I recently spoke with some of the leaders in the VoIP peering space about the market. As you know next year is the year of VoIP peering and some will say the year of VoIP peering may even be 2005. Either way, the market for VoIP peering is growing and growing quickly. I recently had a chance to ask some questions of Nextone’s Dan Dearing and InfiniRoute Network’s Gary Tauss about the market and where it is headed. If you want to get an idea where things are going, you would do well to listen to what the two of these visionaries have to say about the market.

As I post this I am excited that TMC’s second VoIP Peering Summit is taking place this week in Los Angeles. I am here at Internet Telephony Conference & Expo, where this summit takes place and there could not be more buzz about the concept of VoIP peering.

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NEXTONE COMMUNICATIONS ANSWERS
Dan Dearing, Vice President of Marketing, NexTone

What are your thoughts on the state of VoIP peering?

As carriers migrate to VoIP, the need to efficiently and securely exchange traffic in its native IP format becomes increasingly important. Carriers around the world are using session management solutions to peer with carrier partners and deliver VoIP services to existing enterprise and consumer customers.  As carriers commission VoIP peering solutions, they are finding that their success requires two essential ingredients:  management tools and know-how.  VoIP peering requires a robust solution which eliminates the complexity of VoIP interconnects but also provides sophisticated session management intelligence that enables PSTN-like quality of service and scale for VoIP.  Most peering solutions today provide network operators with very limited tools (e.g., network trend analysis) and analytics (e.g.,  call detail records) to scale their networks.  In addition, carriers must retool a work force that has been focused on the PSTN network and may likely not know IP networks at the level that is necessary.  A new generation of network specialists are needed to address the session management issues of VoIP peering.

What are the benefits of VoIP peering?

VoIP peering provides carriers with a facility to quickly create seamless and secure IP interconnects with their customers, providing faster service turn-up and the ability to realize revenue sooner.  It reduces carrier CAPEX and OPEX to deliver voice services by simplifying how interconnects are made.  In the past, many VoIP service providers used TDM circuit-based methods to connect with other partner carriers to solve interoperability and security problems, which required a pair of media gateways linked in a back-to-back configuration to convert voice traffic from VoIP to TDM and back to VoIP again.  Unfortunately, costly DSPs were required on the media gateways to perform this conversion.  Because DSP resources are no longer needed, carriers can reduce the cost of peering by 50 to 80 percent depending on the capacity of the network interconnection.

Since adopting VoIP peering to exchange traffic with other carriers, LatiNode-a Miami-based VoIP wholesale carrier serving Central and South America-has increased its annual voice traffic from 31 million minutes in fiscal year 2001/2002 to 500 million minutes in the period ending June 2004 (fiscal year 2003/2004).  During that time, the company increased customer (voice originators) and supplier (voice terminators) interconnects from 20 to 120.

What do you think 2006 will hold?
Wider adoption of VoIP by service providers and the enterprise will fuel the need for VoIP peering.  Infonetics Research recently reported that one quarter of all voice minutes will be VoIP based by April of 2006 and that one half of all central offices will support VoIP. Industry innovators like iBasis and KPN, who have long used VoIP technology in their networks, are now joined by traditional voice service providers who are converting their entire networks to VoIP by 2010. Session management is crucial to managing and scaling peering points between these networks. This advanced technology is the signaling intelligence of the converged IP network, providing  network operators a comprehensive end-to-end facility to manage all aspects of their real-time services, including subscriber policies, service connectivity, and traffic management.

On the enterprise side, private VoIP networks will be back in vogue as this technology empowers the enterprise to better manage its telecommunications costs with a flexible and secure facility to insource and outsource SIP-based applications.  The enterprise CIO will use voice/data convergence to manage costs and increase employee productivity with new mobility and collaboration applications.

Will my prediction about 2006 being the year of VoIP peering be accurate or am I too early?

VoIP is being rapidly adopted by both carriers and the enterprise.  VoIP peering enables this migration and is also fueled by this phenomenon. The emergence of IMS in 2006 will further fuel the need for real-time IP peering which expands today’s peering solutions to support a diverse set of real-time applications and services.

How do service providers get involved in peering today?

Service providers use peering to extend their service reach into new markets and to interconnect with ASPs for wholesale services and applications.

Is there an opportunity for enterprise peering as well?

Yes, as enterprises deploy private VoIP networks, peering provides them with a flexible facility to offer new end-user services while also controlling costs.  For example, Shinsei Bank in Japan is using NexTone’s session management technologies to offer its employees a greater degree of mobility with new and enhanced services, while also providing PSTN-like performance, availability, and SLA assurances for real-time communications. Shinsei is using NexTone’s products to facilitate VoIP peering to reduce international calling costs and eliminate its reliance on legacy TDM carriers. The bank will also offer SIP-based telephony solutions based on NexTone’s products that will enable Shinsei’s senior management to access corporate telephony services from their enterprise and home offices, thereby enhancing productivity and profit margins.

What are the biggest challenges facing those who want to peer?

As carriers implement peering facilities for VoIP and other real-time services, they are faced with a number of technical challenges including network security, policy enforcement, signaling protocol interworking, and multivendor interoperability.  VoIP peering solutions must provide carriers with subscriber management facilities, edge intelligence for connectivity management, and traffic engineering capabilities, which are all critical elements needed to deliver real-time IP services in a scalable way. These solutions must combine this intelligence with the ability to process and transport real-time media at wireline speeds, monitor and enforce QoS and SLA parameters, and provide protection against Internet security threats. 

How do you see ILECs living in a world where VoIP calls all travel over peered networks?

This is already happening.  With projects like Verizon’s FIOS, the ILECs are moving to a converged environment that will utilize peering solutions to interconnect their network with their carrier partners and residential/enterprise customers.

INFINIROUTE NETWORKS ANSWERS
Gary Tauss, CEO, InfiniRoute Networks

What are your thoughts on the state of VoIP peering?

VoIP Peering is just beginning.  Different market segments (large carrier, CLEC, enterprise, end user) have different definitions and understanding of what it means.  For us, we are in a linear growth stage where traffic doubles every quarter.  We expect 2006 to begin the geometric or exponential growth phase where traffic grows at a much faster rate.  Since the market is still in this definitional phase, we find that the Tier 1 carriers see VoIP Peering first as a way of addressing their changing traffic matrix due to cellular growth and second as a way to manage the interworking complexity across media, protocol, and business functions while the underlying equipment and market mature.  The next phase, which will be using VoIP Peering to increase revenue will be about the introduction of new services (presence based, peering communities, fixed/mobile convergence) and we see the beginning of that in 2006.

What are the benefits of VoIP peering?

For the Tier 1 carriers, VoIP Peering allows them to serve growing markets without expanding their TDM networks.  This is cost and strategy effective for them today.  Second, by essentially outsourcing the interworking issues (VoIP to TDM, SIP to SIP, SIP to H.323, ordering, provisioning, billing, settlement, and troubleshooting) it allows them to focus on their major issue of converting their own networks internally to VoIP before they have to worry about the interdomain VoIP issues.  In the end, it is the first step they make away from their traditional view of circuits to taking advantage of the Internet.

What do you think 2006 will hold?
For the Tier 1 carriers, 2006 is about solving interworking issues.  The large carriers all plan to be SIP based.  The smaller carriers (especially CLECS) are often H.323 based.  On the more important business side, VoIP Peering is a new form of bilateral relationship for them and they have to move the 100+ years of business process they have formed between them into an IP world.  Qualifying each other, reconciling order processes, understanding new forms of rates, and troubleshooting a new type of business are the issues they will begin to address.

Will my prediction about 2006 being the year of VoIP peering be accurate or am I too early?

For the top 40 international carriers, 2006 is the year they get their ‘toes’ in the water for VoIP Peering.  Only a few (like ATT) have actually deployed end to end VoIP services yet.  Until they make substantial progress internally on their VoIP systems they cannot use VoIP Peering’s major benefits of providing seamless services end to end across networks.  Until that time they will use VoIP Peering to solve operational (cost) and traffic matrix changes. 

How do service providers get involved in peering today?

For us, they usually get involved when they have a problem connecting to new carriers or when they have issues getting quality interconnections to emerging cellular markets.

What are the biggest challenges facing those who want to peer?

Interworking is the biggest issue.  At every technical, business, and operational level the nascent VoIP and TDM systems have incompatibilities.  We are still in the ‘tower of babel’ stage.  For example, the fixed line SIP systems have a very different set of characteristics than the SIP IMS based future mobile systems versus the existing H.323 systems.  Another good example is ENUM.  The CLEC version of ENUM to enable free calling is very different than the large carrier ‘walled garden’ version of ENUM, which is completely different than those who want to run TCAP over IP, and none of these are what the mobile guys want.  We will work through these issues but the major players haven’t really voted on how the world will be quite yet.

How do you see ILECs living in a world where VoIP calls all travel over peered networks?

In the ILEC world, their peering works just fine once they get to VoIP.
They see the interexchange of calls between carriers filtered through their presence/ENUM architecture which supports paid calling.  In their world, if another carrier wants to complete a call to one of their subscribers, they will only reveal the IP address of the phone to carriers with whom they have a paid relationship.  They reject the idea that they will give their database out for free to anyone. This is why they like the ‘walled garden’ form of ENUM and reject the ‘user’ ENUM architectures.  The mobile carriers have similar architectures.