Interconnections Made in Germany


Interconnections Made in Germany

By Hunter Newby, CEO  |  December 01, 2010

This article originally appeared in the December 2010 issue of INTERNET TELEPHONY.

When it comes to the interconnection between networks, and also the key people behind those networks that actually make it all happen, there is no better place to meet and connect than at ancotel (News - Alert) at Kleyer 90 and through the annual customer event – the CNX, or Carrier Networking Xchange.

Ancotel is a 10-year-old business based in Frankfurt, Germany, and it owns and operates what is essentially the main physical and virtual network layer interconnection hub between central and eastern Euorpe, CIS countries and Western Europe. There is no better place to gain direct access to the greatest number of networks and through the annual event it helps to facilitate the business relationships between customers that ultimately drives its customers’ revenue and cost reduction.

All types of networks reside within ancotel, including public and private IP, Ethernet, DWDM and voice from all over the region; therefore, it is a very good place to get great visibility in to what is actually happening in the industry from a geographic as well as a technology perspective. One constant theme from all attendees at the event was that their businesses are all growing, no matter what type of technology they use, or what market they are in. Putting aside the global economic challenges that we all face, this unified message was given in many one-on-one meetings, so it was not rehearsed, or coached.

Probably the biggest surprise in regards to a growing industry segment is that of wholesale voice. This is contrary to many reports of the general demise of the voice business, but the contrast may not actually be so great. Somewhere in between the polarities of growth and contraction is an exchange of the business from large incumbents to smaller, more nimble wholesale-only voice carriers. What is seen as growth for one is actually contraction for the other. Depending on who you are speaking with, the voice business of generating revenue and positive margin can be boom or gloom.

Within the growing side of the voice shift the margins actually look much better than they did for the same exact minute that was formerly under the incumbent telecom. This is due to the fact that it takes less people to operate and maintain voice networks today, specifically, VoIP networks. The presence and prevalence of VoIP in each and every wholesale voice carrier is an indication of the success of IP and a hint that the margins are better as the use of IP increases and the use of TDM decreases.

None of this is to say that there is not also natural voice traffic growth in and of itself, for clearly there is. Again, this is an area of growth more for the nimble and more competitively priced carriers than the slow, expensive and non-responsive large carriers. The large incumbent carriers in Europe, CEE and CIS know that they are losing market share and not getting enough of their share of the natural growth, but it does not seem to bother them much at all. They are more concerned with building the new fiber, wireless and transport infrastructure to carry the actual IP traffic. It is a fascinating shift of business models, priorities and value.

All of this activity is of course also driving the need for more IP interconnections. For this the dominant player in Frankfurt and the world is DE-CIX (News - Alert), the IP peering exchange and co-host of the CNX event. With more than 350 IP network members the company carries an incredible amount of sustained traffic, more than 800gbps. The combination of ancotel as the physical facility to house the network operator equipment and DE-CIX to facilitate the IP network peering is incredibly powerful and a huge advantage for any new carrier that wants to come in to the region. 

This type of neutral interconnection infrastructure is something that no incumbent can build, for it is totally contrary to their existence; yet it is something that they want to take advantage of outside of their home territories. Every incumbent is a competitive carrier once it is out of its own country. This psychological condition makes it somewhat difficult to work with these types of operators, and yet again another reason why neutral interconnection facilities are so critical for all networks to grow.

Overall, the conditions in the region are quite good. All indications from each network operator are that 2011 will be a year of growth for every network type. The most aggressive of all of the projections was from the wholesale voice operators, and for some that growth was projected to be in excess of 100 percent. This is due to many factors, including the ease of scalability on the VoIP platforms; lower capex requirements than physical layer investment for fiber, etc.; and the massive arbitrage opportunity, especially for fixed to mobile calls. The trick for all of them will be to keep the margins as healthy as the prospects for more business, but the way things are going here it does not seem to be an issue for anyone – anyone in the growing wholesale voice business at the CNX that is.

Hunter Newby, CEO Allied Fiber (News - Alert) writes the VoIPeering column for TMCnet To read more of Hunter's articles, please visit his columnist page.

Edited by Stefania Viscusi