October 2004

The Third Age Of VoIP: Embracing Real-Time Call Control

BY Lorenzo Mejia

Since the first PC-to-PC call in 1995, VoIP has moved quickly to change the way the world communicates. In the process of establishing itself as a disruptive technology, it has given rise to different business models. Each of these business models extract different value opportunities that are inherent in VoIP and are characterized by specific technologies.

The First Age of VoIP
The first value opportunity of VoIP was transport: enormous benefits were gained by routing long-distance calls over IP rather than over TDM. Initial deployments — and some of the big names in early days of VoIP — focused on VoIP’s strengths as a transport mechanism.

Once voice is converted into packets, bandwidth that previously carried a single TDM conversation can carry several VoIP conversations. More importantly, the elimination of the need for dedicated TDM ports and interconnects reduces barriers to entry.

Aside from the Internet itself, the core technology driving the First Age of VoIP was the gateway. Anyone with one of these boxes and an IP connection could be a telco. The gateway spawned an era of competition and change never before experienced within the industry.

The disruptiveness of VoIP, however, has made business built solely on transport unsustainable. Competition (assisted by deregulation) has driven margins so thin, that pure-play transport companies fight huge odds to stay in business. Some have been acquired; many have gone bankrupt.

Opportunities for gateway manufacturers are far from over, of course. There are millions of gateways to be deployed before the world is 100-percent converted to VoIP. But the reason for these investments will stem from other advantages that VoIP provides, not transport alone. The First Age of VoIP as a business phenomenon is drawing to a close.

The Second Age of VoIP
The second value opportunity of VoIP derives from the considerable operational advantages possible when separating a call’s signaling from its payload. Pound for pound, a VoIP network is less expensive to build and maintain than a TDM network performing the same functions because splitting off the intelligence that controls a call from the network that carries the payload allows a carrier to operate much more efficiently. This is done by employing a signaling proxy, sometimes referred to as a call agent, softswitch, or session border controller.
In particular, VoIP lowers capex and opex for a number of reasons:

• VoIP permits carrier grade deployments with inexpensive, off-the-shelf servers rather than expensive proprietary hardware.
• The servers that perform the signaling can be clustered as volume grows, allowing an operator to start small and scale more or less linearly.
• Off-the-shelf servers are less expensive to maintain.
• The servers are physically smaller and require less power and cooling than TDM switches; this translates to greater flexibility in where they are located, reduced capex for physical plant, and lower outlays for utilities and colocation.
• VoIP technologies are often built on standard operating systems such as Linux, reducing the amount of training and experience required by installation and maintenance personnel.
• Separation of signaling from payload lends itself to distributed architectures and Web-controllable software, permitting changes in service to be made instantaneously from a browser and without proprietary know-how.

The last point summarizes where VoIP’s greatest operational advantage resides. Using a basic signaling proxy, a VoIP technician with modest training can configure services, create new routes, and set up accounts with changes taking place immediately. From the perspective of a service provider, compare this to when you needed a switch guy from Nortel to come in and reconfigure your DMS 250 or, from the viewpoint of an enterprise, to when you’d make an appointment with your PBX vendor three weeks in advance to install a phone for a new employee.
The core technology driving the Second Age of VoIP is the signaling proxy. This Second Age has only begun to present itself and will remain a driver of opportunity for several years.

The Third Age of VoIP
While the First and Second Ages are different in many ways, one thing they have in common is that they derive their value from cost reduction, not revenue creation. The telecom industry is so vast and was protected from competition for so long that a huge opportunity existed simply for doing things more efficiently and less expensively. The real “bang” from the VoIP revolution, however, will arise from value-added applications that offer increased revenue.

In the TDM world, applications were hard-wired to the switch, and only application developers trained by the switch manufacturer could develop solutions for the manufacturer’s switch. For example, until the relatively recent development of programmable switches, only Lucent developers could develop apps for Lucent switches and a Lucent app could never run on a non-Lucent switch. The developer community was small and the pool of applications limited. With the expense of the underlying infrastructure, the only applications that existed were ones that service providers could cost-justify over millions of end users.

With the advent of widely adopted standards such as SIP, VoIP blows application development wide open. This happens because VoIP architecture decouples the application intelligence from its underlying network elements. Because VoIP uses IP-based technologies, developing a VoIP application is not much different than developing Web applications. The developer community is huge and the underlying operating systems are inexpensive or even free. As a result, applications can be developed rapidly and inexpensively, and can be justified financially over much smaller user populations.

This opportunity driving the Third Age can be appreciated by drawing an analogy to the software revolution of the 1980s. Prior to the PC, computers were large, monolithic pieces of equipment; they were expensive, and could be afforded only by large enterprises. Applications were few and most could be economically justified only where massive numbers of transactions were involved, like insurance claim processing or payroll.

See any similarities with telecom?
With the advent of the PC and the DOS/Windows operating system, software providers had an inexpensive, accessible platform. With development easy and the operating systems affordable, there was an explosion of applications, many targeting narrow market niches. For a few hundred dollars, accountants, dentists, carpenters, landscape contractors, etc. could purchase software that only a few years before even large corporations could not have imagined owning.

The explosion in VoIP applications will be similar. The Third Age of VoIP will be defined by multiple networks, and a wealth of content and applications that reside outside the network on which they are consumed. Further, the manner in which a given application is consumed may be determined in real-time by rules established by a different application residing elsewhere in the network. Here’s an example:

You subscribe to a VoIP phone service that rings on your SIP phone connected to your cable modem. However, if you are offline (as determined by the status of your Instant Messaging client), the system automatically forwards the call to your cell phone, unless it determines that alternatively you are present in a WiFi hotspot, in which case it forwards it to your WISIP phone or wireless PDA.

(I make the assumption that service providers would bill differently for terminating to your cell phone, or would need to share revenue differently if they are terminating to a WiFi hotspot.)

In this scenario, the business intelligence driving how the call will be delivered and billed is determined in real time and comes from applications (Messenger, ICQ, etc.) that in all likelihood are NOT under the control of the service provider. Unfortunately, the core technologies of the first two ages of VoIP — gateways and signaling proxies — do not provide all that is required to unlock this value opportunity.

There will be an explosion of applications offered by VoIP software developers. To ensure that they can be brought into service, recognized on the network, and billed for accurately requires real-time intelligence and billing capabilities. The core technology enabling the Third Age of VoIP is real-time application-aware call control.

The legacy paradigm in telecommunications was that the organizations and infrastructure within a carrier that were responsible for the delivery of service had very little to do with billing. Billing was done after the fact. With the exception of prepaid, there was no need for real-time intelligence. The core technologies in the First and Second Ages have focused largely on service delivery and cost reduction and do little to address this issue.

The Third Age promises to be the most exciting and lucrative of the VoIP industry. We are at the threshold of a revolution in applications that will change the way we do business and communicate. Real-time call control platforms provide the underlying enablement that will make it a reality. IT

Lorenzo Mejia is CEO of telic.net, a provider of a managed software platform for the creation, deployment, and management of next-generation telecom services. For more information, please visit the company online at www.telic.net.

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