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Claiming Your Place In The World Of VoIP Peering

By Hunter Newby


Where we all are in the grand scheme of VoIP peering has much to do with where the service provider and customer are, geographically. It also has a lot to do with who the customer is. In and around the major cities where broadband access is generally highly available, VoIP services exist for both businesses and end users. Out in rural America there isnt much broadband because there isnt much of a business case to justify the build-out cost. Theyre lucky to have POTS in many of these locations and mobile signal in many parts is non-existent. There does exist a great divide in this country between the haves and the have-nots and it and will only grow wider if the RLECs dont do something about it. VoIP Peering may actually be the solution.

As important as it is to see who is deploying and using VoIP Peering it is equally important to see who is not there yet and why. Recently a special group of carriers known as the Intercarrier Compensation Forum (ICF) consisting of some of the big names like AT&T, SBC, Sprint, Global Crossing, and Level 3 and a couple of other vested interests created a document/proposal called the Intercarrier Compensation and Universal Service Reform Plan. The executive summary is a three-page document presented about a year ago and it essentially mapped out a way their way to reduce and ultimately eliminate the terminating fees they have to pay to the RLECs for calls bound for the RLEC networks. As the ICF states "Today's rules are broken beyond repair and must be replaced."

The reasons for this ICF plan include managing (removing) operating expenses and also increasing profitability, namely theirs. The profitability they are concerned with includes that of the flat rate service packages those carriers have come up with and are forced to offer under pressure from the VoBB and MSO unlimited packages that they compete with. Most of those plans are Russian Roulette if the caller has unlimited termination for a monthly fixed rate, but the provider gets billed per minute. If the caller calls a number in the RLEC network a lot the probability for profitability goes way down for the provider. The IXCs and RBOCs just dont want to pay the higher per minute rates and probably believe that since they are being marginalized so should the RLECs. In any case, whatever the motive, it is very clear that they want these rates to go to zero and thats where they are headed eventually with, or without this plan, so the RLECs need their own plan.

Its not that they dont have a plan, either. It just seems that at this point they are trying to maintain the status quo. The Rural Alliance which is a group of 200 rural LECs banded together and produced a 181-page document in response to the ICF plan to outline how it is unfair and discriminatory. You can find it on the OPASTCO site The point was clear to me at least, they have been getting these terminating rates for a long time and thats what their businesses are based and rely upon. It cant just go away on someone elses schedule as they want it. There is also the small little issue of the Universal Service Fund (USF), which is there to help out the rural networks with the high operational and maintenance costs of providing service. Those costs are certainly much higher than the metro-based networks with their large addressable markets and foreseeable returns on investment. What happens to USF once VoIP takes over and traditional phone lines get cancelled? The money flow st ops. Ouch. Now thats not something the RLEC can control, nor fight off. The fact is that POTS is going VoIP in broadband "information service" style faster than they can say rapid depreciation. So, how do they stop the bleeding?

There was one very interesting suggestion by the ICF in their plan about an edge network architecture that would justify and make possible their proposed decreases in the compensation charges. This concept is based on an idea that centralizing call hand-off points would be more efficient and could provide savings to the RLECs if implemented that would off-set the loss of the per minute compensation. In the summary of the ICF plan there was not much detail, but in the RLEC response they made it quite clear that they believed that this was not a good idea and would cost them more and be unfair.

The RLEC contention was that the edge interconnection points would be too far away for them to cost effectively reach. They also stated that ISP Peering (free traffic exchange) models which look very similar to the edge network model didnt work out and that ISPs have reverted to paying for transit. (In case the Rural Alliance hasnt noticed the London Internet Exchange, an IP Peering point, recently hit 76 Gbps a world record Basically the RLECs dont want to look at any payment method, income, or expense amount other than what they already have. They claim, and rightly so, that the law allows them what they have and that suggestions to change it should be within that law. Thats nice, but trying to keep the past alive with laws that probably need changing only prolongs the inevitable and increases the divide between the haves (those in the flat rate model service area) and the have-nots (the ones who pay per minute). Its not that either side is totally right, or wrong. A balance must be reached.

Dont forget, VoIP drives broadband deployment because the business case is there for the consumer to save on the overall combined costs. The broadband access business case at layer 2 is very different than the voice as an application business case at layers 3 and up. Clearly this is not optimal for the traditional service providers and their traditional revenue levels, but it is the reality. Once the consumer figures it out, theyll demand it, or move. A physical move is more difficult than a service provider move, but it is possible.

A perfect example of this cycle is what happened in Allegany County, Maryland. The county was losing businesses and people because of one thing lack of broadband. They were leaving the county physically. When the customers leave, so does the revenue. In this instance that would be tax revenue. Allegany County created AllCoNet and they looked at many providers and designs for a solution and finally found a phase 2 solution in Alvarion, using their pre-WiMax standard equipment. This took a rural, limited access situation and changed it in to a more urban style situation. You can see more about it at

Although this is not an RLEC and it is a municipality that has its own set of rules and regulations that are heating up the point is that they built a packet-based wide-area network and can now provide the services their customers need at affordable prices. The reality of free calls peered across private networks with direct connections is here now. Fighting it puts those that do at a disadvantage. This is not to say that the RLECs arent planning on building their own VoIP WAN, creating an ENUM directory and peering all of their calls internally and across networks, but if they are theyre not telling anyone. If they did, would they let the RBOCs send calls to them for free? I guess they would only if they could figure out how to make money from it in another way and of course if the RBOCs reciprocated.

The road to VoIP Peering has it peaks and valleys. Different operators are at different points on the road. In some places the weather is nice and in some its rough. It seems like these folks are on a long, steep hill in the rain right about now, but theyll get there just like everyone else. IT

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

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