IP Telecom Industry Shapes Up in Taiwan

John Lin, president of 2uDG Taiwan Corp., thinks that his company will soon become a prime motivator for Taiwan's sluggish Internet protocol (IP) telecommunications market thanks to his patented telecoms security solution and patented e-mail dialing solution, along with the formation of alliances.

A strong boost is much needed. "The DGT (Directorate General of Telecommunications) and Chunghwa Telecom have created an environment that is unfavorable to the development of IP telecommunications," Lin laments, referring to the DGT's complicated communications security and IP phone-number regulations, as well as Chunghwa Telecom's demand that IP telecoms providers must offer "quality" communications before they will be allowed to link their Internet-based networks to Chunghwa's public switched telephone network (PSTN), which forms the backbone of Taiwan's telecommunications infrastructure.

Security regulations have kept nearly 100 applications for licenses shuttling among all sorts of agencies, including the Bureau of Investigation and the Criminal Investigation Bureau, reports the IP Phone Open Exchange (IPOX) Alliance. The alliance was organized by Taiwan's IP phone service providers to speed up cross-connection among all of the island's IP networks.

C.F. Wang, president of IPOX member Network Telecommunication Co., complains: "If the security regulators feel that IP phone operators need to acquire approval for their communications surveillance equipment, the DGT should set up a unified review process instead of keeping the applicants busy with bringing one example after another of their equipment to the regulators for review, which is what they make us do now."

The security requirements are reportedly designed to curb telephone crime, which is growing rampantly and causes huge losses to phone subscribers. All of the island's PSTN-phone provides have installed systems that can track callers. This makes life difficult for IP providers, for which tracking is practically impossible in the Internet world. John Lin claims that his company's patented security program can help by preventing criminals from making con calls to subscribers.

Narrowing Down the Con Artists

The security program allows each subscriber to create a personal access code; and, Lin claims, 'No call can reach you unless it comes with your personal access code. In most cases, nobody would have your code except those you have given it too; so, if you get a call from a con artist, you can narrow it down to within a controllable range."

Taiwan formally opened its IT telecoms market in June 2001, but end-user security has emerged as an issue only recently. Insiders note that it has emerged because service providers have begun expanding from enterprise service into end-user service and offering calls to PSTN telephones from IP-enabled PCs.

With IP telecoms service now reaching to end users, phone numbers have become a problem. The DGT has promised to allocate another coding format to providers so that they can offer line numbers to their subscribers. "But," Lin says, "this will cause inconvenience to consumers, because another coding format means that they have to carry an additional phone number. Why doesn't the DGT just allow consumers to make IP phone calls using the existing format?¡¨

Lin claims that 2uDG has a "Directory Book" mechanism which enables IP users to make calls using their existing format. "This is an absolutely legal method," he emphasizes, "and the only loser is Chunghwa Telecom." He believes that the DGT wants to protect Chunghwa Telecom, which it spun off to become a separate entity years ago. "Both the DGT and Chunghwa know very well that if consumers begin making large numbers of IP calls using the existing format," he explains, "Chunghwa will lose competitiveness and money because calls are far cheaper over the Internet than over PSTN lines."

Chunghwa and other telephone-service providers now charge their subscribers a monthly rental on end-user equipment as well as a communication fee for calls made via the PSTN. IP callers have to pay only the monthly rental fee; calls over the Internet are free.

Lin knows that local IP-service providers are hardly able to challenge the huge Chunghwa Telecom at the present time. A major reason for this is that the IP-service providers compete with each other and refuse to provide free cross-network access to their subscribers. "They're afraid that free cross-connections would give rivals a chance to lure subscribers away and force them out of the market," Lin says. To get around this problem, Lin's company wants to form an alliance with other providers with the aim of making the market pie bigger.

Playing the DGT Role

"We hope to convince around five providers to join with us in kicking off a joint service late this year or early in 2006," Lin reports. Within the alliance, 2uDG would play the role of the DGT by authorizing the use of its patented security access code technology and Directory Book mechanism, and would not itself directly offer IP services.

Lin feels that customers will flood in once they learn about the very low service fees charged for IP calls. Then, "Chunghwa will have to compromise and join us in offering IP-telephony services. If this actually happens, 2uDG may turn its function over to the DGT. But if the DGT continues to suppress the development of IP telecoms, we'll move offshore and stop offering services from our Taiwan branch. The government here will lose out on our taxes."

While complaining about the DGT, Taiwan's IP-service providers have high praise for the Industrial Development Bureau (IDB) of the Ministry of Economic Affairs for the strong support it affords the industry. The IDB has been busy carrying out a "Dual Network" wireless broadband project that uses the Internet rather than PSTN as the backbone of wireless telecommunications. In addition, the MOEA has actively encouraged local IT manufacturers and IP-service providers to set up IP sections at international electronics shows held in Taiwan.

The Dual Network project is expected to give a further boost to the island's IT industry, which, insiders say, is being held back from capturing IP hardware market share because of the DGT's conservative attitude. "The hardware industry usually needs support from the domestic market in the embryonic stage of its development, but our hardware industry is not so lucky," moans Rich Chang, sales manager of VoIP-equipment supplier Advantage Century Telecommunication Corp.

Government Support

The government-backed Industrial Technology Research Institute (ITRI) reports that the domestic IP-equipment industry recorded revenues of barely NT$10 billion (US$303 million at NT$33:US$1) last year, with its main products being IP gateways and telephones. With the help of government programs, ITRI believes, revenues will soar to NT$42.5 billion (US$1.2 billion) in 2008.

Most of the IP hardware produced on Taiwan is exported, largely to North America and Europe.

Even with scant support from the local telecoms regulatory agency, Advantage Century and other domestic equipment suppliers have been able to introduce some impressive products. Rich Chang says that his company was the first in the world to roll out wireless IP phones with color screens and triple-way conversion. "For this phone," he notes, "we use TI's [Texas Instruments'] solution to ensure voice quality and reliability." Most of these products are shipped to Europe and Japan.

Other Advantage Century products include fixed-line IP phones, voice gateways, telephony adapters, and universal serial bus (USB) phones. Domestic buyers include cellular-service providers SaveCom International and New Century InfoComm.

The replacement of traditional telephones with IP service is expected to become a general trend soon. Intel, the world's largest chipmaker, is intensifying its promotion of Internet-based Si-Fi and WiMAX broadband wireless telephony; and C.K. Mao, former Vice Minister of Transportation and Communications and once head of Chunghwa Telecom, predicted recently that IP would completely replace PSTN by 2010 and that, in Taiwan, the replacement might be completed a year earlier than that. (Nov. 2005)