By Tara Seals

For carriers, delivering facilities-based VoIP can be an expensive yet QoS-enabled proposition involving building out an expensive core network design, or it can be bare bones, relying on limited infrastructure to deliver best-efforts service. Until recently, it was either-or. Now, a virtual network model has burst on the scene, giving smaller players access to the same quality, control and benefits of owning a large carrier-grade VoIP network. Many see it as a sign of real maturity in the market.

“The way that a voice-over-IP carrier would normally grow is they would set up a voice-over-IP gateway somewhere, let’s say the Philippines, and they would have buyers who wanted to buy that termination from them,” explains Steve Heap, CTO at minutes trader Arbinet-thexchange Inc. “The buyers would be voice-over-IP gateway owners themselves. To stop everyone else in the world from using their termination, they would build security and access lists into that remote gateway, so that only traffic from the buyer can come in.” As the operator gains buyers, it would build out more gateways, ‘but growing it becomes quite onerous in terms of having to make these changes in every piece of equipment that you have in the network,’ notes Heap. Not to mention, he adds, gathering and correlating CDRs from disparate gateways makes billing difficult.

In contrast, a softswitch acts as central command for a VoIP network, and processes all calls within one device, routes them to the appropriate gateways, implements security, authenticates users and assembles CDRs. But at anywhere from $80,000 to $100,000 or more, a softswitch is beyond the reach of many small operators.

Arbinet’s new SoftSwitchAxccess, launched last fall, gives carriers the equivalent of their own individual softswitch without the cost or “the complexity of finding somewhere to house it [or] getting some skilled people to maintain it,” says Heap. Operators get a slice of the switch along with full access to a management system for changing the routing, accessing call detail records, and rating and billing services. Arbinet charges a per-minute rate for use, which Heap says can be as low as one-eighth of a cent.

The virtual network model is giving rise to better-quality services from more players, a signal that VoIP is earning its chops. “VoIP is gaining market share and it’s [due to] a combination of the maturity of the technology and how carriers are sending VoIP,” says Matthew Finnie, vice president of services, development and systems at European powerhouse Interoute. “The ability to run a reliable, scalable network without the large capital outlay has opened the market for quality VoIP services from smaller players.”

Interoute, which recently sold its wholesale TDM voice business to wholesaler WaveCrest in order to focus on its ‘I-21’ next-generation, pan-Europe network portfolio, has doubled the volume of VoIP traffic it carries every quarter, he notes, in no small measure because of the successful launch last year of its Virtual Voice Network, a full switch-partitioning service with a reporting piece that includes dial plans, route labels and routing groups. Operators can perform adds, moves and changes via a Web portal and create their own rate cards. Telehousing, bandwidth and professional services are also part of the deal, along with access to applications like voice mail and VPNs. “So essentially we offer all of Europe on one large distributed switch,” says Finnie. “A lot of interconnection is Ethernet-based. So we had a discussion around creating a global presence without a switch and doing it via a GigE connection in India. Why not give those operators the ability to run a carrier-grade network in Europe?” Companies ripe for switch partitioning include operators carrying international minutes, ISPs looking to add converged services to their rosters and even incumbents looking to extend their ‘on-net’ footprints.

“Softswitch partitioning lets me set up as many customers and suppliers as I want,” says Nuaman Tyyeb, founder of Interdigital Networks and an Arbinet SoftSwitchAxcess customer. “There’s no maintenance, but I have full control over the features, and the billing covers A to Z in its reporting capabilities.” Interdigital Networks is a wholesaler offering minutes to providers that sell retail international services, such as prepaid calling card companies. “This has allowed me to grow, because I no longer have to worry about reaching a maximum capacity.”

In Interoute’s case, big enterprises are targets too. “We are happy to train corporate customers on the partition, and they become their own little telco, set up with a dial plan,” says Finnie. “We do this in such a way that the skills gap is eliminated.”

According to TeleGea, the virtual network play offers operators a way to differentiate themselves. “This is a crowded market, so carriers need to have a rich set of features just for table stakes,” says Kevin Farrell, vice president of product management at TeleGea. “Then they need the quality in there and service control to be flexible in their offers.” TeleGea’s VoIP Delivery Management Solution offers users network termination, a service portfolio for IP Centrex and residential voice and a self-provisioning portal that is a central console where the carrier can manage adds, moves and changes, perform account management, provision services with an ondemand administrator, update billing and so on. It also provides for the implementation of a wholesale downstream, should the carrier want to implement a resale strategy.

The quality-assurance and management functionality built into most virtual operator offers lowers the barriers to entry for newcomers and leads to better quality service for end users. Gone are the days of ‘winging it’ somewhere in Southeast Asia. New Global Telecom’s IPartition service, offered through its associated brand, General Telecom, recently added NexTone’s iView Management System for customer Web interfaces and front-end capabilities. It gives an end-to-end view of real-time IP service performance through network interconnects.

“Carriers have historically utilized outsourcing to gain switch access in the TDM environment. The drivers were capex avoidance and technical expertise, in that order,” says Lee Story, senior vice president of network management services at General Telecom. “VoIP partitioning represents the next logical step for this business model; however, the demand drivers are reversed in comparison with TDM outsourcing. IP is a best-efforts protocol and an IP network contains many more elements than a TDM network, from multiple manufacturers. As a result, the compelling driver for VoIP outsourcing is the availability of expertise, infrastructure and vigilant monitoring that must be provided by the outsourcing partner.”

Another indication that IP telephony is getting out of the upstart phase is the availability of traffic exchange options with some partitioning offers. United Kingdom-based WaveCrest, which launched softswitch partitioning last fall, offers interconnection and trade with both TDM- and VoIP-connected partners on its switch. Arbinet, which runs a marketplace for international and domestic minutes, offers SoftSwitchAxcess customers the ability to buy and sell from Arbinet’s 340 carrier members on its trading floor, called thexchange, if they so choose. There is about an 80 percent overlap for users of Arbinet’s TDM switch partitioning service launched a year ago. “We have seen a number of companies that were switchless resellers becoming a partition member first of all, moving from switchless to switch-based, and [then to] buying all their termination on thexchange,” says Heap. “So they have moved from being captive with one carrier to buying from any of the 340 that weve got. They are finding it a much better way to manage their businesses and the costs of their businesses.”

In Interoute’s case, a connection into the switch gives the carriers the ability to exchange traffic with any other carrier on the switch, thus extending the network footprint for the virtual operator. With some top carriers already hooked in, the benefit is significant. “The rationalization of interconnection cost and hassle is the prime motivator for the big guys to do this,” explains Finnie. “The network economics make this model very valuable. This is VoIP growing up.”

-Additional reporting by Khali Henderson.