Post on 24-May-2018
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
Next-Generation Exchange-Based IP Interconnection
by Brian Partridge | March 2011
This custom publication has been sponsored by XConnect.
I. The IP Era Requires an Evolved Interconnect Model
Network Effect: The phenomenon whereby a service becomes more valuable as more people use it, thus encouraging ever-increasing numbers of adopters.
The IP era of networks and services is advancing so fast it’s become hard to keep up with end-user demand. Network service providers, IP
product and service vendors, and enterprise IT/network managers alike are scrambling to respond to their stakeholders’ increasing demand for
ubiquitous access to rich IP services. From its VoIP, NGN and IMS beginnings to the current landscape of IP services—including fixed and mobile
high-definition (HD) voice, unified communications (UC), HD video calling, video conferencing and telepresence, collaboration, presence, IM,
rich communication suite (RCS) and RCS-e, combining the best the Web and communications services have to offer—the IP network platform
for advanced services has limitless possibilities we are just beginning to fully comprehend.
After the initial invention and establishment of the utility possible with advanced IP services, the next critical step is expanding the reach of those
services on a fully interconnected cross-network basis to maximize their overall value to their communities of interest. This is where we find
ourselves today. The power of network effects has been an underlying pillar of the telecommunications industry since its invention: The value of the
telephone network rose as more people had access to telephones and the ability to communicate over a common network—the PSTN.
Fast-forward to 2010 and it’s a bit of déjà vu. Service providers, vendors and enterprises must now make critical decisions on the most
economical choices to expand their communities of interest to match the network effect that allows us to pick up a telephone and reach
anyone, anywhere in the world. There is no PSTN equivalent for the NGN, VoIP and IMS worlds; instead, we have “islands of IP” that limit
the overall value of an IP service to the on-net community of interest. The magnitude of this challenge has attracted several ancillary service
providers to build hub-based IP peering communities to reduce the complexities associated with bridging islands of IP.
The choices made around IP interconnection architecture are critical to ensure a smooth handoff between disparate IP networks and deliver
true service mobility, regardless of user location or access method. The advantages of exchange-based interconnection based on electronic
number mapping (ENUM) directories are real and achievable today. Providers all around the world are beginning to embrace exchange-based
interconnection in order to enhance their innovative services, reduce operational expenses, increase security and distinguish their brand position.
In this whitepaper, Yankee Group reviews:
The concept of multilateral exchange-based IP interconnection models•
Current market adoption and opportunity for advanced IP services •
Critical decision-making criteria for choosing a hub-based interconnect solution provider•
The current market landscape of hub-based interconnect solutions •
An exchange-based interconnect study•
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.2
Next-Generation Exchange-Based IP Interconnection
II. IP Services Will Dominate the New Services Landscape
It is not news that circuit-switched networks designed for high-
quality voice are giving way to the next generation of networks built
on IP. Network traffic patterns will shift from predominantly TDM
to all-IP over the next several years, providing opportunities for
service providers that provide hub-based interconnect capabilities.
This is true for both the fixed and wireless access markets, where
much of today’s traffic is TDM but where mobile broadband
adoption, mobile soft switching, IMS services and over-the-top
(OTT) services are gaining momentum. It also holds true in
enterprise markets, where UC and videoconferencing vendors are
actively working with peering federation providers to bridge their
communities of users.
New IP Services Call for New Interworking Arrangements
The proliferation of broadband access networks has fueled adoption
of advanced services such as instant messaging (IM), HD voice,
social media, HD and LD video calling and conferencing, and OTT
IP communications services such as Vonage, Google Talk and Skype.
These services represent the next generation of revenue drivers
for service providers as the PSTN is retired, and fixed and mobile
broadband IP networks become ubiquitous.
These new services are all characterized by the following attributes:
Appeal: • The services are highly appealing to enterprises and
consumers based on their prolific use of IP, enabling rich real-
time voice, video and messaging capabilities and support for
mobile payments, Web 2.0 mash-up services and services that
include telecom operator APIs such as location and presence.
Limited reach:• Advanced services are limited in their ability to
drive network effects because they cannot rely on the traditional
PSTN for interconnection among service providers. Without an
interconnection among different networks, revenue and margin
opportunities will be limited to their home subscriber footprint.
Revenue potential:• These services will become an increasingly
large portion of telecom operator revenue as legacy services
such as POTS and SMS give way to services such as voice over
broadband (VoBB) and Rich Communication Suite (RCS).
Network operators that have made money selling TDM-based
voice services are at the beginning stages of a multi-year transition
to the all-IP networks of the future. As networks evolve to IP,
so do the services. These new services cannot rely on the PSTN
for interconnection, creating a strategic need for multi-layered IP
federation services.
III. Multilateral Exchange-Based Interconnect: A Technology Review
To replicate the success of TDM services in an IP world, service
providers and enterprises must consider how they will interconnect
their islands of IP through bilateral, multilateral or hub-based
interconnection arrangements. While the earliest attempts at IP
peering were focused squarely on connecting disparate islands of
VoIP, NGN and IMS the next wave of solutions must expand their
purview to include a much fuller list of short- and long-tail services.
An important difference between VoIP peering and advanced all-IP
service interconnection is that VoIP services could pass from IP to
TDM and back to IP through the use of TDM-to-IP gateways, but
for advanced services such as video calling or UC, a session must
remain on IP to maintain service continuity between different access
networks and endpoints.
We are entering a period of time in which next-generation hub-based
IP interconnection models will become a critical success factor and
TDM interconnections will become a dead end. Next-generation
hub-based IP interconnect exchanges should not be confused with
Internet peering or Internet eXchange (IX) peering points where
Internet networks are interconnected. An IP IX only provides
standard IP/Ethernet Layer 1/2/3 network layer interconnects where
IP packets are exchanged. An interconnect exchange will provide
additional services beyond the network layer, such as service-aware
protocol interworking and interoperability, ENUM registry, security,
identity and commercial/clearinghouse functions.
The terms “exchange,” “IPX,” “federation” and “hub” are
often used interchangeably to describe a hub-and-spoke-based
approach to facilitate scalable and efficient interconnection
between multiple communications entities (e.g., operators,
enterprises). This approach involves a central entity (e.g., hub,
exchange, federation provider), thereby reducing the technical
and commercial overhead and costs of multiple direct bilateral/
peering arrangements. We have predominately used the word
“exchange” in this report. The services offered by the exchange
can vary enormously, as outlined in this document.
NOTE ON TERMINOLOGY
3© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
Private IPX Domain
PathFinder
ISPFNO
MNO
ISPFNO
MNO
IM
Voice VS
MMS
Mobile SubscribersMobile Subscribers
IM
Voice VS
MMS
Local ENUM
Local ENUM
Trusted Environment
Internet
IPX2
IPX3IPX1
The benefits of IP services come with new security risks such as toll
fraud, identity theft, spam over IP telephony (SPIT) and denial-of-
service (DoS) attacks. Traditional network security measures like
firewalls and intrusion prevention systems (IPSs) mitigate some of those
risks, but they are not designed to handle complex signaling/media
sessions using protocols such as SIP. IP-to-IP interconnect requires
some interworking in cases where different SIP signaling variants or the
legacy H.323 protocol are used by IP network elements.
Soon, consumers and enterprises alike will require critical services
delivered over IP. The inevitable adoption of IP services is good for
service providers, who will reap economic value from the services’
popularity. The realities of an iterative transition of this magnitude
are complex. Hub-based IP interconnect can help reduce many of the
complexities by providing a ready-made environment to maximize
service reach and interconnection costs. By combining interoperability
services with ENUM, interconnection delivers the features, quality
and cost benefits of IP and eliminates use of the PSTN as the medium
through which calls are delivered between operators.
Service providers face a number of critical investment decisions
about how best to manage the transition to IP in order to maximize
profitability of existing services, minimize operational complexity
and open the doors to new services and business models not yet
commercialized. One of these critical decisions is choosing the
method(s) for interconnection of IP services.
A hub-based provider of ENUM registries and multi-protocol,
multi-vendor VoIP/NGN interconnection infrastructure can
enable communications service providers to join multilateral
interconnection relationships with IP service providers, either at the
regional level or around the globe.
How Multilateral Hub-Based Interconnect Works
Multilateral hub-based federations operated by neutral third parties,
infrastructure vendors or wholesale service providers enable
service providers to more intelligently route sessions in the most
cost-effective manner and increase the reach of services for their
member subscribers. Their role is to provide a central point of
interconnection among like-minded operators at the signaling layer,
media layer or both.
At the heart of today’s hub-based peering solutions are ENUM
registries, SIP signaling hubs and media layer interconnection
hubs (internetwork packet exchange, or IPX, networks) among
different service providers. For example, Exhibit 1 shows the
GSMA’s IPX Service architecture, where PathFinder is the global
carrier ENUM registry and media is connected via private IPX
networks or via the Internet.
Exhibit 1: GSMA IPX ServiceSource: Yankee Group, 2011
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.4
Next-Generation Exchange-Based IP Interconnection
To clarify, IPX is not responsible for offering end-user services; it
provides the interconnect between service providers that offer
end-user services. IPX supports various functions so a customer
of Service Provider A can set up and complete a session with a
customer of Service Provider B. IP services transported over IPX
must be standardized and documented in a service specification to
ensure interoperability.
IPX generally consist of two layers:
The transport layer• provides connectivity between two service
providers. This layer provides a guaranteed QoS bit-pipe function.
The service laye• r provides establishment of connections and
management of billing and settlements for a service.
Around these core assets, multilateral peering providers compete
based on the flexibility of their offerings, in particular as it relates to
security, settlement models, network management and reporting/
analytics. The efficient use of ENUM lies at the heart of any
multilateral peering value proposition.
ENUM History and Definitions
ENUM began when the IETF Telephone Number Mapping Working
Group set out to define a domain name system (DNS)-like
architecture and protocol for mapping a traditional E.164 telephone
number to an IP address via Uniform Resource Identifier (URI). This
process of association between telephone number and IP address
is very similar to the way in which URL addresses are resolved to
IP addresses through DNS infrastructure supplied via the Internet.
While this appears to be a rather straightforward proposition, the
term ENUM often leads to confusion, given all the different types
of ENUM in the marketplace and how they relate to intra-carrier
peering architectures (see Exhibit 2).
Proponents of ENUM have espoused the benefits of operational
cost savings and service quality made possible by avoiding traditional
PSTN routing infrastructure (i.e., SS7) to complete VoIP calls
destined for a non-local VoIP endpoint. For some, this has been
a benefit in search of a problem to address, as the islands of VoIP
have been small enough that the percentage of originating VoIP calls
that are actually destined for an IP endpoint are sufficiently small—
estimates range from 15 percent to less than 5 percent of overall call
volume, depending on the operator. From a wholesale interconnect
perspective, though, the benefits gained from direct or hub-based IP
interconnect (e.g., cost, quality) are applicable for voice even if the
endpoint is not IP, provided the interconnect is IP-enabled.
Despite some clear advantages, some operators have deemed the
existing SS7 routing infrastructure “good enough” and find the
cost of TDM routing dips insufficiently prohibitive to motivate a
move to a new model. However, this is not a static situation, as
user demand and competition will force the hand of operators
who have yet to commit to a hub-based peering approach. As the
islands of IP grow and the number of endpoints that can consume
IP services grows exponentially, several Tier 1 operators have
publicly committed to a complete decommission of their PSTN
infrastructure during the next several years. Furthermore, there is
decreasing support for existing TDM gateway equipment as these
products transition to end-of-life status.
Exhibit 2: ENUM DefinitionsSource: Yankee Group, 2011
The original version of ENUM as a global, public directory, with subscriber opt-in capabilities and delegation and the country-code level in the e164.arpa domain. This is also referred to as User ENUM.
A carrier may use ENUM within its own networks, in the same way DNS is used internally to networks.
Groups of carriers or communications service providers agree to share subscriber information via ENUM in private peering relationships. This is the preferred ENUM model, as carriers themselves control subscriber information, not the individuals. Carrier ENUM is also referred to as Infrastructure ENUM and is being adopted today to support VoIP peering.
Public ENUM
Private ENUM
Carrier ENUM
5© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
Multilateral Peering Federation Benefits
Multilateral IP peering federations offer a number of potential
benefits to their members, including:
Reduction of operational costs• by enabling the most direct
routing possible, avoiding unnecessary costs from transit
carriers and hops.
Increased quality of voice calls and features• through
minimizing all unnecessary transcoding and unnecessary hops
from transit carriers.
Full end-to-end cross-network interconnect• for new IP
multimedia services (e.g., HD voice, video, RCS).
Flexible commercial models• , including traditional bilateral
settlement, cascade payment and hubbing, and the new multilateral
and settlement-free (also known as “bill and keep”) models.
Creation, management and negotiation of •
interconnection agreements, ranging from very simple to
extremely complex, among multiple operators.
Why Hub-Based Interconnect?
Yankee Group forecasts and survey data provide evidence of the
growth potential for IP services. For example, consider the most
mature IP service, VoIP. An excellent microcosm of this trend is
the rise of cable operators in the U.S. as providers of competitive
voice services. Yankee Group forecasts U.S. multi-service
operators (MSOs) will capture more than 30 million subscribers
by 2014. In total, Yankee Group expects nearly 48 million VoIP
subscribers in the U.S. by 2014, accounting for 27 percent of all
telephone lines (see Exhibit 3). This is hardly a U.S. phenomenon:
Yankee Group forecasts that VoIP will represent 17 percent of all
fixed telephone lines in use globally in 2014.
Hub-based interconnect can provide advantages for other fast-
growing services, including enterprise IP services such as UC and
videoconferencing, as well as OTT IP services, and it can have an
impact on local number portability.
Exhibit 3: US VoIP PenetrationSource: Yankee Group, 2011
24,497
29,804
35,118
39,946
44,220
47,934
14%
17%
20%
23%
25%
27%
0%
5%
10%
15%
20%
25%
30%
2009 2010 2011 2012 2013 2014
0
10,000
20,000
30,000
40,000
50,000
60,000
Total U.S. VoIP Lines Percentage of U.S. Lines That Are VoIP
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.6
Next-Generation Exchange-Based IP Interconnection
Enterprise Services: UC and Video Services
UC converges all forms of audio, video, Web, desktop and mobile
communications on an IP network, resulting in the breaking down
of all distance, time and media barriers. UC enables people to
communicate with each other anywhere, any time, over any device.
Its promise is compelling in terms of productivity enhancements;
however, the challenge in the UC market to date has been
inefficient architectures that tend to follow traditional vertical silos
or inefficient use of IP connectivity, which limits network effects.
Similarly, enterprise-class videoconferencing solutions from
vendors such as Polycom and Cisco are also gaining interest
as improved quality, lower costs and the economic benefits of
reduced travel resonate in a down economy—but they also require
a new architecture to ensure the greatest possible network effects.
Hub-based interconnect can provide part of the answer to the UC
and videoconferencing challenges by allowing interworking among
different vendor implementations and underlying networks.
Results from Yankee Group’s Anywhere Enterprise: 2010 US
Unified Communications (UC) FastView Survey show both
the maturity of and opportunity for adoption of various UC
components (see Exhibit 4). These results point to greater
adoption of advanced UC services planned over the next 24 months,
including video and mobile VoIP, both of which benefit from hub-
based interconnection.
Consumer Services: Video Calling
The recent industry buzz around video calling has been focused on
the front-facing cameras and corresponding peer-to-peer (P2P) video
services now available on iconic smartphone devices such as Apple’s
iPhone 4. While these devices capture our imagination and certainly
raise the visibility of video calling, their success is confined to the semi-
closed Apple environment, and they cannot benefit from the network
effects possible in a truly open network with any-to-any connectivity.
Today, nearly every PC, laptop or mobile device either has or will
have native video capabilities. The combination of faster networks,
more capable devices and improved UIs have come together to
make video calling viable after years of failure. OTT video service
providers such as Skype and Tango are now reaching a new
generation of users who embrace the video calling experience.
Consumers are drawn to video calling based on a desire to travel
less in an effort to be more productive and save the environment,
enhance the value of their P2P communications by adding another
visual dimension and, perhaps most importantly, have fun with it.
Exhibit 4: UC Components Deployed, Piloted or PlannedSource: Yankee Group’s Anywhere Enterprise: 2010 US Unif ied Communications (UC) FastView Survey, December 2010
33%
40%
42%
46%
48%
50%
56%
58%
59%
59%
59%
69%
74%
74%
23%
25%
19%
22%
19%
28%
22%
21%
20%
17%
21%
19%
13%
13%
23%
18%
21%
18%
21%
13%
15%
12%
15%
18%
12%
8%
12%
7%
0% 20% 40% 60% 80% 100%
Speech recognition apps
Telepresence
Soft phones
VoIP apps on IP phone
Location-based services
Telecommuter solutions
Mobile phone integration
Desktop applications
In-house audio conferencing
Unified messaging
Desktop video conferencing
Web conferencing
Room-based video conferencing
Corporate IM
Already deployed
Pilot-testing
Plan to deploy in next 24 months
Which of the following UC components have you deployed or do you plan to deploy?
n=443
7© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
The key challenge to mass adoption of video calling is the lack
of interoperability between different vendor or service provider
implementations of the service. Telepresence and videoconferencing
service providers such as Cisco, BT and AT&T have launched
“video exchanges” to overcome these obstacles. Video exchanges
are physical places where users on one enterprise and/or carrier
telepresence and videoconferencing network service can connect
securely and reliably with users on one or more other telepresence
and videoconferencing networks. However, this interworking is
limited to the telepresence environment and specific systems, and it
requires a physical network connection to the exchange.
Hub-based interconnect can provide the policy/routing support and
signaling/media interworking between individual video calling service
providers or video exchanges to overcome the remaining technical
obstacles standing in the way of any-to-any video calling.
OTT IP Services
According to its latest financial results, Skype has rocketed past
550 million users and nearly U.S.$200 million in annual revenue
(see Exhibit 5). Skype is rapidly becoming a popular mobile service
due to the combination of smartphones and strategic alliances
with traditional service providers such as Verizon Wireless and 3
U.K. The increasing popularity of services that ride over the top of
service provider networks has created a disintermediation effect
that separates network owner from application value creation.
To recapture some of the lost value, service providers have the
opportunity to either work with or peer with Skype to offer on-net
completions among communities of subscribers, a situation that
benefits both user communities.
Hub-based interconnect affords the opportunity for OTT service
providers to peer with one another or with network-based providers
of IP services. By increasing the network effects of their services, they
are able to increase their perceived value, resulting in faster growth
for both OTT and traditional network service providers.
Importance of Local Number Portability Regulation on IP Peering
The regulatory trend requiring service providers to allow customers
to keep their phone numbers if they change service providers offers
an additional incentive to adopt a hub-based peering solution. The
European Union already mandated local number portability (LNP);
many countries including the U.S., Canada, France, India, Mexico,
Australia and Korea have already implemented LNP; and countries
such as Nigeria, Russia, Peru and Qatar are presently evaluating
timelines for adoption. Taiwan, Saudi Arabia and Japan launched
LNP requirements in 2006; India introduced LNP by the end of
2010. Brazil, Singapore and Mexico all adopted LNP in 2008. With
the global move toward LNP comes the requirement for a global
registry for number resolution. Global ENUM registries run by hub-
based interconnection providers help solve this issue.
Bilateral Direct IP Peering Is Applicable, but Not Scalable
Bilateral IP service peering follows a model similar to a standard
PSTN interconnection, where service providers create a separate
technical and commercial relationship with every other provider
to which they peer. Bilateral peering works well in the PSTN—an
environment with established and stable technical standards, a
limited number of participants and simple rules for call routing. By
contrast, the emerging IP services environment is less suited to
bilateral peering due to the continuing evolution of standards and
services (see Exhibit 6 on the next page).
Exhibit 5: Skype Users Top 500 Million Source: Yankee Group, 2011
Skype Users by Year (in Millions)
171276
405521 560
-
100
200
300
400
500
600
2006 2007 2008 2009 2010
0
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.8
Next-Generation Exchange-Based IP Interconnection
Without a central call-routing registry, bilateral peering requires a
daily exchange of data between each pair of peered carriers so that
each can maintain its own routing registry information. This process
also introduces security and trust concerns, which limits scalability.
Bilateral peering is viable for a number of significant direct peering
relationships, but it will not facilitate more universal interconnection
between the many hundreds (and soon to be thousands) of
IP-enabled service providers globally.
IV. What to Look for in a Hub-Based Interconnection Partner
When choosing an IP interconnection partner or multiple partners,
it helps to understand your overall goals from a service and
operations perspective and then match them to your partners’
capabilities. Yankee Group identifies six key service criteria and one
optional area that IP service providers should bear in mind as they
evaluate their multilateral peering options. These are:
ENUM registry services•
Peering policy management•
Signaling interoperability•
New services: Multimedia IP•
Security and identity•
Reporting and settlement•
Media management (optional)•
ENUM Registry Services
At the heart of any peering proposition lies the ENUM directory.
The key criteria involve its overall size, inter-connectedness to
other ENUM registry services, flexibility in terms of privacy and
data-sharing policy, and speed with which ENUM infrastructure is
able to respond to ENUM queries.
Questions to ask:
What is your total number of ENUM entries?•
Do you maintain a global or a regional directory?•
How many other ENUM registries do you peer with?•
What is your current charging model for directory dips?•
What is your approach to addressing potential privacy concerns •
among peered operators?
Exhibit 6: Multilateral Exchange Provides Flexibility Required for IP Services Source: Yankee Group, 2011
Bilateral Interconnection Multilateral (Federation)Interconnection
SP (Service Provider)
Federation/Interconnection Provider
9© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
Peering Policy Management
A multilateral federation should provide the ability for member
service providers to decide how extensively they peer within the
federation. Ideally, all members would peer without discrimination;
however, the reality is that members need to be in control of
that decision (for instance, in the case of peering with a regional
competitor). Ideally a peering solution can include support for unique
peering arrangements between different providers, based on criteria
such as geography and service type, or, for smaller federations, based
on similar communities of interest (e.g., all cable operators).
Questions to ask:
What is your mechanism to control peering policy?•
How much control do I have regarding access to my data?•
What is the service-level agreement (SLA) related to peering policy?•
Signaling Interoperability
Every successful IP session requires interoperability among signaling
protocols between service providers to initiate service sessions
with feature transparency. Protocols in use within the industry
include SIP, SIP-I, BICC, H.323 and, for new providers, Extensible
Messaging and Presence Protocol (XMPP). Also, because providers
use different software platforms to implement their service,
there are significant variations even within a given protocol that
require intermediation to ensure interoperability. Hub-based
interconnection service providers should handle the translation and
normalization of signaling among member service providers.
Questions to ask:
To what extent can you guarantee interoperability among •
different SIP protocol variants?
What is your full range of multi-protocol support?•
What processes do you have to ensure that vendor-specific •
protocol implementations have support?
How long will you support a given protocol?•
New Services: Multimedia IP
The complexity of supporting end-to-end video introduces
significantly more protocol interworking (including multi-protocol,
H.264, H.263, SIP, H.323, ISDN, Cisco Telepresence Interoperability
Protocol and XMPP) and normalizing media issues, such as
transcoding, codec management, bandwidth issues, frame size,
refresh rates, etc.
For services like presence, both SIMPLE (a SIP derivative) and XMPP
are often used. Even for HD voice, transcoding between different
HD codecs, as well as G711.1, G.722, G722.2 (Adaptive Multi-
Rate Wideband (AMR-WB)) and SILK, etc., all require increased
functionality and services to enable a call/session to flow end to end.
Questions to ask:
To what extent are you able to guarantee interoperability among •
different video protocols, including proprietary?
Which codecs are supported?•
How long will you support a given protocol or codec?•
Security and Identity
Any multilateral interconnection federation under consideration
must be able to make its members feel every step is taken to ensure
their security concerns are addressed at the infrastructure and
service levels. For example, a VoIP caller must be fully identified
and authenticated to ensure caller ID is correct, anonymous calling
is handled correctly and VoIP threats such as SPIT and caller ID
spoofing are minimized.
To prevent SPIT, the interconnection provider must analyze calling
behavior and proactively identify suspicious calling patterns, which
include sequential dialing of numbers, numerous calls of similar duration
and call patterns that do not reflect normal consumer behavior.
Based on these attributes, a SPIT call can be identified and blocked or
diverted to a “junk” voice mail box in a similar manner as junk e-mails.
Questions to ask:
What steps have you taken to ensure that a member identity •
is protected?
What is your security architecture?•
How do you identify and mitigate SPIT?•
How do you identify and mitigate caller ID spoofing and voice-•
based Vishing attacks?
What is the process for maintaining the latest information •
related to signaling attack signatures?
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.10
Next-Generation Exchange-Based IP Interconnection
Reporting and Settlement
The opportunity to eliminate PSTN’s per-minute charges raises
the question of what settlement arrangement should take its place.
Generally, there are five settlement models in use today:
Bilateral settlement:• Termination charges are agreed to
bilaterally among service providers for either transport- or
service-layer interconnection.
Hub-based cascade (and clearinghouse) payment:•
Termination charges are cascaded among service providers for
transport- or service-layer interconnection.
Hubbing: • The hub charges for services as a contracting party,
with no transparency.
Bill and keep settlement:• Reciprocal call termination charges
are zero. That is, each network agrees to terminate calls from
the other network at no charge.
Multilateral:• This model enables, across some of the different
options above, a more scalable, reduced management cost
implementation for contracts and commercials for multiple
interconnections.
While many service providers with balanced traffic will enter
settlement-free (bill and keep) arrangements, situations exist in
which both traditional and non-traditional settlement arrangements
will be necessary. These broader settlement models are especially
relevant to a new wave of IP service providers that can benefit
from a wider range of settlement options based on their specific
commercial goals and interconnection relationships. For example,
cable companies (MSOs), Web 2.0 service providers and enterprise
UC solution providers may choose to employ one or more
commercial models depending on their peering policy.
An interconnection exchange provider should gather metrics to
support per-call and per-minute settlement for voice, video, IM and
other content and offer a flexible approach to settlement. Reporting
capabilities should map well to the internal key performance
indicators (KPIs) established by the member service provider.
Questions to ask:
How is monthly reporting handled? What data are you collecting?•
How do you support complex settlement challenges?•
What reporting tools do you make available to member •
service providers?
How do you charge for settlement and reporting services?•
Media Management (Optional)
An interconnection service need not be tightly coupled with
media management, and indeed many providers prefer that an
interconnection service not interfere with media when it can be
avoided. However, for a variety of technical reasons relating to
security, QoS management, private/public IP or interoperability,
it will sometimes be necessary for an interconnection provider to
handle the media.
Where the interconnection provider does handle media, it is
important to discern whether it is for commercial reasons (its billing
model may be based on capacity or ports consumed and therefore
relate to call volumes) or for technical reasons, done only when
required to facilitate the interconnection service. As video and high-
bandwidth codecs are adopted more widely by VoIP consumers,
service providers may prefer an interconnection provider that only
handles the media when absolutely necessary.
Questions to ask:
In what instances will you handle the management of Real-Time •
Transport Protocol (RTP)?
What media protocols and codecs can you support?•
How do you charge for media management services?•
11© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
V. IP Interconnection Exchange Landscape Overview
One measure of the value placed on hub-based IP interconnection
services is evident in the diversity of the competitive landscape.
Counting Tier 1 network operators, specialists and vendors, the
market landscape for hub-based IP interconnection services has
spurred continued investment. Solutions span regional, global, signaling-
layer or media-layer connections, or all of the above. Today, this
landscape includes signaling and settlement interconnection-focused
service providers such as BT, Tata, BICS, GSMA IPX operators,
Neutral Tandem, Syniverse and Arbinet. Service providers in this
category build their value proposition based on their ability to provide
a range of interconnection and settlement services, their geographic
focus and footprint, and commercial terms. ENUM registry operators
such as Neustar, Telcordia and TNS and equipment vendors such as
Nominum and NetNumber differentiate on their ability to provide
advanced features around their ENUM registries. Several providers
such as XConnect provide a combination of services including ENUM
registry, multimedia IP interconnection hub and value-added services.
Supplier Spotlight: XConnect
XConnect is a neutral managed service provider offering
federation-based carrier ENUM registry and next-generation
multimedia interconnection and peering services. XConnect builds
its value proposition based on its ability to reduce the costs of
interconnection and termination, enhance service quality and
support rich multimedia IP communications on a cross-network
basis. XConnect operates one of the largest worldwide ENUM-
based IP interconnection federations, called the Global Alliance, and
the world’s first national VoIP/NGN interconnection federations in
the Netherlands, South Korea and South Africa.
As the XConnect ENUM registry grows quarter by quarter,
participating service providers can complete an increasing
percentage of outbound off-network calls as sessions to other
members of their federations, with the remainder routed to mobile
and fixed-line networks. XConnect IP Federation Architecture is
represented in Exhibit 7.
Exhibit 7: XConnect Federation-Based Interconnection Exchange ArchitectureSource: Yankee Group and XConnect, 2011
Master Registry
Provisioning Manager
Replication Server
External Sources
Web Server
Hosted Directory
Server
Master Directory
Server
Policy and Security Server
Session Border
Element
Session Control Element
Session Border
Element
Session Media
Element
Reporting Server
Rating Server
Quality Control Server
Local Routing Engine
Session Border
Element
Session Media
Element
Web Browser
(Reporting)
Web Browser
(Provisioning)
Session Border
Element
Session Media
Element
ENUM Directory Management Subsystem
Media Management Subsystem
Call Data Management Subsystem
Service Provider
Service Provider
Session Management Subsystem
Call Flow
Media Flow
API
Provisioning
Replication/Data Push
Number Query
API
Number Query
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.12
Next-Generation Exchange-Based IP Interconnection
The XConnect service provides the benefits associated with
managed services. Service providers do not deploy any new
equipment; they only pay for the services they actually use.
Headquartered in London with offices and points of presence in
the U.S., Europe and Asia, XConnect provides services to over 100
communications service providers in more than 20 countries.
A useful exercise is to contrast XConnect hub-based interconnection
services with an interconnection offering from a company like
Sprint. Sprint offers an interconnection solution called the Partner
Interexchange Network (PIN), which also aims to bring together
VoIP networks but is only focused on the exchange of voice services
and does not include ENUM directory services. Exhibit 8 provides a
comprehensive market overview comparing different operators and
vendors of ENUM directory services, interconnection hub services
and additional value-added interconnection services.
Exhibit 8: Hub-Based IP Interconnection LandscapeSource: Yankee Group, 2011
VI. Hub-Based Interconnect Case Study: Telio
Company Overview and Positioning
Telio is a European provider of access-independent communications
services. The Telio Group is headquartered in Oslo, Norway, and has
operations in Norway, Denmark, the Netherlands and Switzerland.
Telio is one of the largest providers of broadband communications
services in Norway, measured in traffic. Founded in 2003, it was the first
company to offer VoIP in Norway when it launched the service in 2004.
Telio’s value proposition is to provide a continuously improving
end-user experience by offering innovative and user-friendly
telecommunications services based on flat-fee pricing. A
combination of Telio offerings can replace traditional fixed
telephone services by using the Telio VoIP solution over a fixed or
mobile broadband connection.
XConnect O Global 4 4 4 4 4 4 4 4 4 4
Telcordia O Global 4 4 0 0 0 0 0 0 0 0
Syniverse O Global 4 6 6 6 0 0 0 0 0 0
Neustar O Global 4 4 0 0 0 4 0 0 0 0
IntelePeer O US 4 0 0 4 6 0 6 0 0 6
Arbinet O EU/US/HK 4 4 4 4 0 0 6 4 4 0
TNS O Global 4 4 0 6 0 0 6 0 0 0
BT - IP Exchange O UK 4 0 0 4 6 0 0 6 4 0
Neutral Tandem O US 0 0 0 4 0 0 6 0 4 0
Sprint - PIN O US 4 0 0 4 0 0 0 0 4 0
NetNumber V/O Global 4 4 4 0 0 4 0 0 0 0
(O)p
erat
or/(
V)e
ndor
Mar
kets
Reg
istr
y
ENU
M R
egis
try
Serv
ices
Inte
r-R
egis
try
Inte
rope
rabi
lity
Voi
ce In
terc
onne
ction
Mul
tim
edia
IP
(HD
, vid
eo, e
tc.)
GSM
A P
athF
inde
r-Co
mpl
iant
Flex
ible
Sett
lem
ent a
nd
Fina
ncia
l Cle
arin
g Se
rvic
es
Priv
ate
Exch
ange
/IPX
Ori
gina
tion
and
Te
rmin
ation
Ser
vice
s
Ente
rpri
se F
eder
ation
s
ENUM DIRECTORY SERVICES INTERCONNECTION HUB
ADDED SERVICES
Competitor Analysis/Market Overview
13© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
March 2011
Telio’s mission is to be a major force in defining and providing fixed,
video and mobile Internet communications to the consumer and
small businesses.
Business Challenge
The business challenges that drove Telio to consider a hub-based
IP interconnect involved operational cost control, management
efficiency and differentiated service strategy. As it does in several
countries, IP-to-IP communications in Norway falls outside the
regulatory framework covering traditional telecommunications
services (e-com services).
The dependency on incumbent operators for regulated interconnect
can be a major challenge in maintaining service profits for VoIP
operators. Managing the costs associated with both national and
international interconnect required a solution that was both cost-
effective and flexible enough to remove the administrative burden of
maintaining several bilateral peering arrangements.
On the service side, Telio required a solution that allowed for the
cost-effective delivery of innovative IP services, such as HD voice
calling, presence and video services, as well as pure IP delivery
among the greatest amount of networks and subscribers.
Solution
To meets its business challenges, Telio decided to initially outsource
IP interconnect to XConnect in a pay-as-you-grow model, thereby
reducing the dependency for interconnections based on more
capital-intensive TDM/IP gateway models of the past.
The hub-based interconnect service allowed Telio to interconnect
once and gain access to many networks it wouldn’t have been
able to access using the bilateral peering models of the past. The
cost and complexity to re-create that reach through a bilateral
model would be onerous at setup and beyond, on both a technical
level (ENUM registry, interworking, security) and a commercial/
contractual level.
As XConnect developed its hub-based federation model, it aligned
with Telio’s views on how the telecom world should evolve while
offering a distinct cost savings due to its multilateral basis. In
particular, Telio takes advantage of the following XConnect hub-
based interconnection services:
National peering for domestic interconnect•
International peering via the XConnect Global Alliance•
Settlement-free peering via the Free Alliance•
High-definition voice interconnection via the HD Alliance•
The original interconnect between Telio and XConnect was
completed in 2007 and went live approximately 20 days from the
start of interoperability testing. Telio recently expanded its scope
with XConnect to include its European subsidiaries, which took
about 10 days to add.
Why XConnect?
Ultimately, XConnect was chosen due to the diverse range of
federation options it could provide to Telio to reduce costs
and increase service reach, quality and profitability. A major
consideration was the fact that XConnect had multiple, live
operating federation services in commercial use and allowed for
both national and international peering in a neutral manner. Telio
gives XConnect high marks for its overall scalability, since it offers
the ability to easily peer with new service providers as they join.
Technically, support for advanced interworking across multiple
protocols (SIP, H.323 and XMPP) allowed for the greatest possible
service reach and security features to protect Telio’s assets
within the federated environment. Additional consideration was
given based on the level of peering control and policy XConnect
could provide; Telio could choose a high degree of interconnect
configurability and control. Telio also gave consideration to
business model flexibility, which removed many shortcomings of the
traditional interconnection model.
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.14
Next-Generation Exchange-Based IP Interconnection
Benefits
Telio experienced the following benefits through its partnership
with XConnect:
Reduced opex and capex due to a single connection to the •
interconnection hub
Increased ARPU and APPU through longer calls, lower customer •
management cost, better customer experience, and faster and
better bundling of services at higher fees
Reduced churn through more compelling and sticky customer •
experience and faster and better bundling of services, both
within and outside of Telio’s network
Availability of accurate call routing and addressing information •
through a global ENUM registry
Assurance that calls are routed as IP all the way between •
networks to preserve call quality and exploit the revenue
potential of new multimedia services
Easier creation and management of multiple interconnect •
agreements, which involve complex work items such as
interoperability testing, peering policy management and policy
enforcement; XConnect’s interconnection hub allows Telio to
interconnect with more than 150 services providers using just
one agreement
Negotiation of commercial agreements and settlement rates •
between interconnected networks
Ensured network security across multiple interconnection partners •
Access to additional federated communities of interest such as •
members of GSMA’s PathFinder service, other IPXs or other
federated UC communities
Future Plans
In the future, Telio expects XConnect to remain a vital part of
its operations—in particular, in support of new services-based
federations in RCS, IM, video, presence and mobile VoIP. Telio
expects its partnership with XConnect guarantees that future
deployments and services will work seamlessly, and it anticipates
that XConnect will be a key partner in the delivery of video
services. Video interconnection is a new service segment with
many more variables attached to it (handsets, screens, codecs),
and that will demand a comprehensive review of the traditional
interconnection model. Solutions in this area are still matriculating
and represent an opportunity for both Telio and XConnect.
VII. Conclusions
The rich nature of IP services has caused an explosion of market
demand. Traditional network service providers, Internet-based
service providers and enterprise vendors alike are carefully
evaluating strategies to aggressively compete for new customers
and defend against subscriber churn. Against the backdrop of
the current economic environment, service provider investment
will either save costs or increase revenue. Multilateral hub-based
peering/interconnect for IP services provides an opportunity to
accomplish both.
Choosing a multilateral interconnection partner is becoming a
strategic imperative for service providers that wish to increase
the network effects of their IP services while controlling costs. It
is important to understand the differences among interconnection
service providers regarding ENUM registries, peering connections
and their services in support of peering policy, security and
management. Arming oneself with the right set of questions will
lead to a successful choice.
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Brian Partridge, Vice PresidentBrian Partridge is vice president of Yankee Group’s Anywhere Network research group with expertise in carrier network infrastructure and service delivery solutions. He focuses on the challenges that network operators face as multimedia services migrate to packet-based networks. Specifically, he examines market drivers, vendor/operator strategies and new business models driving investment in next-generation service delivery architectures, including NGN, IMS and SDP.
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