Stealth Intros VOIP Peering

Stealth Communications Inc., a small Internet exchange provider based in New York City, says it is changing the economics of offering voice over IP (VOIP) services.

Last week the self-funded carrier introduced a new service it calls the Voice Peering Fabric, which it claims will help carriers drastically reduce capital and operational expenses for interconnecting with other carriers.

In simple terms, the VPF is a peering point like the Internet exchange points, MAE East or MAE West. Using a network based on IPv4/IPv6, it provides the infrastructure for VOIP carriers to exchange traffic. As part of the service, the carrier has developed a Website where members of the VPF can see which carriers are offering bandwidth at what price.

So why is this interesting? Typically, when VOIP carriers connect to other carriers, they do one of three things: They rent space in a carrier hotel and pull the fiber themselves; they lease capacity from a local loop carrier; or they use a gateway to connect into an incumbent carrier's TDM network.

Any of these options is expensive. Using the Voice Peering Fabric, providers can connect to the peering point that Stealth has built for a fee of $500 per month for each 100-Mbit/s connection.

“This makes it much simpler and easier for these next-generation companies that will compete against the incumbents to connect to each other’s networks,” says Frank Dzubeck, president of Communications Network Architects, a telecom consultancy. “It’s really going to accelerate the entire voice-over-IP issue, because it’s eliminating some of the costs associated with offering VOIP services.”

The new service could help VOIP providers competing with U.S. Bell operating providers and large long-distance carriers compete even more cost effectively for local and long-distance telephony services. The threat to incumbent hegemony is becoming increasingly more severe as cable operators like Cablevision Systems Corp. (NYSE: CVC) start offering VOIP services (see Bells' Hell: VOIP?).

This model might also streamline the process of finding a peering partner. Instead of going through a broker, members of the VFP can go to a Website and bid on each other’s capacity.

Stealth has built the New York exchange point using IP routing gear it’s developed internally and high-end routers from Procket Networks Inc. The core routing startup has already shipped initial deployments of its PRO/8000 product and expects to install more as Stealth expands. Shrihrai Pandit, president and CEO of Stealth, says he selected Procket over Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR), because it provided better performance and port density.

After only a week of offering the service, Stealth says it has already signed up six customers, including China Telecommunications Corp. (NYSE: CHA), Core Networks (CNI Global), and Net2phone. Pandit says another 25 have expressed interest.

He says Stealth has plans to expand its business to large enterprises.

“We want to be able to go to a Goldman Sachs or Bear Stearns and say, ‘You don’t have to go through MCI or AT&T any longer to connect your VOIP network. You can find your own connection partners on our site.’ ”

The service provider is also planning to set up comparable peering points in other key locations like Miami, Los Angeles, and San Francisco. Eventually, it may even expand into Europe.

Dzubeck says this is a good opportunity for Stealth at the moment, but it won’t be long before the interexchange carriers (IXCs) get into the act, too. He says MCI is the most likely IXC to go down this path.

“There’s nothing to stop MCI from setting up its own peering points and establishing its own portal,” he says. “That could be bad for Stealth -- or maybe they’ll buy them...

“They already have a strong commitment to IP. And now, they’re free of encumbrances. This is a new business model that could make them money, and I’m sure they’d be interested.”

— Marguerite Reardon, Senior Editor, Light Reading