VoIP peering's business model shifts

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(Telephony Via Thomson Dialog NewsEdge) The explosion in voice-over-IP traffic is producing a new and rapidly growing market for peering services, as VoIP providers try to avoid the public network in transporting and terminating their IP-based calls. What VoIP peering promises is the ability both to provide end-to-end IP connections for VoIP, thus improving quality and control, and to enable new services, such as video calling, that aren't possible as long as VoIP calls traverse the public network.



As VoIP usage increases, so does the use of VoIP peering. Stealth Communications, which operates a voice peering fabric (VPF), has seen minutes of use grow from 18 billion in 2005 to a projected 100 billion this year, said Shrihari Pandit, president and CEO. In the near term, however, it can be confusing to sort through the voice peering options, which include multiple commercial models, in terms of what a VoIP peering service can do and how the relationship between the two VoIP providers is commercialized.

There is some confusion in the market, said Alan Nunn, chief technology officer of Newport Networks, a softswitch maker. The first level of confusion comes from whether peering companies are talking about purely carrying IP traffic regardless of what is in that traffic or whether they are peering voice traffic. Then there are different commercial models from the two extreme communities the telco community and the pure Internet community each of which is coming from a different angle. The telco guys are thinking per minute, and the Internet guys are thinking per number.

A number of neutral entities have popped up that offer VoIP providers peering and give them a choice between those two common commercial models.

There are two different commercial paradigms, said Eli Katz, CEO of Xconnect, which announced at VON '06 that it had acquired IpeerX and now collectively serves 300 service providers in 30 countries. One is a bilateral settlement based on per-minute, per-call activity, and the other is settlement free. The relationship between the service providers is independent of the role the neutral facilitator plays in that. We provide products and services for both models. For a true peer-to-peer environment, bill and keep seems to be the more appropriate commercial model.

Having fixed costs is increasingly important to VoIP players because competition is forcing everyone to fixed-rate models, Pandit said.

Beyond the choice of commercial models, however, there are also distinctions in the type of VoIP peering service and competition among the players to attract the largest number of service providers and thus build the largest ENUM database of VoIP numbers to which calls can be terminated over an all-IP connection.

There are many different levels of peering or interconnection of networks, Pandit said. You can connect at the physical layer, the network layer or the application layer.

Stealth's VPF is primarily transport, operating what amounts to a private Internet, around North America and into both Europe and Asia, he said, enabling direct peering among service providers. The service supports either bilateral agreements or fixed connections with per-month fees and free ENUM database dips. When calls come into the VPF, the database dip determines if the number being called is served by a provider connected to the VPF and terminates the call accordingly.

Other peering providers, including NeuStar and Xconnect, have layers of applications on top of peering services such as signaling management, security and protection against VoIP's version of spam known as spit, quality of service, caller ID authentication and more.

Global Crossing announced a wholesale VoIP peering service at VON '06 that followed its enterprise peering service both enable its customers to keep their VoIP calls on its IP network whenever possible.

It enables our customers to have more predictable costs and to control quality, said Patrick Reilly, senior product development manager. That's important, as they are forced to move to flat annual fees and compete against folks with larger scale.

Within the VoIP peering community, many expect more telecom service providers will be offering peering as a commercial service.

It's a very natural extension for carriers to offer this within their own customer base, just to enable traffic that logically should remain on-net to remain on-net, as it has no reason to go off-net, Katz said. There is a natural evolution within the carrier network.

The question is whether larger telecom providers will seek to muscle in on VoIP peering and change the shift toward a bill and keep environment.

The telcos have been sitting back for a while, saying, This VoIP stuff is no big deal to us, Nunn said. Now, they are starting to see the peering guys getting some traction we would expect to see them start playing a me-too.

Peering will only become more important in the VoIP world, Katz said, to enable VoIP providers to compete on more than price by adding advanced features. VoIP peering will enable advanced services such as video calling, and increase the value of VoIP by increasing the number of all VoIP connections for consumers, he said.

Copyright 2006 by Prism Business Information. All rights reserved.www.prismb2b.com
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