1. IP Telephony Regulation in Korea Information & Communication Policies for the Digital Economy Korea Information Strategy Development Institute Chong-Hoon Park & Osang Kweon

2. Korea Information Strategy Development Institute Definition of IP Telephony I Analysis of IP Telephony Market II Policy Issues III Foreign Policy Trends IV Policy Direction V Content KISDI

3. Definition of IP Telephony Korea Information Strategy Development Institute

4. KISDI Information & Communication Policies for the Digital Economy Voice telecommunication services provided through the Internet Korea Korea ITU Definition ITU Definition Japanese Definition Japanese Definition Reference Reference VoIP : Use of Private Networks Internet Telephony : Use of Public Network IP Telephony : VoIP + Internet Telephony Communication service using a packet switching system where voice is converted to IP packets and transmitted Definition

5. KISDI Information & Communication Policies for the Digital Economy Phone to Phone is mainly provided by SSP(type1) and FSP 1998 IP Phone to IP Phone is mainly provided by SSP(type1, 2) 2000 Wireless IP Phone to Wireless IP Phone will be provided by whom? post 2003 PC(Web) to Phone is mainly provided by SSP(type2) 1999 Development Path

6. KISDI Information & Communication Policies for the Digital Economy ① Characteristics of voice, data, fixed, mobile (under laws and regulations related to spectrum use) ② Service area boundaries of fixed telephony does not apply ③ Mobility from fixed services is possible 14.9 % → 20 % Internet Telephony Characteristics

7. KISDI Information & Communication Policies for the Digital Economy Service TypeFixedMobileInternet Mobility Indoors (Fixed) Indoors and Outdoors (high) Indoors and Out (Dependent on type of internet access) Area Code YesNo Content Voice Voice and some data Voice and Data Service Fees LowHigh Dependent on service type and internet access Positioning

8. Analysis of Market Demand Korea Information Strategy Development Institute

9. KISDI Information & Communication Policies for the Digital Economy Data : KISDI Unit: 1 million persons July 2001 Data: KISDI Unit: 1 million persons 2000.6 3,117 2000. 12 9,062 2001. 6 12,732 2001. 12 5,919 2002. 6 9,732 2002. 8 3,256 Internet telephony traffic dropped sharply after service is charged since July 2001 Share of L-L and L-M traffic became similar with the technology development of interconnection Revenue decrease is not as large as traffic drop As the share of L-M calls increased, revenues have reached previous levels Market size of 20 billion won at the end of 2002 Market Statistics

10. KISDI Information & Communication Policies for the Digital Economy - persons between ages of 15~ 59 years old Target - 13,684,008 persons /750 persons Collected Group/Sample size - Face to Face Interview Survey Method - Seoul, Busan, Daegu, Daejeon Gwangju(5 major areas) Area Covered Demand Survey of Internet Phone Service (August 2003) Potential Demand: 3,196,584 I Market Size : approx. 800 billion won II Based on population at the end of 2002  Market Potential

11. KISDI Information & Communication Policies for the Digital Economy - service classification, number, and interconnection rule is not clear Legal Barrier - recognized as having lower call quality than fixed telephony services - recognized as a free service Perceptions of Users - concern of taking away revenues of voice telephony - taking away competitiveness from Incumbent Carrier if new service introduced Cannibalization Barriers

12. KISDI Information & Communication Policies for the Digital Economy - reasonable fees compared to fixed telephony services Low Fees - internet/ video calls in addition to voice Various Value-Added Services - indoor/outdoor use based on type of internet connection Mobility - enhance service reliability in emergencies of PSTN network Reliable service in Emergencies Drivers

13. Policy Issues Korea Information Strategy Development Institute

14. KISDI Information & Communication Policies for the Digital Economy How should government classify IP Telephony? - Depending on classification, IP telephony service can be regulated and service operators needs to go through licensing process - Government need to consider whether IP phone has the same characteristics as voice telephony - Government needs to differentiate local/long/International of IP phone. - Government needs to know whether it can categorize fixed and wireless. Issues Issues Classification

15. KISDI Information & Communication Policies for the Digital Economy Are terminating numbers allowed for internet telephony services? Which is the best numbering system for IP telephony: local numbering system, identification numbering system (mobile numbering), ENUM? Up to how many numbers will be allowed including identification and subscriber numbers if identification numbering system is implemented? What are the possible barriers to the mobility of IP telephony, if the local numbering system is implemented? Is it technically possible? Would service providers be able to use the identification numbering system if local service providers are using the local numbering system? Can all types of IP phones receive terminating numbers regardless of QoS? Issues Issues Number

16. KISDI Information & Communication Policies for the Digital Economy Are IP telephony operators ‘free riding’ on broadband subscriber lines? - If it is free riding, what would be the impact on settlement? - If it is free riding, what would be the impact of settlement? Is there a method to calculate cost based on the amount of usage of the subscriber networks? Can the current telephone and data networks be added to IP telephony networks? Issue Issue Can the concept of QoS guarantee be introduced to the internet based on Best Efforts? Are regulated operators responsible for QoS of IP networks? Should QoS of IP telephony be announced for the protection of IP telephony users? Issue Issue Interconnection & QoS

17. Foreign Policy Trends Korea Information Strategy Development Institute

18. KISDI Information & Communication Policies for the Digital Economy Increase of broadband subscribers (13 million subscribers as of the end of 2002) and greater interest in IP Telephony - Significant increase of subscribers for IP telephony operators Vonage and Net2Phone Plans by CATV operators to offer IP telephony services in 2003 - AT&T Broadband, Comcast, Time Warner Cable, Cox Communications - Criticism on IP telephony positioning (Primary-line, and Secondary-line) Roll-out of IP telephony is expected to be at current levels in the second half of 2004 Market Market Continued growth in unregulated environment; currently FCC and PUC are re-examining classification of IP Telephony - Minnesota PUC designated Vonage’s VoIP service as a telecommunication Service in August 2003 Current position of the FCC on IP Telephony - contribute to public interest by leading the emergence of IP telephony through international and access charges - examine each case if two-way telephone terminals have characteristics of telecom services RegulationRegulation U.S.A.

19. KISDI Information & Communication Policies for the Digital Economy Japan Rapid increase of IP telephony subscribers along with internet subscribers - broadband subscribers increased from 65 thousand in 2001 to 10 million in June 2003 - 5 million subscribers of IP telephony; 3 million using IP phone with terminal 9 million : total wireless voice service of 11 IP telephony operators with terminating number of 050 Softbank and KDDI are leading the expansion of IP telephony; NTT plans to offer IP telephony services based on FTTH in the later half of 2003 Market Market IP Telephony is considered ‘voice’ in Japan where telecom services is classified as voice, data, and dedicated lines 050 system allowed for wireless voice services to 11 operators in the same year in May 2002 - Numbering system: 050-ABCD-XXXX (11 numbers) - Same numbering system for different telecom service operators 3 levels of call quality based on R value (A; 80, B; 60, C: 50) Numbering is granted only if call quality is above C level RegulationRegulation

20. KISDI Information & Communication Policies for the Digital Economy Australia Rapid expansion of the broadband market (112% growth in 2002) Switch to voice services from PABX to internet for large financial institutions Comindico established an All IP based telecom network and acquired a carrier license to become an IP telephony wholesaler and B2B operator Market Market ACA, ACCC service policy: “Technology Neutral” - IP telephony was classified as other voice services Investigating the impact of mid-long term changes of the current regulatory framework (ACIF) in consideration of NGN Studying the ENUM numbering system for a connecting method between internet and existing telecom services (ACA) Examining the interconnection relationship between voice and data networks (ACIF) RegulationRegulation

21. Policy Direction Korea Information Strategy Development Institute

22. KISDI Information & Communication Policies for the Digital Economy Examine the plan for IP telephony introduction as a way to develop the telecom market Introduce new services to stimulate growth in the telecom market Introduce new services to stimulate growth in the telecom market Consider the impact of other related systems Modify legal framework including numbering systems and interconnection Modify legal framework including numbering systems and interconnection  Policy Direction

23. KISDI Information & Communication Policies for the Digital Economy Classify IP telephony service as ‘telecommunication services’ and differentiate between“international” and “long-distance” Service Class Special service provider or Facilities-based service provider license is needed depending on ownership of network License License Classification & License

24. KISDI Information & Communication Policies for the Digital Economy Apply the identification numbering system for terminating numbers of IP telephony Ex.) 0N0 – XXXX – XXXX ※ Examine the views of service operators with local service licenses on the use of unallocated numbers Numbering System Numbering System Establish minimum standards for call quality in terms of regulations - Create new standards for call quality for IP telephony Quality of Service Quality of Service Number & QoS

25. KISDI Information & Communication Policies for the Digital Economy Apply Long-Run Incremental Cost - Need for improvement in current interconnection standards ※ Account settlement for backbone networks Need for detailed fee structure for between data networks, between data and telephone networks, interconnection and user costs Examining the establishment of “IP telephony networks” ※ Account settlement for subscriber networks Settlement principles based on a fixed amount Interconnection Interconnection Interconnection

26. KISDI Information & Communication Policies for the Digital Economy Establish an appropriate system in response to the paradigm change to facilitate the development of the telecom market Build a NGN, Ubiquitous environment through improvements in current systems including service classification, numbering system, call quality and interconnection Build a NGN, Ubiquitous environment through improvements in current systems including service classification, numbering system, call quality and interconnection Establish a cyclical relationship between existing and new markets Establish a cyclical relationship between existing and new markets Stimulate growth in the telecom market through developments and expansion of new services Stimulate growth in the telecom market through developments and expansion of new services  Policy Objective

27. KISDI Information & Communication Policies for the Digital Economy Thank You! Korea Information Strategy Development Institute