1. 23rd Annual Telecommunication Conference and Trade Exhibition

2. VOIP CHALLENGES FOR CARIBBEAN OPERATORS Regenie Fraser, Secretary General, CANTO June 26, 2007

3. CONTENTS Voice Over Internet Protocol (VoIP) VoIP - Status in Caribbean markets Challenges to regional operators How are regional operators protecting their revenue base Response of government & regulator VoIP regulations – a global view Role of governments Role of regulators What is CANTO doing?

4. Voice Over Internet Protocol (VOIP) Voice over Internet Protocol (VoIP), broadly refers to voice calls using a broadband internet connection. The term “VoIP Services” is used loosely to cover a range of publicly available voice services using VoIP technology. This includes; -Voice over broadband (VoB) such as international private lease circuits -Voice over digital subscriber loop (DSL) -Voice over Wireless Local Area Network -IP telephony

5. Voice Over Internet Protocol (VOIP) Consistent with emerging ITU definitions, IP telephony refers generally to IP based networks, regardless of the owners. The term “VoIP Services” refers more to the provision of voice services over networks that are competing with incumbent network operators. This presentation focuses on “VoIP Services” in the Caribbean region.

6. VoIP Status Within the region, where liberalization has taken place, a technology neutral approach has been adopted to the licensing of voice services. In addition to incumbent telecoms, other network operators and service providers have been issued with various types of licenses to provide voice services – e.g. internet service providers, international voice service providers & domestic voice service providers. To date, no jurisdiction has issued specific class of service licenses for VoIP Services. In Bahamas, Guyana & Antigua, incumbent telecoms are still operating under exclusive franchises.

7. COUNTRYVoIP STATUS AnguillaNo specific license but allowed under technology neutral voice services license. Considerations being given for class of service license for VoIP services for the future. AntiguaIllegal. Issue to be addressed as market is liberalized. BahamasNo legislation. BTC still has the exclusive franchise to offer voice telephony services in Bahamas. BarbadosPolicy is in development. VoIP service providers will need to be licensed as either a domestic or international operator and registered in Barbados. VoIP service providers should have interconnection with the domestic network (PSTN,) VoIP (the service) includes but is not limited to P2P, PC to phone, Phone to PC, and Phone to Phone services. VoIP service includes only those services that allow access to and/or from the Public Switched Telephone Network (PSTN) and use North American Numbering Plan (NANP) – conforming numbers (i.e. not Peer to Peer (P2P) services. CaymanNo specific license but allowed under technology neutral voice services license

8. COUNTRYVoIP STATUS DominicaNo specific license but allowed under technology neutral voice services license GrenadaNo specific license but allowed under technology neutral voice services license GuyanaNo legislation. GT&T still operates under exclusive license, as the reform of the sector and modernization of its regulations is yet to take place. JamaicaNo specific license but allowed under technology neutral voice services license. Specific number ranges have been allocated for VoIP services. Consultation on VoIP pending. St KittsNo specific license but allowed under technology neutral voice services license St LuciaNo specific license but allowed under technology neutral voice services license St VincentNo specific license but allowed under technology neutral voice services license SurinameNo specific license but allowed under technology neutral voice services license Trinidad & TobagoNo specific license but allowed under technology neutral voice services license. There are plans to consider issues such as the call center operators who offer international calling services and issues such as numbering, location and the provision of emergency services.

9. What Regional Telecoms Are saying About VoIP Services From a recent CANTO survey of 14 regional markets, the following are some key additional findings In all markets there is evidence of the presence of independent international VoIP operators such as Skype and Vonage. At least one market indicated that there is evidence of agents operating to get persons to sign-up for programmes such as Vonage Affinity Programmes. There is also evidence of persons providing technical support to users of independent VoIP services. Individuals purchase equipment such as analogue terminal adaptors which allow a standard telephone to be plugged into a broadband connection. Local licensed operators and or service providers such as ISPs & international call centers offer VoIP services, sometimes illegally.

10. VoIP Challenges for Regional Operators Unlicensed international operators compete with licensed operators for international voice revenue. Voice services provided by incumbent licensed operators are constrained by regulations. Access plus local voice services provided by incumbent operators are generally provided at subsidized rates, while they loose high margin international traffic to illegal operators. Local network providers invest in and maintain telecoms infrastructure that are used freely by the unlicensed operators.

11. VoIP Challenges for Regional Operators Contd. As licensed operators upgrade their network to new technology to achieve cost reductions necessary to compete, they further facilitate the erosion of their voice revenue stream. Unlicensed operators are allowed to compete unfairly, as they are not required to support economic development through taxation, payment of licensing fees, participation in universal service or provide employment. Regulators have not been responsive to the plight of licensed operators. There is a crippling lag between technology changes, legislative changes and regulatory policy development.

12. How Are Regional Telecoms Responding? If you can’t beat them, join them. To protect their revenues regional operators are launching competing VoIP Products, either by themselves or in partnerships with companies such as Net2Phone. Full service operators are providing service bundles to retain customers. Some operators are attempting to use service differentiation, for example focusing on QoS issues through the provision of service level agreements (SLAs), to assure customers higher quality of service for own VoIP service. Operators are migration to NGN or IP based networks, to facilitate the provision of new services in order to increase their value preposition and improve cost effectiveness.

13. How is Government & Regulator Responding Regionally there is a high level of regulatory uncertainly surrounding VoIP. Responses from telecoms in 13 regional markets indicate that there are no specific VoIP policies in place in their markets. In one market (Barbados) a consultation process is currently underway to develop a VoIP policy for that market. In Antigua VoIP is illegal. The issue is expected to be addressed with the liberalization process. In liberalized markets regionally, the license under which network operators are allowed to provide voice services are technology neutral.

14. How is Government & Regulator Responding Contd. In general, VoIP is treated as enabling technology and little or no attention is paid to “VoIP Services” and grey market operators. In some markets, vain attempts have been made to use media releases to advise the public, that individual or companies should not offer telecommunications services without the requisite license. In some instances regulators have strongly suggested that incumbent licensed operators offer their own VoIP service to counter the illegal operators. As one respondent to CANTO’s questionnaire puts it - “when it comes to VoIP, the regulator practices blind eye regulations”

15. VOIP Regulations- A Global View A review of the approaches to VoIP regulations globally reveals that generally two frameworks have been employed, service definition and or specific regulations. Given the various flavors of VoIP services, properly defining the services within the context of respective markets brings clarity to the market. This allows for common understanding of the various products and the development of service models that fit the market conditions. Clear product definition facilitates the development of more effective regulations that take into consideration country specific circumstances such as, level of telecoms market development, government social policy agenda and the needs of consumers.

16. SOME REGULATORY DEFINITIONS OF VoIP SERVICES MAIN CATEGORIES OF VOIP DEFINITION SOME COUNTRIES USING DEFINITION *QUALITY of SERVICE ( becoming less relevant) Japan, India FUNCTIONALITY (This covers equipment or terminals used and or network architecture) India, Japan, Jordan, Malaysia, Spain, Israel, Saudi Arabia & Hong Kong NUMBERING SYSTEMJapan, Taiwan WHOLE OR PART PROVISION OF SERVICE OVER IP/PSTN Israel & Jordan (The ITU uses this definition) BY SERVICEUSA (Views VoIP as information service) Italy (VoIP as nomadic and non nomadic services) EU (Publicly Available Telephone Services (PATS)) EU (Publicly Accessible Electronic Communication Services (PAECS)) USERS/USAGEChile (Public or closed group of end users) Australia & Tunisia (Corporate or residential use) * Quality of service is becoming less relevant from a pure technology perspective but other factors such as directory, emergency and other special services are being used as differentiators. Countries may use several definitions, depending on the regulatory outcome they want to achieve. Source: ITU The Future of Voice; Document : FoV/04 12 January 2007; Table 1.1 Main Categories of Definitions

17. Trends in Regulatory Approach to VoIP USA uses light touch regulations, no licensing requirements but contribution to USO required. Sweden, Norway & Finland have linked VoIP regulations to the PSTN regulations. Ireland has focused on customer protection issues. Italy initially focused on nomadic vs. non-nomadic services. Pakistan has a clear policy to reduce grey market traffic and has established a Vigilance Committee comprising reps from Government, regulator, operators and concerned agencies, to police the market. Bangladesh’s government has created a state agency “Rapid Action Battalion” (RAB) which has shut down several illegal VoIP operations, and as a result the government has filed cases against offending companies.

18. Role of Government Governments need to help to shape the development of a stable market. How do they achieve this? - They can’t hold back the technology and attendant benefits to consumers and operators. -They can’t do nothing and hope for the best outcome. -They need to ensure that an appropriate legal and regulatory framework is in place for VoIP. ( See Draft Discussion Prepared by CANTO) -They need to guide the development and implementation of policies to more effectively manage the development of the sector.

19. Role of Regional Regulators In their role to help the market to develop in a balanced and sustainable way, regulators need to; Be more proactive in management and monitoring of the market. Ensure a level playing field for all operators and service providers. Ensure that all who benefit from the market, obey the laws of the respective countries. Ensure that the approach to regulations take account of, the level of market development and the desired market outcome.

20. Role of Regional Regulators Contd. Ensure that products are defined to give effect to the desired regulatory outcome. Ensure that regulations are comprehensive and address issues such as; Fairness and non discrimination Consumer protection USO contributions, other public benefits, Quality of service Numbering resources Interconnection If illegal operators cannot be substantially reduced through regulations, then an alternative consideration would be to relax regulatory restrictions on the similar services provided by licensed operators.

21. What is CANTO Doing? Out of discussions at the 23rd annual AGM in January 2007, a working committee on new and emerging technologies was formed to spear head work on this issue. To date the committee has; Communicated by letter to 13 Caribbean Ministers responsible for telecommunications, outlining the concerns that CANTO members have with the state of VoIP in our markets. Prepared a set of draft guidelines for regulations of VoIP. Circulated the draft guidelines to regional Ministers. Collaborating with CTO to lobby regional Governments on the subject. Included the issue for extensive discussions at this conference.

22. What next? Our hope, is that by continuing the dialogue, collectively, we can find solutions

23. THE END Regenie Fräser Secretary General 67 Picton Street Newtown - Port of Spain Trinidad & Tobago - W.I. Phone: 1 868 622 7448/3770/4781 Fax: 1 868 622 3751 Email: rfraser@canto.org