Ideas for VoIP Interconnect Evolution

Like other folks involved with VoIP, we ponder how the new interconnect model for future IP services will evolve.

I think we all share the same vision - open, global, peer to peer communication between any two applications on the Internet. This is the model we experience with the World Wide Web (WWW) and it works. Any browser can have a session with any web server. The technical challenge of HTTP inter-working is easy and the interconnect model is simple.

The WWW business model is a broadcast model. The web site sponsors pay to have their content advertised on the Internet. It is a very simple economic model that benefits both the source (web browser) and destination (web site) of each session.

The interconnect challenge for Next Generation Networks (NGN) is much more complex. Like the WWW model, there are two different challenges: finding a technical and economic solution that encourages networks to interconnect.

First, the technical inter-working challenges are much more complex. For example, VoIP, with its many features and codecs is much for complex that a typical web session. But, like all technical issues, the inter-working challenges are being overcome. The more challenging problem is finding the economic model that provides an incentive for for every network to interconnect.

The economic model for interconnecting networks for VoIP and other value added IP sessions such as video, gaming, and content distribution is much less simple than the WWW model. Many folks in the industry have advocated for a &ldquoBill-and-Keep” model. In this model, the interconnecting networks bill their end user subscribers, keep all the revenue and interconnect with one another for free. There is no sharing of revenue between the networks of the calling and called parties. This simple model does have its merits, but the practical reality is that no network operators have indicated any interest in this model.

The economic model problem is simple, different applications might require more or less network infrastructure services and therefore have different costs, which may be small, but are still material for the network operators. In addition, the direction of the value exchange for session between the source and destination is unknown to the network.

In some scenarios the calling party (source) is willing to pay for the entire session, in other scenarios the called party (destination) is willing to pay for the entire session. The major challenge is to find an economic model, coupled with a technical solution, that enables the efficient exchange of economic value that tracks the value of interconnected sessions.

When this solution is found, NGN interconnection will flourish. But back to the point we ponder - how will the winning model for NGN interconnection evolve?

We see four possible paths:

1. Dominant Player Defines the Solution. In many industries a dominant player evolves that defines the industry wide standard. AT&T certainly did this for the US telephone network. But, today the telecom world is more competitive and fragmented than ever. It seems unlikely that a single company, or even a consortium of companies can dictate the industry standard.
2. Industry Cooperation. This is possible and we see these beginning of these efforts from CableLabs, GSMA, i3 Forum and others. But the process to define technical standards and standard practices is long and bureaucratic. In addition, since this is a global challenge, there will be competition between different interest groups which are huge, such as wireless versus wireline carriers, or the US versus the EU. This migration path is possible, but long.
3. Regulation Mandating. NGN interconnect standards is a scenario where regulators might add some value. But unfortunately regulators usually do not understand the issues, are overly influenced by the dominant players and lack innovation. It is doubtful that regulators will solve the problem.
4. Grass Roots. The last possible evolution path toward an NGN standard could from the users themselves. For example, this kind of solution could come from an open source project. Another scenario is that a group of small companies or new entrants to the industry develop a solution that works and grows to critical mass. One possibility for the grass roots success scenario could be the Voice Peering Fabric (VPF) run by Stealth Communications. It is private ethernet network that enables VoIP peering among networks.

The VPF is not a carrier and provides a neutral solution for network interconnection. The VPF provides an ENUM server to support the Bill and Keep economic model for interconnection. The VPF ENUM implementation has been successful, but the narrow appeal of the Bill-and-Keep model has limited its growth. We understand that the VPF will soon be providing infrastructure services that enable efficient interconnect billing settlements between peering VoIP networks.

If they get the economic model right, VoIP peering on the VPF will flourish. If this happens, could the amount of network traffic using the VPF NGN interconnect model grow to critical mass and become a de facto standard before being countered by a solution from the industry giants? We will see.

The VPF is just one example of a possible grass roots solution for NGN interconnection. I am certain there are other innovators and entrepreneurs working to solve this global problem. If you know of any, I would like to hear from you.