VOIP Peering Bypasses KPN
XConnect is peering together the VOIP services of United Pan-Europe Communications NV (UPC) (Nasdaq: UPCOY), Casema NV , N.V. Multikabel , Essent Kabelcom BV , and CAIW .
When the cable networks are peered, 450,000 cable VOIP users will be able to talk with each other over pure VOIP connections that never touch the PSTN.
Cable dominates the video business in the Netherlands, servicing 7 million subscribers or about 93 percent of the country’s households. (See Cable Is the Voice of VOIP.) The new peering arrangement may help the cable companies parlay that impressive stat into telephony leadership as well.
If Dutch cable VOIP catches on, the incumbent telco, KPN Telecom NV (NYSE: KPN), could suffer in two ways. First, it could loose revenue if a portion of its voice customers begin using their cable connections to make phone calls. (See KPN Reports Mixed Q3.) Second, it could also miss out on the interconnection fees it normally gets from cable companies to connect VOIP calls through the PSTN, explains XConnect CEO Eli Katz.
Today only 6 percent of the cable subscribers use VOIP service, so the cable guys still have some marketing to do. (See CEO Makes VOIP Predictions.)
But they appear to be making quick progress. The first 450,000 VOIP subscribers signed on within the first nine months of the service's availability in the Netherlands, Katz says. And interest is said to be growing. (See VOIP's Hot.)
That’s where it gets interesting, and potentially very disruptive. The 6.5 million cable subscribers that aren’t yet buying the VOIP service now have a much more compelling reason to do so. With the pool of cable VOIP users soon reaching a half million households, chances are pretty good that some of their friends and family are also "on network."
“It’s more than just going to your cable operator for your voice service, its more like people will feel like they are joining a kind of movement where you can communicate in a whole new way,” says VOIP analyst Jon Arnold.
KPN isn't taking this lying down. (See KPN Buys Attingo.) The carrier launched a bundled Internet access and consumer VOIP service called InternetPlusBellen last Spring. KPN says it now controls a 44 percent share of the broadband access market, well ahead of the cable companies, which together control only 29 percent. With its bundling strategy, KPN is using its broadband leadership as a wedge into the VOIP market. (See Cable, Broadband Growing.)
But Katz says the peering of the five Dutch cable companies is just the first step. Next is the connection of those networks to others around the world that are also using the XConnect peering platform. This could eliminate even more interconnection fees for the Dutch cable companies. It might also cause some KPN voice customers to defect to cable voice for the attractive international rates.
“This is the beginning of the end of the trillion-dollar PSTN interconnection business of all carriers on a global basis,” Katz says. (See Former BT CTO Fears for Telcos.)
If this is just the beginning of a worldwide cable VOIP peer-up, it makes sense that it would start in the Netherlands. Of the country's 16.4 million people, 75 percent live in a place with an Internet connection. It is fertile ground for VOIP.
A coalition of cable companies in the U.S. is working on a similar peering initiative. CableLabs released an RFI for such a project in December. (See Cable Crowd Seeks VOIP Peers.) XConnect is one of 30 or so peering companies to answer the RFI, but CableLabs will likely issue an RFP before selecting a winner.
— Mark Sullivan, Reporter, Light Reading