& cplSiteName &

VOIP Peering: Incumbent Killer?

Light Reading
News Analysis
Light Reading
6/16/2005
50%
50%

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

(39)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 4   >   >>
HeavyDuty
50%
50%
HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:47 AM
re: VOIP Peering: Incumbent Killer?
How is the end-user getting to this IP peering system?

Maybe, from a DSL connection at the SOHO. The infrastructure for that still requires a PSTN last mile connection, from the folks with the physical plant to offer: your local LEC! That means you pay your DSL service provider that, if it isn't the LEC, leases the last mile from the LEC. Then, you have to get from the central office to the VoIP peering location, probably via a leased line; the only way to get there from here if you want to avoid the lines leased for the Internet.

Now, use common channel signalling (ccs; a.k.a., SS7) to get the VoIP traffic routed and add features that are the equivalent of a point-to-point, digital, PSTN (PSDN) line, because they are the feature provider for the aforementioned PSDN.

If you use a cable modem to get your VoIP connection the cable provider will need to use leased lines to get to the VoIP peering point then again to get to the end-point (through a LEC, if the call is to a PSTN end-point)...

How using the PSDN (a subset of the PSTN), via layers of vendors and adding the VoIP overhead, is going to kill the incumbents has escaped me. That said, I'm all for it if these guys really have a LEC killing alternative, or even successful pretense thereof.
HeavyDuty
50%
50%
HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:47 AM
re: VOIP Peering: Incumbent Killer?
How is the end-user getting to this IP peering system?

Maybe, from a DSL connection at the SOHO. The infrastructure for that still requires a PSTN last mile connection, from the folks with the physical plant to offer: your local LEC! That means you pay your DSL service provider that, if it isn't the LEC, leases the last mile from the LEC. Then, you have to get from the central office to the VoIP peering location, probably via a leased line; the only way to get there from here if you want to avoid the lines leased used by the Internet.

Now, use common channel signalling (ccs; a.k.a., SS7) to get the VoIP traffic routed and add features that are the equivalent of a point-to-point, digital, PSTN (PSDN) line, because they are the feature provider for the aforementioned PSDN.

If you use a cable modem to get your VoIP connection the cable provider will need to use leased lines to get to the VoIP peering point then again to get to the end-point (through a LEC, if the call is to a PSTN end-point)...

How using the PSDN (a subset of the PSTN), via layers of vendors and adding the VoIP overhead, is going to kill the incumbents has escaped me. That said, I'm all for it if these guys really have a LEC killing alternative, or even successful pretense thereof.
melao
50%
50%
melao,
User Rank: Light Beer
12/5/2012 | 3:10:46 AM
re: VOIP Peering: Incumbent Killer?
Great post.
People tend to forget that the physica layer is important.
The incumbents are still the ones with enough capilarity in their physical structure, to reach the end-users.
Hard to kill something like that. Built on many years.
OldPOTS
50%
50%
OldPOTS,
User Rank: Light Beer
12/5/2012 | 3:10:45 AM
re: VOIP Peering: Incumbent Killer?
Does anyone believe that a nat interconnecting a few VoIP suppliers together (peering) will destroy the PSTN suppliers?

My recollection was that my previous large enterprise network traffic was much more than the 3B Min/ year (~250 Million Min/m). The competition fails to understand the scale of the Tier 1 or Tier 2 PSTNs. CCSs/erlangs anyone.

The enterprises may also need a physical connection to a peering points. Probably also obtained from the LECs? But enterprises are probably a good starting point for the service.

Checkout Wiltel's latest announcement with SBC, 6/16. (see LR 'NEWSWIRE FEED') Does anyone really understand the size of their SBC adjunct network?
Lots and Lots of Fiber, why?

OldPOTS
rjmcmahon
50%
50%
rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:10:41 AM
re: VOIP Peering: Incumbent Killer?
Checkout Wiltel's latest announcement with SBC, 6/16. (see LR 'NEWSWIRE FEED') Does anyone really understand the size of their SBC adjunct network? Lots and Lots of Fiber, why?

Can you give more details? The newswire feed was light on anything real. Who owns and controls the fiber, SBC or Wiltel? Why is it an adjunct network? How will SBC transition off of copper to the fiber, i.e. will they rollup Wiltel in attempts to strengthen the SBC parent or will they take SBC wireline through bankruptcy, pawning off the pensions to places like the PBGC http://www.pbgc.gov/ (taking a page from other "deregulation" such as airlines and CA energy?)
Scott Raynovich
50%
50%
Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 3:10:40 AM
re: VOIP Peering: Incumbent Killer?
I disagree, the access method does not matter. Revenue is the important thing to track here, rather than the access method or engineering paths. What the VOIP peering fabrics are doing is siphoning off revenue from incumbent service providers, both local and long distance, regardless of where the traffic comes from.

This is the fundamental impact as the network goes to packet from traditional voice.

Here's an example -- Say I pay $30 for packet broadband and $50 for all you can eat voice, which I purchase from an RBOC. The RBOC is routing the voice traffic over its own long-distance network or paying connection fees to an IXC. Let's say I switched to some sort of VOIP service -- so all of my voice traffic is going via packet via my cable provider or an Internet provider. The bill would be $30 or less, and the RBOC has lost all of the voice revenue. Then, if that traffic were routed and signaled through a VOIP fabric, the incumbent IXC loses all the interconnection revenue as well.

So the access point is moot. The RBOCs and incumbent lose revenue on VOIP no matter how you slice it.
jepovic
50%
50%
jepovic,
User Rank: Light Beer
12/5/2012 | 3:10:37 AM
re: VOIP Peering: Incumbent Killer?
VoIP is a threat to RBOC, sure, but I don't understand why VoIP peering should be especially threatening. VoIP carriers can cut some cost by not using gateways, but it's not like they are interconnecting via RBOC now.

Also, RBOCs can and will cut the prices of PSTN when they have lost enough market share. The real production cost of PSTN is lower than VoIP, for sure. There is nothing fundamentally cheap about VoIP, rather there are fundamentally expensive elements such as residential gateways. The high PSTN prices come from the overinflated organisations of the RBOCs, not the underlying technology.
HeavyDuty
50%
50%
HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:36 AM
re: VOIP Peering: Incumbent Killer?
"What the VOIP peering fabrics are doing is siphoning off revenue from incumbent service providers, both local and long distance, regardless of where the traffic comes from."

If your dialing an IP phone (making a phone call), be it via your cable vendor or DSL service, the call does get handed to the backbone for transmission to and from the VoIP peering center.

VoIP is an application that runs on OSI layer 3-7, the backbone is level OSI level 1-2. Layer 3 must go through level 1&2 to get anywhere. A great deal of the backbone is owned by RBOCs and IXCs (if the Feds allow SBC to eat AT&T and Verizon to eat MCI the RBOCs will own the vast majority of the backbone).

The VoIP providers are providing a telephone call as an application and are getting the volume rate for their connections to the backbone, not the retail rate a person or small business would pay.

"So the access point is moot. The RBOCs and incumbent lose revenue on VOIP no matter how you slice it."

The RBOCs and IXCs lose a little money when they provide volume rates to a VoIP businesses, so the access point is not moot. If the merger mentioned above goes through one can look for that cost to rise significantly.

As long as you youngsters keep forgetting that applications that touch remote devices and software use a backbone (OSI layer 1& 2), us old timers will always have a job.
Scott Raynovich
50%
50%
Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 3:10:35 AM
re: VOIP Peering: Incumbent Killer?
If I could add something here, it mystifies me that folks continue to say the answer to the packet threat to the incumbents is, "But RBOCs own access."

Yes, they have access networks, but it's at a time when access methods are proliferating. At one time, the only line of communication into a house was copper. Now you have HFC, and mobile networks, and soon, WiMax.
Scott Raynovich
50%
50%
Scott Raynovich,
User Rank: Light Sabre
12/5/2012 | 3:10:35 AM
re: VOIP Peering: Incumbent Killer?
"VoIP is an application that runs on OSI layer 3-7, the backbone is level OSI level 1-2. Layer 3 must go through level 1&2 to get anywhere. A great deal of the backbone is owned by RBOCs and IXCs (if the Feds allow SBC to eat AT&T and Verizon to eat MCI the RBOCs will own the vast majority of the backbone)."

Hmm, that is nice and technical. But you still haven't explained where the $50 in revenue goes when we drop the local RBOC as the voice provider and substitue with packet VOIP.

Or where the IXC revenue goes when the traffic gets transported as VOIP via softswitching.

Are you saying the incumbent voice business is just dandy?

Page 1 / 4   >   >>
Featured Video
Upcoming Live Events
September 17-19, 2019, Dallas, Texas
October 1-2, 2019, New Orleans, Louisiana
October 10, 2019, New York, New York
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
December 3, 2019, New York, New York
December 3-5, 2019, Vienna, Austria
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events