Nifty new technology is available that enables carriers to hand off voice traffic across disparate IP networks, saving on the huge costs associated with traditional interconnection methods. But carriers are skeptical of the market opportunity this approach affords, Light Reading has learned.

Using border control switches, carriers can avoid the need for traditional, expensive voice switches at the junction of carrier networks. Today, an operator using IP to carry voice on its network has to convert the traffic to TDM in a tandem switch in order to connect to a similar TDM tandem switch in another operator’s network.

Now carriers can accomplish the same results, but avoid the TDM conversion via border control switches. Analysts say the cost of IP-to-IP peering can be as little as 20 percent of the cost of converting the traffic to TDM then back to IP to cross network boundaries.

These border control switches, made by Acme Packet, Ingate Systems AB,Jasomi Networks, Kagoor Networks, Netrake Corp., Newport Networks Ltd., NexTone Communications Inc. and Ridgeway Systems & Software Inc., also overcome other technical hurdles, like firewall and NAT (network address translation) traversal and signaling interoperability. (For more on these issues see Session Controllers Kick Off, Startup Raises Bar on SIP Security.)

This all sounds terrific, but, several carriers contacted by Light Reading had reservations about the benefits of this approach.

”If someone could definitely say what the market opportunity is to do this, we’d be interested… Everything has to do with ROI. We won’t spend time on it otherwise,” says Martin Capurro, director of product management, global data and IP, Qwest Communications International Inc. (NYSE: Q).

Likewise, AT&T Corp. (NYSE: T) is sitting on the fence for now. “The market for this type of peering hasn’t happened yet,” says Joe Aibinder, director of product marketing for VOIP, AT&T. "We are moving to a SIP-based network -- we’ll see what happens."

Aibinder adds that one of the biggest issues in this kind of exchange of traffic is keeping track of who is carrying what for whom. And he says carrying voice will have the added complexity of who owes how much to whom. “This won’t be handled like Internet peering, where we all terminate each other's traffic without paying fees; it’s going to follow the voice model."

Christine Hartman, analyst at Probe Group LLC, says carriers have yet to work out IP voice peering between networks, precisely because of these business issues. "The hard part is coming to agreements on who pays whom more or less," she says.

Still, there are unilateral IP peering arrangements starting to happen, whereby one carrier terminates the voice traffic over IP for another carrier, which analysts say is a move in the right direction.

Level 3 Communications Inc. (Nasdaq: LVLT) on Monday announced a deal like this with T-Systems Inc. -- a division of Deutsche Telekom AG (NYSE: DT) -- that it claims establishes the first softswitch-based interconnection between two independent operators ever (see Level 3 Expands VOIP Service, T-Systems Teams for US VOIP).

Level 3 says T-Systems is using its softswitch-enabled voice termination service to offload voice traffic from its enterprise customers to Level 3 through a standard IP port to avoid the cost of TDM interconnection. Level 3 is using a combination of its own homegrown softswitches, Sonus Networks Inc. (Nasdaq: SONS) gateways, NexTone border control switches, and Edgewater Networks switches for NAT and firewall traversal.

Dennis Kyle, Level 3 VP, says right now the service is a TDM-to-IP handoff. “We will enable voice peering down the road, but we’ve not yet publicly connected those dots.” He adds that Level 3 is in discussions with carriers to establish these deals but “there is a chicken-and-egg situation where everyone wants to know who else is in before they will commit."

Acme Packet, the loudest company on the block in the border control switch space, made a big song and dance about its deal with Global Crossing Holdings Ltd. recently. But a closer look at this deal reveals that Global Crossing is actually using Acme’s switch to terminate IP traffic for Point One. In other words the peering is only one way (see GlobalX Uses Acme).

A spokeswoman for Acme says carriers have to "learn to walk before they can run, and hopefully soon they will be doing two-way deals."

— Jo Maitland, Senior Editor, Boardwatch