VOIP Cuts Out Middlemen

NEW YORK -- The accelerating migration of service providers and enterprises to VOIP peering platforms is having a profound and permanent impact on the economics of telecom network interconnect, resulting in the disintermediation of a number of operators from once-lucrative businesses, according to a major new report from Heavy Reading (www.heavyreading.com), the market research division of Light Reading Inc. (www.lightreading.com).

VOIP Peering & the Future of Telecom Network Interconnection analyzes the industry trend underway toward VOIP peering and the effect it is having on the voice settlements process. It evaluates each of the key VOIP platform operators today and compares the services and functions provided, as well as the business models employed.

The 92-page, all-new report features profiles of 16 companies that provide peering services at the transport, signaling, or ENUM level, as well as the perspectives of eight operators and eight VOIP peering equipment and solution providers.

"By eliminating the need for many of the middleman functions, VOIP peering will dramatically change the role of wholesale service providers in the interconnection process, as well as the role retail service providers for enterprises," says John Longo, Senior Analyst with Heavy Reading and author of the report. "Since carriers can directly interconnect much more easily with VOIP, a lot of the value provided by wholesalers in the past is being eliminated. The result will be a movement from the role of a minute reseller to an interconnection facilitator."

Peering will also drive the industry closer to a "bill and keep" settlement model, with standardized and reduced termination rates in the short term, Longo adds. "It provides the vehicle to expand advanced services and features beyond the service provider networks," he says.

Key findings of VOIP Peering & the Future of Telecom Network Interconnection include the following:

VOIP technology provides more efficient routing, which justifies interconnections that were previously not economically viable. In the TDM environment, interconnections between carriers require direct trunks between carrier switches. Because VOIP is IP-based, it benefits from the meshed IP networking structure, whether on the Internet, a private IP network, or a peering fabric. It does not require expensive switch ports or discrete trunks and is relatively insignificant in terms of volume compared with Internet-driven IP traffic on the backbone.

Wholesale carriers are being disintermediated by retail carriers as they directly connect via VOIP peering. Retail carriers have passed TDM traffic off to wholesale carriers to facilitate transport to terminating carriers both domestically and internationally. With VOIP peering, retail carriers more efficiently interconnect their own networks and settle traffic directly between themselves.

Retail carriers are being disintermediated by enterprise customers as they directly connect via VOIP peering. Enterprises, particularly large ones, see an opportunity to cut their costs significantly by directly peering with trading partners. Once connected to a peering fabric, they receive additional savings by terminating their non-peered traffic at wholesale or better rates via exchange market members. Savings reportedly range as high as 50 to 90 percent.

A federated peering model will emerge as natural trading partners come together in peering communities or federations, which will then federate with other such groups. Certain communities, such as voice-over-broadband providers and cable operators, have common motivations to peer that drive them into peering federations. In some cases it's motivated by money, in others it's service, but ultimately it's both. As the federations solidify, they reach out to other groups with common interests to reduce costs and expand service reach.

VOIP Peering & the Future of Telecom Network Interconnection is published in PDF format and costs $3,795. The price includes an enterprise license covering all of the employees at the purchaser's company.

For more information, or to request a free executive summary, contact:

Dave Williams
Sales Director
Heavy Reading
858-485-8870
[email protected]

Press/analyst contact:
Dennis Mendyk
Managing Director
Heavy Reading
201-587-2154
[email protected]

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About Heavy Reading
Heavy Reading is an independent market research organization offering quantitative analysis of telecom technology to service providers, vendors, and investors. Its mandate is to provide the comprehensive competitive analysis needed today for the deployment of profitable networks based on next-generation hardware and software.

About Light Reading Inc.
Founded in 2000, Light Reading Inc. (www.lightreading.com) is the ultimate source for technology and financial analysis of the communications industry, leading the media sector in terms of traffic, content, and reputation. It reaches an extensive audience of executives and technologists within the telecom and enterprise networking communities, as well as the financial/industry analysts and investors who track these sectors. Light Reading was acquired by United Business Media in August 2005, and operates as a unit of CMP Technology.

About CMP Technology
CMP Technology (www.cmp.com) is a marketing solutions company serving the technology industry. Through its market-leading portfolio of trusted information brands, CMP has earned the confidence of more technology professionals than any other media company. As a result, CMP is the premier provider of access, insight and actionable programs designed to connect sellers and buyers in ways that yield superior return on investment. CMP Technology is a subsidiary of United Business Media (www.unitedbusinessmedia.com), a global provider of news distribution and specialist information services with a market capitalization of more than $3 billion.