VON Peering Initiative

My trip to VON last week was cut short last week by three feet of flood waters following through my home in Atlanta. Nevertheless I did get to spend some time at the show and these are a couple of my impressions.

First, Rick Martin and his colleagues put up a courageous effort to rebuild the VON show in a very tough economic climate. The conference agenda looked good and a couple of premier keynote speakers certainly made the conference content worth attending. Nevertheless, the attendance had to be less than they hoped for. For what its worth, I heard that the Channel Partners show, which followed immediately after VON, was a good success.

Second, a possible spark for re-igniting interest in VON may come from a grass roots VoIP peering effort being led by Dave Gilbert, CEO of SimpleSignal. As a VoIP operator, Dave organized a meeting at VON with a cadre of like minded VoIP service providers who want to build a "bill and keep" (settlement free) VoIP peering federation. This idea is certainly not new. A number of VoIP visionaries, starting with Jeff Pulver (the founder of VON), have created settlement free VoIP peering networks. At TransNexus, we were the Atlanta node for Jeff's second Free World Dial-up (FWD II) network in 1998 which used VocalTec software and Dialogic cards. FWD II was a lot of fun and was a fascinating testbed for the early days of VON, but it never took-off.

Other more commercially based peering federations such as the Voice Peering Fabric and XConnect have had success, but the dream of a rapidly growing, VoIP peering network which can challenge the Public Switched Telephone Network has yet to emerge. I do not think the VoIP peering pioneers made any mistakes other than being too early for the market. Perhaps the grassroots effort by Dave Gilbert and his group of VoIP service provider peers will have the good fortune of stumbling onto perfect market timing and starting a new peering federation that grows virally. If they do, it will be good for VON and good for everyone in the VoIP business.

Interview with Rich Tehrani

Rich Tehrani is CEO of TMC which publishes Internet Telephony magazine.

RT: What has the economic crisis taught you, and how has it changed your customers?

JD: If you are not over-leveraged, then an economic downturn can actually create new opportunities as competitors and customers adjust to their businesses’ lower revenue and lower profit margins.

RT: How is this down economy affecting your decisions to reinvest in your company or market, if at all? Where will you invest?

JD: We are fortunate that in our niche of the VoIP market, demand is still growing. We are hiring engineering staff, but keeping all other expenses flat.

RT: What’s the strongest segment in the communications industry?

JD: Wireless.

RT: With the rise of smartphones and netbooks, many wireless technologies, such as WiFi appear to be poised for rapid growth. For example, we’re seeing more and more airlines add in-flight WiFi. In general, how widespread should WiFi be, in your view?

JD: I don’t know how widespread WiFi should be, but I hope it becomes universally available. WiFi is an inexpensive and reliable network access technology that anyone can provide. All other forms of wireless network access are controlled by spectrum license holders. WiFi offers hope for a competitive market of public network access.

RT: Which nation or region of the world will present the largest opportunity for your company in 2009/10?

JD: We serve customers around the world, but our best market is the United States.

RT: In what ways is President Barack Obama helping or hindering the technology markets? What more can he do?

JD: For this question, our perspective is limited to observations of FCC policy. In this regard, I think the FCC under the Obama administration will do more to encourage competition and innovation. For the last eight years, the FCC appeared to favor the policies of major telephone companies over smaller more innovative firms. I think this is changing, but it is still too early to be certain.

RT: What device or devices do you use, and what do you wish you used?

JD: I like to keep it simple. I use a laptop and it is all I need.

RT: I understand you are speaking during ITEXPO West, to be held Sept. 1 to 3 in Los Angeles. Describe your talk and tell us what companies or people should attend.

JD: I will be giving a tutorial on number portability and why it is important for all VoIP service providers. Telephony service providers have always relied on the Local Exchange Routing Guide for routing. VoIP service providers still use the LERG today to translate routing based on “Local Access & Transport Area” and “Operating Company Number” because the rate schedules they get from their providers are quoted in terms of LATA and OCN. However, we are now reaching a tipping point in number portability.

By some estimates, 25 percent of all numbers in the LERG have been ported to a different carrier. This means that traditional routing using the LERG without number portability correction causes up to 25 percent of all calls to be misrouted. Misrouted calls still get completed, so the end users do not realize a service issue. But the service provider gets stuck with a termination charge larger than necessary because the call was not routed to the lowest cost provider. TransNexus will be releasing a new version of its free OSPrey routing server which will include the ability to host locally, or query, the U.S. number portability database managed by NeuStar.

RT: Why should customers choose your company’s solutions? How do they justify the expense to management?

JD: We see two reasons why customers choose the TransNexus solution. First, we have been focused on developing software for VoIP routing and accounting since 1997. Few companies can match our experience and focus. TransNexus is not a start-up that will disappear when the funding runs out. We are here to stay. Also, we have a proven track record and are certified partners with leading VoIP vendors such as Acme Packet, Cisco andMetaSwitch. The second reason is price. We have always kept our expenses low so we can offer what I believe are the most competitive prices in the industry for sophisticated VoIP routing and reporting software.

Interconnect Business Models

One of the most interesting white papers I have read on the economics of network interconnect models was written by Jay M. Atkinson and Christopher C. Barnekov who were working at the FCC. The white paper has a very odd title: "A Coasian Alternative to Pigovian Regulation of Network Interconnection". The title sounds comical for non-economists like me, but if you take the time to dig into this white paper it offers an insightful understanding of interconnect costs between networks. More importantly, it illustrates why interconnect costs between two networks are not equal. When a small and large network interconnect, the larger network tends to experience a disproportionate share of the interconnect cost. This explains why network operators fear a simple bill and keep peering model with smaller networks. You can download the white paper from http://web.si.umich.edu/tprc/papers/2004/348/CoasianAlternative040901b.pdf.

If you do not have the time to read the tedious details covered in this white paper, you can download a presentation I gave at PTC'06 entitled "Interconnect Business Models". It summarizes some of the main points addressed by Atkinson and Barnekov in their white paper.

VoIP Peering Discussion at VON

I had an interesting discussion yesterday with Dave Gilbert (SimpleSignal), Dave Cullerot (Acme Packet) and Kevin Groth (XConnect) about the current state of VoIP peering and how it will evolve. VoIP peering is an old idea that is slowly catching on, but will a public VoIP peering network ever replace the Public Switched Telephone Network? There is plenty of speculation about this topic which the four of us will be discussing next Tuesday, September 22nd at the VON conference in Miami. We are participating on a panel titled"The Peering Puzzle: VoIP Interconnections and Peering in a Distributed-Network World".

One fundamental issue of contention is the definition of VoIP peering. Some folks define VoIP peering as a secure, dedicated IP connection between two VoIP carriers. This definition is how data peering is defined between to large Internet Service Providers. But other folks take a more expansive view and believe VoIP peering is a many to many, peer to peer connection among a large and open group of VoIP networks. This type of peering enables the full potential for two peers to realize all the application possibilities of peer to peer communications, such as the use of broadband codecs and video.

While most peering issues are discussed in terms of technical interoperability, I believe the most important issue is the economic model. The primary economic incentive of peering models are focused on cost avoidance for the source network. This approach in not sufficient. If you want a VoIP peering revolution, there needs to be an economic incentive for all VoIP networks to open their networks to any anonymous VoIP network. Peering models today lack a secure clearing and settlement mechanism that provides an efficient incentive for destination VoIP carriers to take traffic from an anonymous sources. When this problem is solved, a public VoIP network will replace the Public Switched Telephone Network. The white paper "Peer to Peer Settlement for VoIP Networks" provides a proposed solution.

Our panel discussion at VON is scheduled for 8:00 am next Tuesday. I hope you will join us.

Report on IT-Expo in Los Angeles

I just returned from the Internet Telephony Expo in Los Angeles where I gave a tutorial on Number Portability. Overall the conference was good. I am always interested in trade show attendance and vibrance since it is a good business indicator for our market. Overall attendance at the keynotes seemed to be up from last year and the exhibit hall had about the same number of booths. More importantly, I did not detect any gloom. The continued growth of VoIP in a recession is a good sign for rapid growth of the VoIP business when the overall market rebounds.

Interestingly, my 8:30 am tutorial on Number Portability was well attended. By most measures, the topic of Number Portability registers about zero in terms of excitement. Couple this with an early morning time and I expected just a few of folks in the room reading the paper while they drank their coffee. Instead, the tutorial was well attended and the group was engaged, asking a lot of questions throughout. One gentlemen told me that a last minute call from his CEO, who was stuck in traffic, instructed him to attend the number portability tutorial and take notes. In the past, VoIP folks dismissed number portability as insignificant. But things have changed. We have found that up to 40% of our customer's VoIP traffic is to ported telephone numbers. This means that their least cost routing, without number portability correction, is wrong for 40% of their calls. The simple implementation of routing calls based on the ported number can increase a VoIP provider's net income by 4% to 8%. This is not a revenue increase, this is cash income straight to the bottom line. One TransNexus customer tells me that our analysis is much too conservative and that the savings is significantly greater. All driven by an easy to implement database dip. Everybody loves easy money, I guess that is why an early morning tutorial on a dry topic drew such a keen crowd. You can download the presentation from www.TransNexus.com.