and time
• The Future is Digital, and the next step in
  digital telephony is packet voice. Packetized
  data moves independently as on a multi-lane
  highway
• Packets take up less room, but do not necessarily
  arrive together
• Packet switch is more efficient mode of transport
  
• Less expensive, facilitates one network not two
• Packets allow for enhanced services, melding of
  Web info, data, voice and video

17
The Economics of Convergence
Example New York - Sao Paulo, Brazil

• Notes
• 2 megabits bandwidth
• yearly commitments assumed
• 27 loading
• Jan, 1999 prices

18
Data and Voice Traffic
Arthur D Little Consulting 1999
19
Telecommunications Market Growing in Africa
20
1998 - International Traffic by Origin
21
Traffic Growth by Region 1997-1998
SourceTelegeography
Global Average
22
Largest Telecommunications Routes From Africa
(Anglophone Countries)
23
1999 - Inter-Regional Internet Bandwidth (Source
TeleGeography)
USA Canada
5,916 Mbps
13,258 Mbps
Asia/Pacific
Europe
170 Mbps
949 Mbps
69 Mbps
Latin Amer. Caribbean
Africa
24
Major Infrastructure Being Built to Handle the
Projected Load

• Qwest and Level 3 - burying fiber - U.S.
• ATT, Carrier 1, GTS and Deutsche Telecomm -
  burying fiber along tracks, canals, electric
  lines - Europe
• Teledesic and Iridium - low orbit satellite
  network
• Teligent and WinStar - microwave high speed local
  loop
• Global Crossing, Marubeni -transoceanic cables -
  Europe, Africa, Pacific

25
ITXC The Story Behind
26
ITXC Background

• Internet Telephony eXchange Carrier
• Founded 1997
• Financing from Intel, Chase, VC, VocalTec, ATT
• NASDAQ ITXC (IPO Sept 27, 99)
• International Subsidiary in UK and Singapore.
  Sales office in Beijing.
• Largest Wholesale Internet Telephony carrier by
  footprint, volume
• Tom Evslin Founder, Chairman and CEO
• Founder and VP of ATT WorldNetsm

27
ITXC.Net History

• Focused exclusively on wholesale VoIP industry
• Deployed 1000 VOIP gateways on 4 vendor
  platforms
• 10 network wide gateway upgrades in 24 months
• Three supported platforms, Vocaltec, Cisco and
  Clarent
• ITXC.net carries more traffic than any other IP
  telephony network or Clearing House

28
ITXC Customers Affiliates

• Facilities-based Telcos, PTTs
• Bell Atlantic, Ameritech, China Telecom, Korea
  Telecom, GTS, Japan Telecom, Telstra, CW Optus,
  IDT...
• Telephony resellers
• Newly formed ITSPs
• International ISPs (for termination)
• Pure wholesale - Not business or residential end
  users

29
Building at Internet Speed After 24 months
220 PoPs 135 Cities 60 Countries 130
Affiliates
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Is there proof that this works?
ITXC.net (000s of MOUs)
31
GAMTEL Gambia Telecom Internet Telephony
32
The First Stage Winners in Africa Will Be...

• Those who enable transitions
• Those who know their place in a layered industry
• Those who move quickly
• Those who buy gateways
• Those who depreciate their gateways (and
  soft-switches) quickly
• Those who look to new markets

33
Big Picture of How GAMTEL Will Make Money in This
New Industry

• Test technology today by terminating and getting
  paid for it
• Sell IP calls to keep your costs down - high
  margins
• Both
• Build a domestic Internet Telephone Network with
  ITXC Intellectual Expertise
• Start writing enhanced services applications
• Use a voice ASP for enhanced services
• Carefully define your market in this new world

34
Network Economy

• Operate one network
• one set of cables
• one support team
• More efficient use of bandwidth
• Less expensive components
• No IRUs
• No long term bandwidth commitments

35
Opportunities for GAMTEL

• Arbitrage
• Revenue defense
• Political
• Value-added IP based services
• Unified messaging
• Internet economics

36
Opportunities for GAMTEL - Arbitrage

• Primarily International outbound
• Diminishing opportunity with increasing
  competition and lower margins
• Regulated vs.Deregulated
• Need to use a Internet telephony carrier for cost
  and quality
• High volumes possible

37
Opportunities for GAMTEL - Revenue Defense

• Protect your customers by offering competitive IP
  based telephony to cost-sensitive user base
• Open up new destinations using Internet Telephony
  instead of existing PSTN carrier relationships
• Lower cost base over Internet

38
Opportunities for GAMTEL - Political

• Lower outbound costs increase usage amongst lower
  incomes
• IP telephony and competitive telecoms industry go
  hand-in-hand with the Internet economy
• Lower prices always increase volumes, lower
  imbalance of traffic
• Internet/IP telephony infrastructure roll-out,
  leapfrogs old technologies

39
Opportunities for GAMTEL - Value Added IP-based
Services

• Audio-conferencing
• Application Sharing
• Device to Phone (webtalkNOW!TM)
• Web to Phone
• International 800 (Borderless800TM)
• Home Country Direct (BDirectT)M )

40
Opportunities for GAMTEL - Unified Messaging

• Voice, e-mail and fax mailbox
• Text to speech and vice-versa
• Roaming services
• Mailbox out-dial over VoIP
• Virtual PBX

41
Opportunities for GAMTEL - Internet Economics

• One network for Voice and Data
• Common bandwidth
• Common equipment
• Common staff

42
OPPORTUNITIES FOR ISPs
43
Opportunities for ISPs- New Revenue from
Voice/Fax services

• PC/Web to Phone
• Phone/Fax to Phone/Fax
• Value added services

44
Opportunities for ISPs- PC/Web to Phone

• Work with ITXC or a similar company
• Sell or give away a PC client or Web browser page
• Build your own brand
• Advertising or subscription based model

45
Opportunities for ISPs- Phone/Fax - Phone/Fax

• Only when
• You have experience with telephony minutes
• You have real-time billing and call control
  facilities (switch , pre-paid platform)
• You understand the pricing dynamics
• You have legal approval
• You have a distribution mechanism and/or a strong
  telephony focussed partner

46
SHOW ME THE MONEY (US)
47
International Termination Traffic Per Bandwidth

• 384Kbps (30 Ports) 400,000 Minutes/Month
• 512Kbps (48 Ports) 600,000 Minutes/Month
• 764 Kbps (60 Ports) 800,000 Minutes/Month
• 1Mbps (96 Ports) 1,000,000
  Minutes/Month
• Multiply by
• Agreed Termination Rate (0.00)
• Gross Maximum Income/Month (00,000.00)
• Less
• Cost of Bandwidth/Month (00,000.00)
• Net Maximum Income/Month (00,000.00)

48
Cost of Terminating Calls

• Fixed Costs
• Termination Gateway(s)
• Cost of 30 Lines or E1 Connection
• Monthly Costs To Be Incurred by Telco
• Internet Connectivity Bandwidth 7000 -
  20,000
• (Minimum of 384Kbps Prices vary from
  country to country
• Local Termination Charges
• (Prices vary from country to country)

49
Hypothetical Example of Income To Be Generated
From Terminating Calls(Actual s may vary)

• 512Kbps 48 Lines 600,000 minutes
• Multiply By Terminating Rate of 0.15
• Total Gross Income 90,000
• Subtract Monthly Cost of Bandwidth 10,000
• Subtract Cost of 48 PSTN Lines
• Subtract Cost of Gateways
• Total Net Income 80,000
• GROSS MARGIN PER MINUTE 0.01 - 0.35

50
WHERE DO THE PACKETS COME FROM?
51
Who is Originating Minutes Who Is Terminating
IP Calls Today?

• Incumbent Telcos
• Ameritech (USA)
• Bell Atlantic (USA)
• Japan Telecom
• Korea Telecom
• China Telecom
• GAMTEL (Gambia Telecom)
• New Competitive Carriers
• Internet Service Providers (ISPs)
• Cable Companies
• Wireless Companies
• Internet Telephony Service Providers

52
CRANS Network Topology
Affiliate Facility
ITXC Carrier Facilities
Affiliate Managed IP
Public Internet
ITXC CRANS
PSTN
Affiliate Switch
53
How a Telco can originate call to the world
54
How does a Telco become an ITXC Termination
Affiliate?

• Review and signing of Non Disclosure Agreement
  (NDA)
• Review and completing a Deployment Provision Form
• Provide IP Connectivity Address or Addresses for
  testing
• Review and signing of Carrier Origination
  Termination (OT) Agreement
• Intense testing and deployment period - DP team
  works with the affiliate to test its Internet
  connections, and PSTN lines and the installation
  of the CRANS
• If the affiliate passes all of the tests and the
  quality of its termination meets the ITXC
  Standards, a certificate is awarded and ITXC
  Sales force will begin to sell minutes to the new
  destination to origination affiliates
• ITXC does the selling, marketing and insulates
  affiliates from debts and pays affiliates
  directly.

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ITXC Global Offices

• ITXC Corp600 College Road EastPrinceton, NJ
  08540 USA1.609.419.15001.609.419.1511 (fax)
• ITXC Asia Pte Ltd391A Orchard Rd. 13-08Ngee
  Ann City Tower ASingapore 23887365.838.403565
  .235.0349 (fax)

ITXC Ltd.1 Northumberland AvenueTrafalgar
SquareLondon WC2N 5BW England44.171.872.56234
4.171.753.2789 (fax)