Will VoIP clearinghouses give providers much-needed support?
By John L. Guerra
Reprinted from Billing World — November, 2004.
Because VoIP providers can’t operate in a vacuum, they are starting to look for business and technical support from someone who knows the ins and outs of a non-traditional voice network.
With so many traditional carriers, as well as cable providers and ISPs, trying to gain a foothold in VoIP, it’s only natural that a relatively new provider-which some refer to as the VoIP clearinghouse-should emerge to provide some guidance.
However, not everyone agrees on what exactly constitutes a VoIP clearinghouse. Companies that offer such services as managing VoIP traffic, performing network monitoring and managing QoS issues can be considered clearinghouses.
At the same time, large VoIP carriers that manage hundreds of interconnection agreements around the world offer clearinghouse services to smaller and less-experienced carriers that want a single point of contact for their interconnection agreements and that want help with capturing and billing for VoIP traffic and managing quality of service.
Who is on your network?
Packetized voice traffic can be a real mystery for TDM carriers that aren’t paying attention to their networks. Problems such as malfunctioning softswitches and multiple signaling formats make it difficult to determine who to bill for using your network, because neither the calling number identification nor carrier identification data is there.
Jay Thomas, vice president of product marketing for Narus, says a lot of TDM carriers often don’t even realize that they’re being cheated out of potential revenue from VoIP traffic. VoIP carriers often convert their packetized voice to the TDM standard and run it across their networks. When that traffic hits the next VoIP gateway, it’s converted back to packets and terminated without the TDM carriers knowing it.
“We’re finding many of the IP carriers are just learning that they have VoIP traffic on their networks,” he says. “Now they’re asking themselves, ‘What am I going to do about it?’ They have a choice. They can find a way to make money off it by having IP carriers sign SLAs, they can prevent it from getting on their networks, or they can ignore it. But if there’s money to be made, they should go out and make it.”
Carriers are losing millions of dollars in revenue each month from illegal and non-sanctioned international VoIP traffic, and carrier settlement negotiations often ignore such calls altogether because neither side can determine with accuracy which calls are VoIP and which aren’t.
Max Smetannikov, vice president of business development analysis at Global Advertising Strategists, recently finished a study on the VoIP last mile. The study centered on VoIP carriers like Vonage and traditional voice carriers that don’t own their own VoIP networks yet sell that service to residential customers. He found that newcomers to the VoIP market are more agile and are ranked higher than their large, established PSTN counterparts that are also entering the VoIP market. Yet those start-ups aren’t going anywhere without larger carriers handling their traffic and setting up interconnection routes for them.
“Vonage, for example, doesn’t care how voice travels beyond the last mile,” Smetannikov says. “We found that their VoIP traffic is turned right into PSTN. Their VoIP rates are low, and it was easier to do wholesale agreements with PSTN carriers than to come up with QoS arrangements with VoIP carriers within North America.”
Steve Heap, CTO of Arbinet, says carriers often have to request information on calls when disputing unauthorized traffic at settlement. In some cases, carriers still use lookups to match a TDM phone number to its corresponding IP address to determine the originating carrier.
Frank Estes, vice president of TransNexus, which develops interconnection software for VoIP access control, accounting and QoS management, sees VoIP emerging as something carriers can no longer ignore.
“VoIP traffic is getting there,” he says. “There are about 15 million minutes a month from standard VoIP players in the United States. More and more carriers are asking for peering agreements with carriers.” As those minutes grow, clearinghouses play an increasingly important role in managing those calls.
What is a clearinghouse?
Defining a clearinghouse can be open to different interpretations. Some carriers are large enough to provide peering and routing information to their client carriers. Wholesale carriers, for instance, can determine the best quality routes and make that information known to other partners or providers that sign up for the service.
Arbinet executives such as Chris Reid, vice president of marketing, believe there are few true VoIP clearinghouses and consider the company an exchange-where carriers can choose the best route from a list of routes and their rates. Arbinet primarily serves as a single point to shop for the best rate.
“Clearinghouses are designed to help carriers mitigate lost revenue by quickly identifying VoIP users and pinpointing the originators of international calls that can be measured and charged for,” according to a Narus white paper on identifying VoIP traffic. Clearinghouses develop proprietary software that uses algorithms to locate calls with certain behaviors indicative of VoIP traffic. They’ve also got to be able to capture those calls across several kinds of network links, including DS-3s, STM-1 and GigE, and perform automated identification, classification and filtering of certain kinds of VoIP traffic. Few traditional PSTN and IP carriers have the time, engineers or money to build these kinds of systems. Plus, not all carriers are convinced it’s worthwhile to build VoIP detection capabilities until they know there’s enough traffic to help them pay for the effort. However, industry figures show that 30 to 35 percent of all VoIP calls on a carrier’s network may be illegal, or unauthorized; each call representing lost revenue.
One business model: Primus
Primus is a good example of the growing role of VoIP. Several years ago, the provider had about 300 million minutes of traffic on its circuit-switched PSTN. Since 2000, the company has moved about 50 percent of its traffic to VoIP. “They’re now doing about a billion minutes a month on VoIP,” says TransNexus’ Estes. “As a result of them moving over to VoIP, they have a lower cost network and are able to sell more minutes with lower internal costs.”
Primus got involved in VoIP traffic in 1998, says Geoffrey Hicks, senior vice president of network services and technology. The company began to leverage arbitrage in national routes and entered into partnerships with common carriers in the United States and PTTs overseas. It also sought out ISPs and other “non-traditional means” for terminating voice traffic. “Our business model was to play the arbitrage and the high cost of PTT termination, and underbid the PTTs. Some of them are still our best partners,” Hicks says. Primus was able to use its traction in the PTT world to migrate to VoIP carriers rather easily.
“Virtual-facilities” VoIP carriers, such as Vonage and Packet8, have to forge agreements with carriers like Primus and others who can supply them with transport. “They need to enter into those agreements predominantly for termination if they want to be competitive,” Hicks says.
Other carriers, because they have a lot of VoIP traffic and knowledge of the market, offer to terminate traffic and create agreements between VoIP carriers around the world, provision QoS levels, and help in settlement and dispute resolution.
But the fact is, the clearinghouse field is emerging with players finding ways to satisfy the growing need among VoIP carriers to find each other and write termination agreements and make money on that traffic.
Wholesalers/clearinghouses serve more to enable a myriad of providers to have one relationship rather than relationships with 300 carriers around the world, which reduces the administrative costs of bilateral agreements and enables the members of the clearinghouse to exchange traffic without having to establish a relationship or geographic presence. It also opens a door for providers who normally don’t participate in global calling.
Trouble in VoIP land: bad handoffs
However, from a technical standpoint, there’s still a lot of work to be done with VoIP calls. Multiple signaling protocols and various switch and hardware capabilities interrupt the flow of VoIP call information across platforms. The calls may get through, but call detail records and customer data can be dropped.
SIP, H.323, and other signaling protocols can make handoffs tricky. Carriers with the expertise and income can write bridging software to ensure interoperability for providers that handle different kinds of traffic. They can also turn to software developers for creating gateway and switch interoperability functions, so VoIP calls can jump from platform to platform without dropping vital call detail and/or calling number identification information.
Or clearinghouses can take care of that problem. “Efficient handoffs from the PSTN to the IP network are easily accomplished by gateways, and other types of VoIP equipment,” Hicks says.
“Most of the carriers want to peer,” Estes says, “We have 10 carriers who want to terminate, so we sell them the software.” Variations of the VoIP interoperability software, based on the Open Settlement Protocol from the European Telecommunications Standards Institute (ETSI), can be bought off the shelf, or software engineers can write the coding bridges between asymmetrical protocols in-house, Hicks says.
TransNexus’ open settlement protocol is designed to let carriers route traffic as well as authenticate that traffic and endpoints using digital X.509 certificates with a private/public key setup, Estes says. Carriers can use the system to determine when circuits are busy and the rates charged for termination-“the same stuff they’re getting off the PSTN, we get that same stuff off the VoIP network,” he says.
The majority of long-haul transport overseas (more than 90 percent, according to Nikkei Communications) is performed in VoIP using H.323. “Just getting all of the network equipment in the call flow to speak the same protocols is difficult,” Estes says. “Then there is the issue of price and margin and reacting to changes in available routes, and taking advantage of lower priced routes. It’s also difficult to collect usage information in real time to track network performance, as well as the issue of collecting usage information on a timely basis to understand network performance.”
Billing and OSS also fail to keep up
VoIP’s growing share of calling minutes has put billing and OSS personnel on notice that they have to do something quickly. Though larger carriers have more resources to throw at the challenges, smaller carriers have turned to off-the-shelf products or relied on other providers that installed bridging software for them-all in an attempt to migrate to VoIP networking, or to find revenue in existing VoIP traffic.
“As usual with new technology, the OSS/BSS systems were forgotten in this gold rush,” Estes says. “Standards once seen as a major contributor to network quality and interoperability could not keep pace with the revolution. Hence there is a glut of bought-and-maybe-paid-for equipment in place which does not play well with other bought-and-paid-for-equipment.”
Estes blames “mass confusion in whose H.323 or SIP am I using” and equipment vendor’s aversion to potential commodity pricing.
A representative of InfiniRoute Networks, a company that describes itself as a “carrier-neutral VoIP peering service,” says carriers need a place to create billing agreements that handle the different VoIP call detail standards out there. InfiniRoute carriers send VoIP calls to other VoIP carriers, so there’s little PSTN translation, says Seng-Poh Lee, vice president of marketing at InfiniRoute.
“In the peering VoIP world, IP gets switched and delivered as IP, which opens a large amount of connections with the VoIP world,” Lee says. “Most carriers don’t have agreements, and it’s a much bigger problem as the large number of carriers has expanded.”
The result is that carriers use a combination of formats and code in their call detail information. Billing systems can’t recognize all the information needed to capture calls correctly and put them on their bills.
“The ETSI Open Settlement Protocol addresses these issues across multiple domains by requiring the use of standard reporting information from both end points, and the use of standard measurement guidelines to be reported by the network telephony devices,” Lee says. This information is then streamed to a central server for immediate compilation of the ASR, duration, and cause codes by destination, e164 number and events like latency and jitter.
QoS problems and clearinghouses
Quality of service definition is still very important to the wholesalers of VoIP traffic; their client carriers count on the wholesalers to arrange the routes at the right price and with acceptable quality. “The first thing VoIP carriers do is to compare prices,” says Smetannikov at Global Advertising Strategists. “You know, for instance, that carrier X has low prices to 150 countries. You don’t know how that carrier connects to those countries; the quality of wholesale voice is such that everyone uses it if it’s close enough. No one distinguishes between VoIP and non-VoIP in the sales process. You look at the price and say, ‘That’s low for this route,’ then you look at the quality. Everyone’s under pressure to deliver the low price.”
In that sense, then, VoIP traffic does matter. “Before VoIP, where routes cost a dime a minute, they now cost 5 cents,” Smetannikov says. To get lower rates, wholesale carriers often blend VoIP and PSTN traffic and thus the rates. It’s a daily creation in the hands of those who route the traffic and come up with the prices. It’s much like the stock market, a commodity. “An e-mail comes out a couple of times a day stating prices and routes, and that’s what these small VoIP carriers see when shopping for a wholesaler to route their traffic,” Smetannikov says.
End-to-end QoS deteriorates when a traditional, circuit-switched call is converted from TDM to VoIP and back, a natural progression as PSTN traffic moves off and onto the IP cloud. Without standards within intercarrier operations, VoIP, Diffserv, MPLS and other platform formats affect quality-and QoS can be a big differentiator when carriers are looking for reliable transport or termination partners for their calls. Carriers want their traffic to be of adequate quality; some buyers are willing to pay higher rates if they know their calls won’t be dropped or filled with static noise.
Clearinghouses and wholesalers performing those clearinghouse functions must be able to pick the best route for their customers, so QoS [problems] can be avoided, says Lee of InfiniRoute. “How do you guarantee the best route? You have to have a peering company that can find those routes with good network understanding in real time,” Lee says. “They have to monitor these routes all the time.”
“When you’re switching between TDM and VoIP, you don’t know who’s carrying it,” he says. “You can’t be guaranteed the QoS you want. With direct VoIP it’s more of an open environment, but it’s point-to-point; you have fewer interruptions in QoS.”
Session Border Controllers drawing attention
Carriers are working on a device that can aid in managing VoIP calls, from creating a connection point for VoIP carriers to call detail creation to security functions. The device, which sits on the edge of a carrier’s network, has been referred to as a “session border controller.”
The boxes put power in the hands of VoIP carriers who want to limit or at least identify access to their networks by senders of other traffic. It’s also a place that collects information valuable in settling intercarrier disputes over traffic revenue.
“It’s like a VoIP-to-VoIP gateway with security built in,” says Arbinet’s Heap. A carrier, such as Verizon, would assign the box, or connection point, a public IP address that it would then hand out to its “authorized” VoIP traffic partners-as a way to keep unauthorized calls off its network. The box would also block the sender from seeing into the interior of Verizon’s network. “The second leg is hidden from the sending carrier,” Heap says. “You can’t hack in; the device funnels all the attempts through that one point, and records the details of every call that goes through that one point and helps the receiving carrier to maintain a billing relationship and charge the carrier interconnecting with it. A lot of attention is being paid to these devices.”
“I’ve seen a lot of interest” in session border controllers, Smetannikov says. “These devices tend to be used for do-it-yourself conflict resolution with other carriers. The spike in interest in the boxes indicates that it’s an issue people have either faced or perceive of running into at some point.”
It’s an indication of VoIP’s growing importance that companies are beginning to step forward to offer a complete, or nearly complete, stable of services to support it. Indeed, VoIP has become a lot more than just shifting minutes inbound and outbound. As the work going on to perfect the session border controller attests, VoIP’s importance creates new roles for service providers that want to differentiate themselves and find new ways to raise revenue.