March 2000
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IP TELEPHONY: ENABLING THE FUTURE
BY OFER GNEEZY
The Internet's real impact on global communications is its role as a
technology platform ideal for developing and deploying new services more
quickly and cost effectively.
It has become commonplace to ascribe the rapid pace of change that is
transforming business and society to the Internet. That theory certainly
holds true in global communications as the Internet is profoundly
affecting virtually every aspect of the industry, from input devices
(formerly known as telephones), to transmission and services. The Internet
is not only increasing the pace of change, it is also raising expectations
for the rapid development of new technologies and faster deregulation of
the communications marketplace. For service providers, there is a
heightened sense of urgency about keeping pace with these changes and the
resulting increase in demand with new, competitively priced services.
Ironically, the Internet, the primary cause of much of the tumult, is also
at the heart of the solution.
After several years of hard work, Internet telephony has finally hit
the big time. We're seeing explosive growth in the volume of voice and fax
traffic moving from the circuit-switched telephone networks onto the
Internet, much of it coming from "traditional" Tier One
telecommunications carriers. Already, a number of these carriers are
delivering Internet-based service to their customers undifferentiated from
their traditional network service. The achievement of quality standards
equivalent to or better than that of traditional phone networks marks a
coming of age for Internet telephony, because while large carriers are
eager to take advantage of the lower transmission costs of Internet
telephony, quality and reliability of service have always come first. In
turn, this new level of quality is driving an ever-increasing volume of
traffic onto the Internet.
The Internet's real impact on global communications, well beyond its
lower cost structure, is its role as a technology platform ideal for
developing and deploying new services more quickly and cost effectively.
Unlike traditional, circuit-switched phone service, IP telephony is based
on open, industry technology standards, facilitating rapid application
development and service deployment. This means that while basic voice and
fax service dominates current Internet telephony offerings, within only a
few years there will be a large number of value-added applications
available, including unified messaging, roaming toll-free service, and
other advanced communications solutions that we can barely conceive of
today. In other words, the Internet, which has already transformed
commerce and enterprise data applications, is about to irreversibly alter
the face of global communications. It is driving the creation of a new,
expansive, open communications industry that will be fueled by existing
carriers, ISPs, and a multitude of newly enabled market entrants from
every corner of the world.
WANTED: A NEW BUSINESS MODEL BUILT FOR GROWTH
To date, Internet telephony service providers (ITSPs) have generally
adopted one of three business models: Wholesale traffic exchange, the
clearinghouse model, or building a network from scratch.
While obvious and practical for early IP telephony market entrants,
these models limit participation in the Internet communications revolution
to players with existing networks. In order to enable Internet telephony
to achieve its full growth potential, a new, more open business model is
required. Think, for example, of the role that data network providers like
UUNET (an MCI WorldCom company) have
played in expanding the number of ISPs. By enabling ISPs to outsource
their network infrastructure, these data network providers have
effectively opened up that market to any organization that has the ability
to attract, retain, and support online customers. It is easy to see how an
outsourced or "hosted" model could be applied to Internet
telephony. If the "heavy lifting" of deploying and maintaining a
global Internet telephony network infrastructure were outsourced,
virtually any organization with the ability to attract and retain
customers could become, almost overnight, an international service
provider. For existing regional carriers, hosted Internet telephony from
an Internet telephony service provider (ITSP) provides the ability to
deliver services to destinations beyond the home territory, enabling them
to realize revenues that had previously been "out of reach." The
possibilities for IP telephony market expansion in this model are nearly
limitless. One can imagine, for example, an entrepreneur becoming an
international long-distance provider, an ISP becoming an enterprise telco,
or an e-commerce provider delivering voice-enabled solutions.
Perhaps most excitingly -- as outsourced or hosted Internet telephony
takes hold - value-added services will proliferate as new market entrants
search for new ways to compete for customers. An expanding number of
competing service providers will not only spur innovation, but can also be
expected to accelerate overall demand for communications services. Those
able to leverage Internet telephony to deliver these innovative new
services will succeed, while those carriers that hesitate or are late to
market will lose customers to swifter, more innovative rivals.
MANAGING RISK BY OUTSOURCING
Deploying new packet-switched, Internet-based services, while
significantly easier than rolling out new circuit-switched services, still
requires significant technological know-how. By partnering with an ITSP to
outsource infrastructure, service providers can avoid many of the common
technological pitfalls associated with the rollout of new services, and
more quickly and successfully expand their offerings and enter new
markets. In addition, service providers can work with ITSPs to create
customized communications that enable them to compete more aggressively,
while managing the risks inherent in new service deployments.
Providers that outsource also benefit from an ITSP's direct access to
the local PSTN in each country where there is hosted infrastructure. This
arrangement enables providers to offer international voice and fax service
at the cost of local calls. In this model, carriers also avoid the time
and hassle of conducting negotiations throughout the world for local
termination rates, since they can take advantage of the rates available to
the hosting ITSP.
Another significant advantage to the hosting model is the ability to
extend existing services by originating calls from new locations abroad.
For example, a regional carrier with no international presence could
market calling-card services to expatriate communities in countries in
which its hosting provider has local phone network access, capturing
previously untouchable revenue streams.
There are also advantages in scalability and operational flexibility
with this model that would be impossible were a carrier to undertake its
own global network build-out. For example, with hosting, a carrier needn't
be concerned about sub-optimal equipment deployment when traffic on a
given route expands or declines. Nor does a service provider have to
scramble as global communications regulations, technologies, and standards
evolve. Internet telephony hosting puts the burden of adapting to these
changes on the ITSP, enabling service providers to continue to focus on
their customers.
THE FUTURE OF INTERNET TELEPHONY
For existing carriers and new market entrants alike, the outlook is clear:
Those who are able to most quickly deliver value to the market will
succeed. The debate over the future of telephony is largely over - it will
be Internet-based. Perhaps the only questions that remain to be answered
are how long it will take to get to this new, packet-switched world, and
who will lead the way. To date, the trail toward global presence and toll
quality has been blazed by ITSPs. That hard work has produced some
remarkable results that are changing the communications industry. The next
step toward realizing that future is opening the door to the rest of the
industry, enabling new market entrants and existing carriers alike to
participate in this revolution. c
Ofer Gneezy is president and CEO of iBasis, Inc. iBasis uniquely
combines a superior technology platform, premium Internet bandwidth, and
proprietary Assured Quality Routing (AQR) software to deliver toll-quality
Internet telephony services to Tier One carriers and other international
service providers. The iBasis Network, a global, high-capacity Internet
communications network, is the world's largest international Cisco Powered
Network for Internet telephony. The company can be reached at its
worldwide headquarters in Burlington, MA at 781-505-7500 or on the
Internet at www.ibasis.net.
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Policy-Based
Management: Stoking The Red-Hot IP Services Market
BY GOUTAM SHAW
It's a fact � ITSPs eager to cash in on the lucrative business
opportunities associated with the red-hot IP services market need to build
the right network infrastructure, the right way, from day one. But
building a network infrastructure that supports the delivery of enhanced
IP services does not, of itself, guarantee success in this highly dynamic,
competitive market. Clearly, ITSPs need something more.
Mapping Subscribers And Service-Level Policies To Network-Level
Resources
In today's e-business world, customers want and expect to have a gamut of
personalized IP services and pricing options available at their
fingertips. To meet this demand and stay one step ahead of the game,
progressive ITSPs require an end-to-end policy-based services management
system. With such a system, ITSPs have the flexibility to seamlessly
integrate subscriber, service, and network-level policies across the
entire system. This in turn allows them to dynamically deliver various
levels of service quality to their customers. A policy-based services
management system enables ITSPs to utilize network resources more
efficiently by mapping subscriber and service-level policies to
network-level resources. In essence, it arms ITSPs with the cost-effective
solution they need to create subscribers and their services, or levels of
service, and deliver the services according to their customers' needs
based on the selected service level agreement (SLA).
A policy-based system offers ITSPs the capability to create the
ultimate delivery platform by building the policies that determine which
services customers have access to and when � right into the network
infrastructure. In a highly congested marketplace, such a solution offers
ITSPs a real competitive advantage - the ability to differentiate service
offerings and move up the value chain by delivering personalized,
multi-technology IP services according to customers' needs and
expectations. This powerful capability can play a significant role in
attracting and retaining more customers.
For example, a policy-based management system enables the network to
determine which type or level of service (e.g., bronze, silver, gold) the
customer gets and the ITSP then sets up the network accordingly. With a
policy-based platform, service levels are efficiently mapped into the
network level, offering the capability to deliver every type of service
and feature imaginable.
This type of platform would, for example, allow a corporate executive
to select a gold level service package for VoIP calls made to his or her
colleagues. This level of service offers premium quality voice,
characterized by high clarity and granularity, and low latency. However,
the executive may decide to choose a lower priced, bronze service for
overseas calls made to family and friends. With a policy-based management
system, the user has the flexibility to choose either or both packages,
depending on a particular set of needs at any given time. The policy-based
service management system allows the customer to select a variety of
service quality levels. These service quality levels dynamically interact
with the network elements to help implement the policies so that the
customer receives the quality desired.
The following example illustrates how a policy-based management system
assists in the execution of a VoIP call from start to finish.
- Customer places call from a regular phone or PC;
- ITSP receives signal from the network that a call is coming through;
- Policy-based system identifies the customer and determines whether
or not they subscribe to a specific plan. If they subscribe to a
prepaid package, the policy determines how much calling time remains.
This information is then communicated to the caller (e.g., through a
voice prompt);
- System authenticates the user via a PIN, password, etc.;
- System configures a media gateway with the appropriate QoS (e.g.,
bandwidth) so the user can place their call according to the QoS
stipulated in the service package;
- Call is connected;
- After the call is completed, the system tracks pertinent accounting
information and sends the information to the billing system; and
- ITSP bills for the call accordingly.
In a nutshell, an integrated, policy-based IP management system offers
ITSPs:
- The flexibility to create and deliver value-added services and
bundles of services based on customers' specific needs;
- Customer self-administration -- a feature that enables customers to
create and manage service packages to meet their needs, and pay for
these services on a per-call basis;
- A vendor-agnostic system that provides "intelligence" that
enables various network components to seamlessly communicate with one
another so that policies are enforced throughout the entire network;
- Simplification. The more complex the network and services are, the
greater the value of policy-based management. A policy-based system
facilitates the creation of complex services and simplifies
modifications and enhancements for the re-provisioning of services;
- An intelligent accounting system that captures usage and enables
ITSPs to bill for services on a per-call basis - a feature that is
crucial for subscription services; and
- More efficient use of bandwidth and a more efficient network.
Driving The Revenue Curve
Putting a policy-based system in place will position ITSPs for future
growth, giving them the framework they need to cash in on the IP services
market and deliver a wave of customized services and packages. But more
than that, they'll have a sustainable competitive advantage by being able
to offer their customers the flexibility to choose the level and quality
of service they want - when they want it. ITSPs planning to make their
mark and deliver next-generation services such as Web commerce, call
centers, and unified messaging, need to inject policy-based service
management capabilities into the equation. This will clearly put them
ahead of the pack.
Goutam Shaw is product manager for Bridgewater Systems Corporation.
Bridgewater has designed a new architecture of intelligent, carrier-scale
software that transforms the way service providers create, provision,
manage, and bill for network-wide IP services. The WideSpan solution is a
unique, scalable suite of IP service provisioning and control software
that helps Internet providers manage high-octane growth and deliver
services faster. For more information, visit the company's Web site at www.bridgewatersystems.com.
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Good-Bye To The Old
Regime
BY GREG GALITZINE
While it may be some time before the "newly-IPOed" Internet
Telephony Service Providers (ITSPs) stand side by side with the likes of
AT&T and MCI WorldCom/Sprint as far as market capitalization is
concerned, there is no denying the fact that the recent spate of public
offerings bodes well for the future of telecommunications. Embodied by
companies such as ITXC, iBasis,
Net2Phone, deltathree.com,
GRIC, and e-Net;
with their zeroplus.com service provider play), the growth that this
sector has seen in the last half of 1999 signals that the incumbent
service providers need to beware.
This crop of next-generation service providers has seen their stock
prices explode beyond even the most liberal projections of a year ago.
E-Net, the smallest of the above-mentioned companies, has seen their stock
price vault from a 52-week low of two dollars to nearly $15. And at the
other end of the spectrum, Net2Phone saw their successful IPO followed by
a stock price run all the way to nearly $93!
And, there's actually something to all of this activity. Internet
telephony, merely a buzzword and a potentially good idea a year ago, is
fast becoming a legitimate telecommunications alternative. Companies are
converging their voice and data networks, customers are signing up for the
low rates offered by these ITSPs in ever increasing numbers, these new
carriers are hauling millions upon millions of minutes of traffic, and the
future shows no signs of slowing growth. Granted, no one expects the
giants of the circuit-switched world to simply lay down and die, but even
they have been forced to embrace the future as evidenced by initiatives
like Sprint's ION, MCI's On-Net, and the like.
The future of telephony is the Internet. And Internet telephony has
changed the face of communications forever. The wealth of enhanced
services, the efficiency of running voice over packet networks, the
realization of all the potential that this industry has to offer, and the
multi-billion dollar acceptance of the next-generation service provider by
Wall Street� A new guard has arrived on the telecommunications scene.
And it's hello to the future, and goodbye to the old regime. |
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