Contrary to what you might think, VOIP is not merely the latest tech fad. It represents both fundamental change and the new foundation of voice communications.
It's not my crystal ball that tells me this – it's the past. History repeats itself. Just as the functionality of any communications network is measured by how many other networks are connected to it, so will VOIP networks be measured. Just as it made logical sense for the original ISPs to find common physical points to locate internetworking and core routing equipment and peer their IP traffic, it also makes sense for VOIP networks to do the same. After all, VOIP is voice over Internet Protocol.
VOIP peering is generally defined as a process of interconnecting two different VOIP networks – with, or without, an underlying commercial relationship associated with the voice traffic. Commercial relationships with a settlement fee component are known as bilateral peering agreements, and relationships with no call-termination charges are known as multilateral peering.
Within the concept of interconnecting there are two components, signaling and media, that are necessary to connect an actual call. In its most basic form, VOIP peering adds value to any VOIP network by simplifying and reducing the costs of provisioning the connection between two disparate VOIP networks. In more advanced forms, VOIP Peering can dramatically reduce operating costs by making voice calls themselves "on-net" and therefore free.
So what’s VOIP peering got to offer the customer? If done properly, VOIP stands to bring a real ROI to an organization in as little as a few months. VOIP peering will compound that savings many times over.
To understand the impact VOIP peering will have on the communications world, we have to examine its status today: Who are the suppliers of voice and IP services today and how will they be affected by the advent of VOIP services? What are they doing to facilitate, or hinder, its progress? Are they even capable of offering the right services for the prospective buyers of VOIP? What are their motives?
There are two major pre-existing network ideologies that have to be understood and put into perspective when it comes to VOIP peering in order to take their best parts and leave the rest. Those two network ideologies are the PSTN (public switched telephone network) and the public Internet.
Incumbent carriers and their equipment vendors – those that grew up in the PSTN – are traditionally slow to move and innovate new offerings and pricing models. It should therefore come as no surprise what you might be hearing from them: They tell you they can deliver VOIP, but they still want to bill you per minute. Meanwhile, new VOIP service providers, whose DNA is more closely tied to the public Internet model, are offering a flat-rate package.
So, let’s dive in and examine the impact from the various perspectives:
Traditional voice LEC service providers are primarily using TDM technology. They are probably on a VOIP network implementation path, but what is driving it? Is it the technology, or the new economics of voice revenue? How will they be competitive if their product is entirely wrong as soon as they get it to market?
Many ILEC's rely on per-minute revenues as their main source of revenue. If the ARPU under this model is $100, how can the ILEC afford to move to a flat $30 monthly rate for the same service? Given that such an offering is already available from cable companies and several voice-over-broaband (VOBB) providers, how can they avoid this dilemma?
The answer is, VOIP peering could fix many of these problems. By establishing VOIP peering agreements amongst themselves, ILECs could cut out middle-men, reduce provisioning times and costs, and build truly secure, low-cost VOIP networks of their own.
A VOBB, or cable MSO VOIP service provider, faces these problems: How does the flat-rate model factor in off-net termination costs? How do they manage the interconnection and settlement process of the myriad VOIP network islands?
Many VOBB and MSO VOIP providers interconnect to one IXC for nationwide call termination and play a ratio game, which is: If the rate per minute multiplied by the minutes used is less than the monthly customer charge, then the provider makes a gross profit. What if the VOBB and MSOs peered all of their VOIP on-net calls with each other? That would raise the probability of an on-net call and lower the per-minute billed call risk exposure. What if the VOBB and MSO had multiple choices for all of the off-net traffic that is still billed per minute? That would enable cost reductions as well. Again, here is where VOIP peering becomes crucial.
Wholesale VOIP providers might be struggling with voice quality. The question is, are they using the public Internet or a private VOIP network for transport? Do provisioning delays result in lost revenue?
Many VOIP carriers use the Internet as a transport medium for hard-to-reach destinations in the world, but in fact the public Internet isn’t the best way of interconnecting gateways in major cities around the world. If the proper VOIP peering network is put in place, it would increase the quality and lower the cost of global VOIP networks.
A private VOIP user or enterprise isn’t looking to make money from VOIP, but they want to save it. The question here is: Are the equipment vendors and service providers providing the right products for your level of risk tolerance and technical capability? Is there an in-house IT staff that can add a hosted VOIP application to the corporate platform? Have the potential savings been quantified? Does sending voice traffic over the public Internet raise concerns?
Well, if you're thinking about this, you're not alone. If your organization has implemented a VOIP WAN, it probably did so to reduce the costs associated with calling between branch locations. Again, here, VOIP peering is powerful because by interconnecting an enterprise VOIP WAN with the VOIP WANs of other organizations, security can be established and savings can be compounded. Imagine having secure, convenient access to multiple private, wholesale VOIP carrier rates for all off-net calls. The CFO will be happy!
These are just some of the ideas of how a vibrant VOIP peering market can change the game. In the future, I’ll be authoring a report for Light Reading Insider that will detail VOIP peering models in a straightforward fashion. It takes VOIP peering from a historical vantage and builds on the evolution of networking from the perspective of what was rational and logical is what has actually succeeded. VOIP and VOIP peering are upon us. Many things are changing. Knowing where it's going should help guide you in your own decision-making process.
— Hunter Newby is Chief Strategy Officer oftelx. Telx is an operator of international network interconnection facilities, including VOIP peering points, in New York and Atlanta.
"There is no need to use the AIN or involle ILECs or any other company"
Maybe not, but they piggyback on a BRI/PRI to the core network anyhow.
This is presumably to deal with 800 number and local number portability translations. Those are about teh only things that the AIN is any use for. With ENUM and similar services, we can expect that even that benfit will fade away.
"Indeed there is no reason for the AIN to exist. Its passing into history will greatly benefit the consumer."
Yeah, if you could just convince the ILECs to rip out the entire core network, then replace it with a whole new layer 1 & 2 technology; except there isn't any viable alternative yet (ROADM, DWDM, InfiniBand, etc... are the latest, high-speed, circuit-switched infrastructure).
I don't really have to do anything. They are converting to softswitch architectures with SIP anyway. DWDM has very little to do with feature creation.
The AIN is passing into a well deserved obscurity.
"There is no need to use the AIN or involle ILECs or any other company"
Maybe not, but they piggyback on a BRI/PRI to the core network anyhow.
"Indeed there is no reason for the AIN to exist. its passing into history will greaty benefit the consumer."
Yeah, if you could just convince the ILECs to rip out the entire core network, then replace it with a whole new layer 1 & 2 technology; except there isn't any viable alternative yet (ROADM, DWDM, InfiniBand, etc... are the latest, high-speed, circuit-switched infrastructure).
"Public Internet and Private IP via distributed Layer 2 Ethernet (see www.thevpf.com) No TDM links there."
Layer 2 Ethernet still needs a layer 1 physical path. If the route stays on the same LAN infrastructure then you're correct. If the Ethernet connectivity must cross the WAN then you're probably in need of layer 1 connections that will indeed run over a TDM backbone.
"Going from $100 to $30 brings top line revenues down 70%. If the $70 was all profit that means the profit is all gone."
It often helps to read and understand the whole post before you reply.
First: It's unlikely the one flat rate charge is the only thing you purchase from your ILEC.
Second: If your call goes from VoIP to PSTN a connection fee is paid by your service provider to the ILEC, and even if it isn't to the PSTN your VoIP provider will lease it's backbone capacity from the ILEC's TDM infrastructure.
The ILECs own the vast majority of the backbone network infrastructure in the USA (and a great deal of the international backbone), providing most of the layer 1 & 2 connectivity for the MSOs & VoIP providers (and provide even more so for the facility-free service providers).
You can't get away from paying the ILECs, even indirectly, without leaving the country.
1. There are two types of VoIP Peering implementations. Public Internet and Private IP via distributed Layer 2 Ethernet (see www.thevpf.com) No TDM links there. All Waves between nodes and no ILEC's. 14 billion minute annual run rate and climbing on that one particular VoIP Peering Fabric BTW.
2. Going from $100 to $30 brings top line revenues down 70%. If the $70 was all profit that means the profit is all gone. Also, last time I checked, the VoBB's and MSO's were giving away the legacy class 5 features like call fwd'ing and call waiting. That's not going to help the valuations of the big publicly traded telcos much.
Once again we have an article that brushes lightly over the fact that the TCP/IP protocol stack is from OSI level 3 - level 7, and to get from one peering point to the next, whether Intenet or private, the connections are via TDM for level 1 & level 2 (often measured in multiples of T1, T3 or OC1).
The ILECs will continue to make money, because they provide the TDM backbone between Internet Peering Points and now they provide the backbone TDM between private VoIP Peering Points. The ILECs will also profit from the what they charge their own VoIP customers (going from $100 in monthly, accumulated, per minute charges to $30 per month, flat-rate VoIP would be more painful if most of that $100 hadn't been profit, and if the flat rate $30 were all you bought from the ILEC; audit your bill).
The blogs and comments are the opinions only of the writers and do not reflect the views of Light Reading. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
To save this item to your list of favorite Light Reading content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Digg
Del.icio.us
Reddit
