VOIP Peering: Incumbent Killer?

Stealth and other peering points are providing more signaling and database features, offering an alternative to the PSTN

June 16, 2005

4 Min Read
VOIP Peering: Incumbent Killer?

NEW YORK -- Stealth Communications Inc. is aptly named. The tiny company is 10 years old and has only eight employees. It isn’t widely known outside a small circle of service providers that use its technology.

All the same, it could turn out to be an incumbent killer.

Stealth for years has been developing its Voice Peering Fabric (VPF), which many experts say is now one of the largest VOIP peering points in the world. VPF and other VOIP peering points offer a way for providers of VOIP services to link networks and exchange traffic, routing it around the more expensive PSTN (public switched telephone network) and avoiding the less secure public Internet.

What's interesting is these services are becoming more sophisticated. Yesterday Stealth announced it is adding more features to help VOIP upstarts use VOIP peering points to circumvent the PSTN and the public Internet (see Stealth Intros VOIP Peering).

At telx’s Customer Business Exchange (cbX) conference, Stealth launched its ASP Market, which will add a range of important telecom signaling and directory services, including 411, 8xx services, caller ID, local number portability (LNP), and SS7 (Signaling System 7). Initial partners in the project include SNET Diversified Group, Syniverse Technologies Inc., and VeriSign Inc. (Nasdaq: VRSN).

With more PSTN-like features like caller ID and LNP being built into VOIP peering points, it will become less important for services providers to access the PSTN -- and this threatens the business of many incumbents.

”Established wholesale providers and incumbents such as AT&T and BT really don’t like this; they can become completely disintermediated,” says Caroline Chappell, an independent analyst and author of a recent Light Reading Insider report on service delivery platforms (SDPs). “This could change the whole structure of how traffic is passed around.”

Stealth CEO Shrihari Pandit says the company’s VPF processed 2.5 billion minutes of VOIP in 2004, and he expects it to do 9 billion minutes this year.

”As VOIP starts growing, you want to redeem the risk of going over the public Internet,” says Pandit. “VOIP networks will eventually replace the PSTN, but they need more interconnecting.”

Stealth also operates one of the largest ENUM databases, offered as a free service to its customers (see ENUM Heads for Primetime and Carrier ENUM Gains Ground). The database now holds 6.5 million numbers, says Pandit. He adds that Stealth is profitable and does $10 million to $15 million in revenues per year, charging service providers a flat per-port monthly fee to connect into the peering point.

Skeptics point to Stealth’s tiny size and the fact that VOIP peering really doesn’t make a lot of money. They also point out that VOIP peering points rarely consist of more than a few Ethernet switches cobbled together with some database software, making the barrier to entry low.

But that's precisely what makes the trend scary to the big telcos, and it’s clear the approach is growing -- like a weed. Stealth isn’t the only one working on VOIP peering fabrics, even though it’s one of the biggest. There are many different forms of VOIP peering. Other peering services from InfiniRoute Networks Inc. and Interoute Telecommunications Ltd. cater to different customer bases. For example, Interoute focuses on connecting incumbent TDM networks to VOIP networks, says Chappell.

Yet another threat to incumbent voice providers, notes Chappell, is if large enterprises start using the technology to create their own large VOIP networks.

There are even more VOIP peering services from providers such as Syniverse and VeriSign that involve specialized database, security, and signaling functions. Stealth caters primarly as a traffic exchange for VOIP pure-play operations such as Packet8 and Net2Phone Inc. (Nasdaq: NTOP).

Telecom experts expect these VOIP connection services to proliferate, offering ever more options and ways to exchange traffic and data.

”VOIP peering is a multi-layer proposition,” says Hunter Newby, the chief strategy officer of telx, which hosts connection points for major services providers. “In order to derive the maximum benefit from it, you first need to understand what you want to do with it. With VOIP peering, like many other things, if it makes sense, solves problems, and saves network operators money, then it will succeed."

— R. Scott Raynovich, US Editor, Light Reading

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