What you need to know about VoIP peering

As companies install VoIP systems, they’re looking for ways to keep more of their voice traffic on IP networks to avoid the toll charges associated with the Public Switched Telephone Network. VoIP peering among carriers promises to make end-to-end VoIP calls a reality.

As companies install VoIP systems, they’re looking for ways to keep more of their voice traffic on IP networks to avoid the toll charges associated with the Public Switched Telephone Network. VoIP peering among carriers promises to make end-to-end VoIP calls a reality.

The VoIP peering market is still in its infancy, with carriers testing third-party services and joining exchanges to handle voice peering. In the United States, VoIP peering services for carriers are available from NeuStar, Stealth Communications, Switch and Data, and Tello.

Carriers are starting to offer end-to-end VoIP services to their corporate customers that take advantage of peering. Global Crossing announced in September that it was peering with VoIP service provider SunRocket. Global Crossing plans to sign other VoIP peering deals during the next year.

For corporate network managers, VoIP peering is promising, but it is still a year or more away from reality. That’s because none of the top-tier carriers in the United States, including AT&T or Verizon Business, offer VoIP peering.

“The numbers being thrown around in the industry are that only 2% to 4% of all VoIP traffic goes through a peering service,” says Mario Galvez, vice president of marketing for Switch and Data, which in June announced VoIP peering exchange services for carriers. “We’re going to see greater cost reductions in the future as the ratio of VoIP peering calls increases.”

VoIP peering refers to relationships between carriers in which they agree to exchange VoIP traffic to keep it on IP backbones instead of the PSTN. By keeping voice traffic on IP networks, carriers can lower costs, improve call quality and offer new IP-enabled services to their enterprise customers.

“The first step of the IP revolution is taking your traffic and making sure it stays on IP,” says William Stofega, research manager for VoIP services at IDC. “If the traffic starts going through gateways and terminating on the PSTN, voice quality will degrade. You get a superior signal in a controlled, on-net call.”

All-IP calls also are cheaper. “Using IP from an enterprise perspective, the savings can be in the 20% to 30% range in telecom costs and operations,” Stofega says. “If you can consolidate and keep your calls on-net, especially if you’re using a WAN, there is significant savings.”

Additionally, carriers can offer new features, including presence and mobility for end-to-end VoIP calls.

Presence is going to have “tremendous value” to companies, Stofega says. He says enterprises also are going to be interested in services that use an IP PBX to provide “the same desktop features on a cell phone. Mobility and presence are where I’m expecting to see new and different capabilities.”

Stofega says these features will be available to enterprises in the next year or two, thanks to the growth he’s predicting in VoIP peering. 

Corporations need VoIP peering to interconnect the islands of VoIP inside their own organizations and among their organizations and key suppliers and customers. Enterprises could establish VoIP peering arrangements among themselves, but few have done that. Instead, industry observers expect enterprises to take advantage of VoIP peering through carriers.

“It comes down to the same old question: Do I need to do this myself, or will my service provider facilitate this in such a way that it is not cost-effective for me to do it?” says John Longo, senior analyst with Heavy Reading. “Agreements like the Global Crossing announcement is the trend that I would expect to see.” 

Carriers have two options in VoIP peering: To develop multilateral relationships through such exchanges as Stealth Communications’ Voice Peering Fabric and NeuStar’s SIP-IX or to develop bilateral relationships with other carriers as in the Global Crossing and SunRocket deal.

Measuring traffic in the billions

One VoIP peering exchange that is gaining momentum is the Voice Peering Fabric from Stealth Communications. Shrihari Pandit, CEO of Stealth Communications, predicts that the 2-year-old exchange will carry more than 100 billion minutes of voice traffic in 2006, up from 18 billion minutes in 2005.

“We’re growing at a very fast rate,” Pandit says. “We don’t have any direct competitors. The alternative is to use a service like NeuStar or VeriSign has to offer, which works like a SIP proxy or SIP redirect service. But the customers need to have a SIP gateway for that.”

Carriers that belong to the Voice Peering Fabric include China Telecom, Telecom New Zealand, XO Communications and RCN as well as VOIP providers Net2Phone and SunRocket.

The Voice Peering Fabric includes a directory lookup service based on the Enum protocol, which matches a telephone number with a corresponding IP address (see "Why Enum matters to VoIP peering").  Stealth Communications has 18 million telephone numbers in its Enum database, up from 1 million in 2004.

Freedom Health Systems is using the Voice Peering Fabric to improve the quality of its VoIP calls. Based in Deerfield Beach, Fla., Freedom Health Systems provides telecom services to hospitals, pharmacies and other healthcare providers.

A year ago, the company began offering its clients VoIP services in addition to the data services it offers over its VPN.

“We have a primary data center in Miami, which we hooked into the Voice Peering Fabric for reliable, high-quality transit to other carriers,” says Will Glynn, director of VoIP services for Freedom Health Systems. “The Voice Peering Fabric gets us jitter-free transport to a handful of other carriers.”

Carrier inconsistency

Glynn says he tried running VoIP calls over the public Internet but found that some carriers provided better service than others. He says call quality is much better and more consistent using the Voice Peering Fabric.

So far, Freedom Health Services has signed up a handful of its pharmacy clients to its VoIP service. “It’s a replacement for their existing phone system,” Glynn says. “They toss out their local key systems and call it a day.”

Freedom Health Systems also takes advantage of the Enum lookups offered by the Voice Peering Fabric. If a VoIP call that it carries terminates to a number in the Enum directory, Freedom Health Systems can keep that call on an IP network end-to-end for lower cost routing. Freedom Health Systems also enters all of the telephone numbers for its clients into the Enum registry so they can receive inbound calls via IP whenever possible.

Freedom Health Systems handles only a tiny number of end-to-end IP calls through Enum.

“Honestly, I was expecting more hits with Enum than we are seeing, but we’re not charging extra for it,” Glynn says. “Enum doesn’t get us that many advantages today but it promises growth in the future.”

While Freedom Health Systems takes advantage of VoIP peering through an exchange, Global Crossing prefers bilateral agreements with carriers such as SunRocket.

“That was our first bilateral agreement, but we have others in the works,” says Pat Reilly, Global Crossing’s senior product development manager for VoIP services. “Most of these conversations will happen in the next six months. Probably, within 18 months we’ll be done.”

Global Crossing isn’t joining VoIP peering exchanges yet, but it is cooperating with the Voice Peering Fabric. This arrangement was announced last week.

“We’ve joined the carrier alliance to provide data access to the different Voice Peering Fabric points,” Reilly explained. “We’ve got this global MPLS network. If any of our customers want to reach the Voice Peering Fabric, we can provide that connectivity.”

Global Crossing has been aggressive in VoIP peering. In June, the company announced Enterprise VoIP Community Peering, which means the company will not charge for calls when its enterprise customers of VoIP outbound services are calling customers of its VoIP local services.

“We have dozens of companies using these two services,” Reilly says. “They’re mostly multinational corporations deploying IP PBXes in their own premises or hybrid PBXes or VoIP-enabled routers. Many are starting with their call center facilities.”

Reilly says this service, which involves a small share of its traffic, saves customers around a penny and a half per minute for VoIP calls.

“Lots of folks are talking about VoIP peering, but we are trying to stand up and move this all forward,” Reilly says. “One of the reasons is that by eliminating access charges we can provide savings to our enterprise and service provider customers. But really we’re also trying to drive up the number of IP end-to-end calls.”

VoIP peering isn’t that useful to enterprises until it reaches a critical mass and most carriers participate. How long that will take is unknown.

“It’s very, very early in VoIP peering,” Galvez says. “It’s going to be slow in developing when it comes to the larger providers because lots of this is still being driven by regulatory issues. At the end of the day it’s about dollars. As long as there is still a financial benefit for local exchange companies to terminate voice traffic on the PSTN, they are not going to participating in peering.”

Galvez predicts that it will be two or more years before VoIP peering reaches a critical mass for enterprise customers to see dramatic cost savings.

“When talking to their service providers, corporate network managers should be asking about their philosophy about peering,” Galvez says. “They should ask about how much of their traffic is being terminated on-net through their network or through a peering partner. And they should ask about how that is translating to true cost-savings.”

Learn more about this topic

Global Crossing Joins Voice Peering Fabric Alliance

ISP offers free Enum registration service to VoIP users

Q&A: NeuStar CEO touts DNS, VoIP plans

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Copyright © 2006 IDG Communications, Inc.

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