PathFinder Business Model Flaw
“PathFinder is the GSMA’s multi-tiered, fully extensible number resolution system. It is designed to facilitate the efficient global interoperability of new and existing IP services using telephone numbers – all within a business framework consistent with operator needs. It provides a comprehensive suite of services designed to enable IP-to-IP interconnections between interconnect partners for voice, messaging, video, and other IP services.”
TransNexus is a certified PathFinder partner. The TransNexus OSPrey server can launch a ENUM query to the PathFinder service as an alternative to least cost routing. We believe the efficiencies from IP to IP routing made possible by PathFinder will generate new profits for carriers and better services for their customers.
As a PathFinder partner, I have been promoting the service to carrier customers. Some of the feedback I have received is very clear. Carriers do not like the Called Party Pays business model of PathFinder. Here is a simplified description of the PathFinder business model. Service providers provision their telephone numbers and corresponding Service Provider Number (SPN) to the PathFinder database. When a service provider originates a call they send a query with the called number to PathFinder. PathFinder returns the SPN of the service provider that serves the called number. This type of service has become critical since number porting between service providers is widespread. All of this is good. Now here is the problem – the carrier serving the called party pays PathFinder for the query. This simple flaw in the PathFinder business model is a serious obstacle to its success.
There is some sound logic to the PathFinder business model and here are some reasons why it makes sense:
- The called network may benefit from the PathFinder service because it may receive the call directly over an IP connection which could be less expensive than a TDM interconnect.
- Also a direct IP interconnection will enable end to end IP services so the called party can benefit from the advantages of VoIP such as wideband codecs and better sound quality.
- The carriers who terminate the most calls will be the biggest carriers since they serve the most telephone numbers. Therefore, the biggest carriers with the most financial resources will make the largest revenue contribution for funding PathFinder. This is an egalitarian concept that regulators would endorse.
Now here are the counter arguments:
- The called party pays model means that the terminating carrier is forced to pay an expense that it has incurred on behalf of the calling network. Everyone fears an expense liability that is out of their control.
- The called party network has no record of PathFinder dips that point to its network and no way to audit its PathFinder bill. Conversely, the Calling party network has complete control over its number of Pathfinder dips and perfect audit capability of its PathFinder expenses.
- Why should large carriers, who will be the net terminators for PathFinder queries, subsidize smaller carriers for PathFinder expenses?
And here is the Partner’s appeal:
Put logic and intellectual arguments aside when defining the PathFinder business model. Go with what works in the market. PathFinder, like so many network initiatives, has a chicken and egg problem. The idea makes total sense, but is worthless until there is a big database that offers value. Getting the world’s largest carriers to participate and provision their numbers to PathFinder is goal number one. Any other focus is folly. If the big carriers want a calling party pays business model – the argument is over. PathFinder needs to implement a calling party pays business model. TransNexus is a big supporter of the PathFinder concept and looking forward to its success.
If you think I have this wrong, please post your thoughts here. This is all about getting it right, you won’t hurt my feelings. This post is all about getting the economic incentives right so PathFinder and the promise of IP to IP communications become a reality for everyone.