VoIP and Direct Access: An Update on the FCC VoIP Trial

Introduction

Since the Communications Act of 1934, only telephone carriers who had a state certification and/or an FCC license could directly access local numbers. However, these regulations have not translated into the world of IP. More IP carriers are moving into voice services, but find themselves at a competitive disadvantage because they don't have this type of licensing requirement, but need access to local numbers for their customers.

In April of 2013, this issue came before the FCC, and plans were put in place to make direct access to telephone numbers a reality for Interconnected VoIP providers. As one company put it, “The manner by which a carrier transmits communications, whether by TDM, IP or two Dixie cups and a string is irrelevant to whether a carrier should have access to number resources for the benefit of the public it serves."1

This paper gives a high level overview of these FCC proceedings, as well as an update on the progress of the project and insight into the potential ramifications.

View the Bonus "How to Get a Location Routing Number (LRN) Checklist

Open the Glossary of Telecom Terms

Direct Access

According to Kurt Rogers, Chief Legal Officer at Vonage, “Direct access to telephone numbers is the future of telecommunications.”2 But today, interconnected VoIP providers already have some access to telephone numbers. These providers generally obtain telephone numbers by purchasing wholesale services from a competitive local exchange carrier (CLEC), and then using these services to interconnect with the PSTN in order to send and receive certain types of traffic between the VoIP provider’s network and the carrier networks. What the VoIP providers are requesting from the FCC is simply the ability to leave out the middle man CLEC.

Potential Benefits of Direct Access for VoIP Providers

VoIP providers and the FCC have identified many potential benefits to allowing direct access.

1. Lower Costs

According to comments filed by SmartEdgeNet, “Because interconnected VoIP providers who do their own numbering will be identified in the Local Exchange Routing Guide (LERG) and similar industry databases, other providers will be able to determine more easily with whom they are exchanging traffic, which should lead to the development of new and more efficient traffic exchange and termination arrangements.”3

In addition, in some areas, the only services offered for access to the PSTN are prohibitively expensive Primary Rate Interface Services. Direct access would eliminate this added cost for some VoIP providers.4

2.  Efficiency

Direct access to numbers will enable interconnected VoIP providers to reduce their reliance on third-party providers, enabling new efficiencies and giving greater control over call routing. By interconnecting with the PSTN on a trunk-side basis, at a centralized switching location, the VoIP provider will be able to use its softswitch and media gateways more efficiently to overcome the availability and scalability limitations inherent in retail interconnections with the PSTN.5

3. Innovation

Direct access is the first step towards the development of a true VoIP peering system. VoIP peering enables direct network interconnection without utilizing the PSTN. Cost reduction is a key driver for VoIP peering, but equally if not more important is the ability to provide innovative advanced VOIP services and features across networks. Video features, high definition audio, and more would potentially become a reality for VoIP.

Arguments against Direct Access

CLECs have generally argued against the idea of granting direct access to VoIP providers. However, the FCC has shown that many of these arguments are baseless or easily remedied. According to comments filed by SmartEdgeNet, “Most, if not all, of the issues surrounding access to number resources by interconnected VoIP providers and the transition from a TDM environment to IP are red herrings.”6

1. Number Exhaust

Initially, there were resource allocation questions. “After all, one has to wonder about the advisability of granting number access without consideration of routing and porting capabilities, ability to track number utilization, and facilities readiness,” said analyst, Martin Vilaboy.7 Opponents to the trial express concerns over the potential impact of number exhaust within certain area codes, fearing poor management can lead to unnecessary exhaust of area codes requiring relief proceedings and development of implementation plans which are costly and can have a negative impact on both consumers and commerce. The threat of number exhaust becomes even greater when considering the expected explosion of machine to machine communications and devices with their own numbers, along with the slew of new types of providers tying voice to all sorts of applications.

Some have expressed concerns in particular that interconnected VoIP providers will request Location Routing Numbers (LRNs) in rural rate centers, which will strand many unused numbers. They explain that in order to obtain an LRN, which is required for carriers to perform several important functions including call routing, number pooling, and porting functions, service providers must become Code Holders in each Local Access and Transport Area (LATA) in which they seek to operate. This in turn requires each provider requesting an LRN to obtain 10,000 numbers in each LATA. When these providers request numbers for LRNs in rural, lightly-populated rate centers, they are assigned blocks of additional numbers that are unlikely to ever be assigned to end-users.8

To address these concerns, the FCC has proposed simply requiring interconnected VoIP providers that obtain numbers directly from the numbering administrators, and to comply with the same numbering requirements and industry guidelines as carriers. To address the concern of number exhaust in rural areas, the FCC granted state commissions the authority to limit numbers for interconnected VoIP providers to rate centers subject to number pooling.9

2. Call Routing Concerns

Others raise questions about the routing of calls by interconnected VoIP providers that use their own telephone numbers. Specifically, commenters explain that interconnected VoIP provider switches do not appear in the LERG, the database which enables carriers to send traffic to, and receive traffic from, a given telephone number. Commenters claim that, without association to a switch, carriers will not know where to route the calls, likely resulting in end user confusion and interference with emergency services and response.10

However, these arguments are also baseless. VoIP providers are already accessing numbers and the PSTN through their CLEC partners. Direct access would not result in any changes to the way calls are currently being routed.

How Direct Access Affects Call Routing

Routing Today

  1. Retail Service Provider queries Number Portability Administration Center (NPAC) database for the Location Routing Number (LRN) of called telephone number to determine Least Cost Route (LCR)
  2. Retail Service Provider Routes call to the Wholesale Carrier selected by LCR.
  3. Wholesale Carrier queries NPAC for LRN to identify the PSTN switch serving the Called Number
  4. Wholesale Carrier delivers call to the Local Exchange Carrier (LEC) providing Direct Inward Dial (DID) services for the VoIP Service Provider
  5. LEC converts call to SIP and routes call over Internet to the VoIP Service Provider

In this scenario, the calling party pays the service provider. The Retail Service Provider then pays the Wholesale Carrier, who pays a terminating access fee to the LEC. Finally, the VoIP Service Provider likely pays a per minute usage fee to the LEC for DID service.

Routing with Direct Access

In this scenario, the VoIP service provider is not purchasing DID services from the LEC. Instead, the VoIP Service Provider has purchased Point of Interconnect (POI) PSTN facilities from the LEC or Alternative Tandem Provider. These POI facilities have an LRN and Common Language Location Identifier (CLLI) code associated with the VoIP Service Provider.

  1. Retail Service Provider queries NPAC for Location Routing Number (LRN) of called telephone number to determine Least Cost Route (LCR)
  2. Service Provider Routes call to Wholesale Carrier based on LCR
  3. Wholesale Carrier queries NPAC for LRN to identify the PSTN switch serving the Called Number, which in this case, is the VoIP Service Provider who has purchased facilities from the LEC or Alternative Tandem Provider
  4. Wholesale Carrier delivers call to the PSTN Point of Interconnect facilities being used by the VoIP Service Provider
  5. The call travels over SIP trunks to the VoIP Service Provider’s network

In this scenario, the fee paid from Service Provider to Wholesale Carrier is unchanged. The Wholesale Carrier will benefit because the VoIP Service Provider cannot charge a termination fee. The VoIP Service Provider will now pay a facilities charge to the LEC which should be less than the cost of DID service. If not, then the VoIP Service provider would use DID services.

Routing with Direct Access and VoIP Peering

  1. Enterprise or Retail Service Provider queries NPAC for Location Routing Number (LRN) of called telephone number to determine Least Cost Route (LCR)
  2. The Service provider sees that the LRN belongs to a VoIP Service Provider with whom they have a VoIP Peering Agreement. The Service Provider then bypasses the PSTN entirely and sends the call to the VoIP Service Provider via IP.

This final case is the lowest cost option. The calling party pays the Service Provider. Depending on the VoIP Peering Agreement, the Service Provider may then pay something to the VoIP Service Provider. However, as the industry moves toward a Bill-and-Keep, it becomes more likely that the original service provider will simply keep the entire payment from the calling party.

FCC Grants Limited Six Month Trial for Direct Access

According to FCC Chairman, Julius Genachowski, “The record we've received to date too often has simply been filled by hypothetical concerns answered with hypothetical solutions. It's time for some data.”11

To get that data, in June 2013, the FCC ordered a limited six month trial, granting VoIP providers direct access to numbers. They wish to test whether the changes will raise issues relating to number exhaust, number porting, VoIP interconnection, or intercarrier compensation, and if so, how those issues may be efficiently addressed.

Who Is Involved?

Though the original request for direct access came from Vonage, the FCC opted to offer the opportunity to be involved in the trial to any interconnected VoIP providers who had a pending petition and met certain terms and conditions. In the Order, released on June 17, the FCC named Vonage, SmartEdgeNet, WilTel Communications, IntelePeer, and Millicorp as having met the Commission’s requirements to participate.

Each provider had to submit a detailed proposal for the trial which identified the rate centers or LATAs in which the participants wished to have numbers directly assigned and which described the phase-in process to implement the trial.

How does it work?

Each of the companies involved in the trial has issued a detailed proposal which includes a plan for exactly how the trial will work. The first phase of the trial involves setting up network and industry databases. First, some providers requested a new Operating Company Number (OCN) from the National Exchange Carrier Association (NECA). Others chose to use their current OCN for the purposes of the trial.

The next step is to apply for thousand blocks of telephone numbers from the North American Numbering Plan Association (NANPA). Once the blocks are obtained, the providers must load newly received number blocks in industry databases. This involves establishing Location Routing Numbers (LRNs) and configuring Switch Homing Arrangements in the LERG and NPAC (Number Portability Administration Center).

As Neutral Tandem explained, "competitive tandem providers currently offer services allowing voice services providers to designate competitive tandems as the homing tandems for their assigned telephone numbers in the LERG."12 This enables the routing of traffic to or from telephone numbers assigned directly to VoIP providers over the designated tandem switches through the competitive tandem provider. Such arrangements, in other words, enable VoIP providers to route traffic to and from the PSTN to their customers.

IntelePeer has also included in its proposal the idea of direct IP interconnection. IntelePeer's proposal states that the company "will establish or maintain direct connections over IP to exchange traffic with any carriers and providers interested in establishing such connections pursuant to new (or existing) commercial agreements. For any traffic not exchanged through the IP interconnection, IntelePeer intends to solicit a commercial arrangement with a national, IP-enabled, alternate tandem provider.”13

Finally, the participating VoIP carriers will provision and test numbers in each LRN to test accounts and PSTN-to-VoIP Carrier call routing. The providers all included plans to test both new and ported numbers before moving on to testing with select live accounts.

Trial Results So Far

As of the print date of this article, all the participating VoIP providers except Vonage remain in testing phases. They have acquired OCNs and 1,000 blocks of numbers and have set up their various agreements and listings in industry databases.
Vonage is farther along in the trial than any of the other participants. In its October report, Vonage provided statistics for the new numbers placed in service and porting requests.14

  • New numbers placed in service - 572
  • Total number of port-in requests - 80,786
  • Percentage of successful port-ins - 100%
  • Total number of port-out requests for directly held numbers - 11
  • Percentage of successful port-outs - 100%
  • Total number of routing failures - 0
  • Description of any billing or compensation disputes - None

Vonage Problems in Phoenix LATA

The only significant problem that any of the participating providers has reported is Vonage's dealings with the RBOC in Phoenix, CenturyLink. Vonage's arrangement to handle inbound PSTN traffic by delivering it to its CLEC is subject to the provisions of the interconnection agreements between its CLEC partner and the RBOC delivering PSTN traffic to its CLEC partner.

CenturyLink informed Vonage that it would only exchange traffic with Vonage if Vonage purchased dedicated TDM trunks in Phoenix and directly entered into a commercial agreement with CenturyLink for the exchange of TDM traffic. Because of policy concerns over creating a disincentive to the long term goal of transitioning to all-IP networks, Vonage has decided not to continue the trial in the Phoenix market. Instead, Vonage will port an additional 30,000 numbers in Atlanta and Boston.

The Future of Telecom with Direct Access

In a July 31 conference call with analysts, Vonage CFO, Dave Pearson, said the direct access trial is progressing well. "If the proposed rules are adopted, that will facilitate the shift to direct IP to IP interconnection and enable long term structural cost savings in the double digit millions of dollars in the subsequent two to three years," he said.15 But more than simple cost savings, the activities at the FCC are pointing to some major long term changes in the telecom industry.

The IP Transition

According to FCC Commissioner, Ajit Pai, “It is time for the FCC to acknowledge that the IP Transition is upon us—that old copper-based networks are fundamentally different from new IP-based networks, and that our legacy regulations slow down the transformation from old to new (not to mention investment and innovation).”16

The TDN-to-IP transition relies on the realization of a physical network that fully supports routing of VoIP traffic between all carriers and VoIP providers, unconstrained by the jurisdictional and regulatory barriers adopted over the last century for the PSTN. Though direct access for VoIP providers is just a small step towards this transition, it is an important one.

Bill and Keep

Direct access to numbers for interconnected VoIP providers will facilitate the transition to a bill-and-keep regime - a goal that the Commission has been interested in for some time - by encouraging providers to voluntarily transition more traffic to bill and keep through commercial agreements. As Vonage has explained, it intends to seek bill-and-keep arrangements, and has executed prospective bill-and-keep arrangements with carriers in advance of obtaining direct access to numbers, when it enters into direct interconnection agreements with other IP providers.17

VoIP Peering

"The one thing to understand is that the need for the CLEC that has the PSTN infrastructure doesn't go away because you can get numbers issued directly to you," says John Abraham, SVP at Shango, a wholesale communications provider. “Their physical network facilities are still going to be critical to delivering service. So the reality it the VoIP guys will still need CLECs, but they will need them a little less."18 But this may not be the case forever.

But VoIP peering allows direct IP-to-IP connections. By eliminating the need for many of the middleman functions, VoIP peering will dramatically change the role of wholesale service providers in the interconnection process, as well as the role of retail service providers for enterprises. VoIP peering provides the vehicle to expand advanced services and features beyond the service provider networks.

According to Jim Dalton, president of TransNexus, “VoIP peering is actually already here. We have customers peering within private networks already using the OSPrey routing server. Direct access will move peering out of private networks and into the public network.” The OSPrey routing server intelligently routes traffic to either the PSTN or an IP interconnect. More information on OSPrey, as well as a free evaluation version of the software is available on the TransNexus website.

1 Reply Comments of SmartEdgeNet LLC, Administration of the North American Numbering Plan, CC Dkt No. 99-200 (May 15, 2012) at 1
2 Vonage, Vonage Comments on the FCC Decision to Explore Direct Access to Phone Numbers [Press Release] (April 18, 2013)
3 Comments of SmartEdgeNet LLC, Numbering Policies for Modern Communications, WC Dkt No. 13-97 (July 19, 2013) at 5
4 FCC Notice of Proposed Rulemaking, Numbering Policies for Modern Communications, WC Dkt No. 13-97 (April 18, 2013) at II.B.2.15
5 See 4, at II.B.2.13
6 Comments of SmartEdgeNet LLC, Numbering Policies for Modern Communications, WC Dkt No. 13-97 (July 19, 2013) at ii
7 Vilaboy, Martin, Last One in... FCC Takes Steps to Open Number Pool, ChannelVision Magazine (May 2013)
8 See 4, at III.A.2.24
9 See 4, at III.A.2.25
10 See 4, at III.B.1.41
11 Statement of Chairman Julius Genachowski, Numbering Policies for Modern Communications, WC Dkt 13-97 (April 18, 2013)
12 Neutral Tandem Comments, CC Dkt No. 99-200 (January 25, 2012)
13 IntelePeer VoIP Numbering Trial Proposal
14 Letter from Britta Strandberg, Witshire & Grannis LLP, counsel to Vonage Holdings Corp., to Marlene H Dortch, Secretary, FCC, WC Dkt No. 13-97 et al. (October 24, 2013)
15 Allison, David, Vonage conducting 'direct access' trial in Atlanta, Atlanta Business Chronicle (July 31, 2013)
16 Statement of Commissioner Ajit Pai, Numbering Policies for Modern Communications, WC Dkt No. 13-97 (April 18, 2013)
17 Comments of Vonage, Numbering Policies for Modern Communications, WC Dkt No. 13-97 (July 19, 2013
18 See 7