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Feature Article
February 2005

Federal Preemption: What Now?

BY Hunter Newby

There are many different implementations, but one thing is the same: ENUM is changing the way voice communications is managed, and in the process, is undoing the traditional telephone company business model. For those who are unaware, there are several commercial ENUM registries in the world, all currently being utilized to varying degrees. Economics and adoption rate will determine which registries succeed and which fail.

"It would make sense for the traditional local carriers to implement ENUM from a network efficiency standpoint."

So, what is ENUM? The acronym stands for Electronic NUmber Mapping and refers to a system of mapping public telephone numbers to Internet URI’s (Uniform Resource Identifiers), basically linking a number to an address. This system works well as part of a database that can store private numbers (such as those of an enterprise) and/or public numbers (such as those of a CLEC or MSO.) The purpose of the database, or registry, is to act as a central point for the call to query. The query will return a “yes” or “no,” essentially to confirm if the number being called is in the database. If it is, the call is connected or peered via either the public Internet or a private IP network. The wonderful benefit of ENUM is that it can make these identifications and subsequent connections directly between the parties and their respective networks without the need for additional networks or routing. Thus, it is very efficient and it eliminates the costs associated with legacy, out-dated systems and business models. Since this technology exists and can be implemented by almost anyone with a need, most if not all of the ENUM calling today is settlement-charge free.

So, who is using ENUM today? There have been discussions, but no conclusions as of yet, regarding two ENUM consumer classifications: carrier and user. Traditional carriers are commonly known as companies that are in the business of selling telecommunications services. They include RBOCs, I/CLECs and IXCs. Users are typically consumers of telecommunications services and fall in to another two groups: enterprises and end users, or individuals. Enterprises consist of businesses, educational and research institutions, and government entities. There are examples across the board of each of the above using ENUM whether knowingly or not, but those who have actually implemented ENUM have done so out of pure economic gain.

ENUM Economics
How does ENUM impact telecom economics? There are three basic ways to save money with ENUM:

  1. Carriers reduce inter-carrier settlement fees.
  2. Enterprises eliminate per-minute metered phone call fees intra and inter-company by building their own VoIP networks, or by buying a flat rate service.
  3. End users move from a per-minute metered service to a flat rate.

The enterprise user category is at a tremendous advantage because they have no business model to charge someone for calling them, so they have nothing to lose and a lot to gain by implementing ENUM.

It would make sense for the traditional local carriers to implement ENUM from a network efficiency standpoint, but from a revenue standpoint, many still have their reciprocal compensation or inter-carrier settlement fees to protect. Since ENUM is basically a reciprocal traffic model enabler, this does not work so well for them at the moment.

Increasingly, cable MSOs are getting into the voice business. This is due in large part to their broadband access to the home, but also due to the economics of VoIP. Since they have no legacy revenue models for per-minute metered voice, they offer their services for a flat rate to the end user. In order to raise the probability of profitability, the MSOs need to minimize their cost to terminate the calls their customers generate. ENUM plays right in to this. The MSOs don’t care about reciprocal compensation because they don’t have much of it, if any. Therefore, they are looking to establish these types of peering relationships. Their approach to buying is also changing. When negotiating with an IXC for domestic call termination, if they are presented with a rate per-minute, they counter with, “Oh, no, we don’t pay per minute. We’re going to send you X number of megabits of voice. What’s our rate per meg?”

IXCs are a bit of a different breed. Reciprocal traffic can occur between those that own or control the network access to the voice device (out-dated business models aside). IXCs are traditionally the middle piece and don’t own the access on either side. Since the cost to terminate a domestic U.S. call is so low now — well under a penny per minute — it can be considered “on-net” and no longer need be defined as long-distance. That doesn’t help the pure domestic U.S. IXC revenue model. What is still considered long-distance, or “off-net,” are international calls. VoIP has been used in the international minutes business for almost 10 years now and it originally acted as a cloaking device to bypass international settlement agreements between carriers (what was originally known as a leaky PBX, and is now known as a Grey Route) to create an arbitrage and lower costs. It was the difference between a circuit switched minute and a data packet. One was regulated, or metered per minute, the other was not. The same thing holds true today domestically, but the rate per minute to most international destinations is still too high to play the flat rate game to the end user. Those places are still “off-net” and billed per minute although many at the lower VoIP wholesale rate.

What is well worth mentioning though is that the more developed the country, the more telecom infrastructure they have. Where there is oversupply, there are low costs to terminate. In those countries, such as the UK, France, Germany, Canada, and parts of Asia, the terminating rate is so low that some voice service providers have begun offering flat rate plans that includes those destinations. If you’re an IXC on a traditional revenue model, that’s spooky. It’s like a big game of RISK; battles are fought and countries become “on-net.”

An end user flat rate model works when the cost to terminate a traditional phone call being billed per minute to the provider offering the service, i.e., an MSO, or VoBB, is so low that even if the end user makes 120 hours of calls in a month, at a rate of $0.005 per minute to terminate to the provider and a service plan rate of $35 monthly, the carrier breaks even. Do you talk on your home phone more than 120 hours per month? Probably not. It’s probably closer to a few hours a week. Starting from that point, the provider of the voice service then looks to further reduce costs by finding other networks it can directly connect and pass calls to, avoiding even having to pay the $0.005. As end users make the logical decision to move from their traditional local and long-distance providers to these new providers, keep in mind that it is the economics and not necessarily the technology that is making it happen.

As it is with anything that is new and being widely adopted simultaneously and globally, there are a few kinks to be worked out. There are some interoperability issues that need to be addressed between network operators’ signaling, but this new system makes so much sense that these challenges are being met and overcome. There are even new business models coming to life around ENUM that solely deal with resolving these issues. They are successful because there is demand and the economics make sense. When was the last time that happened in telecom?

In the next issue there will be an analysis of the currently available ENUM registry services operated by, VeriSign, and The Voice Peering Fabric ( We will identify each registry’s user groups and benefits. If you own, operate, or are aware of a commercially available ENUM registry and would like it to be reviewed, please e-mail [email protected].

Hunter Newby is chief strategy officer at telx. For more information, please visit

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