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IP Interoperability and the cost of connectivity
By Mike DeVito
GTM Vice President for the Americas and Asia Pacific
What, you may ask, does IP Interoperability have to do with sustainability and the cost of connectivity?
To get to the answer to that question, let’s take a look at some trends in our industry, first on the customer side and then in the wholesale business.
On the customer side we see convergence between fixed and mobile networks and between telecommunications and IT. Voice, for instance, is taking on more and more characteristics of an application and becoming more integrated into IT-driven processes.
Devices and applications are also converging. A given device can now manage many applications - for example, social networks, business process applications, messaging and calendaring. And the applications can use multiple devices - smartphones, netbooks, etc. All this adds up to Unified Communications. The users of those devices and applications are increasingly mobile and they are exploiting the new flexibility.
On the wholesale side, this requires new platform solutions and new ways to interoperate between networks, applications and providers. At the same time traditional services remain very important because of the revenue they still generate.
But as our industry consolidates and traditional wholesale services become commodities, carriers are trying to save costs everywhere they can. That commodity factor and the disruptive models of over-the-top players - who create service value by riding for free on operator bandwidth rather than paying for it - make the business case for long-term investments in traditional networks more challenging. Saving costs on the traditional side offers the additional advantage of making more precious cash available for investment in new-wave growth areas.
What's a carrier to do to resolve these conflicting demands and build a sustainable business?
Some are taking new approaches to networks, considering how they can collaborate with each other. They are partnering and co-operating all along the value chain from laying fibre cables jointly (the Europe India Gateway and East African Submarine Cable System are two such examples) to sharing infrastructure or leveraging high-end technological capabilities. We also see a trend toward outsourcing, where operators engage a third party to manage their infrastructure and thus achieve benefits of scale (for example, KCOM and Vodafone outsourcing to BT Wholesale).
Another approach to cost reduction is the new-platform solution: transformation to next generation networks (NGN) based on IP technology. Telecoms companies are transforming into next generation service providers to improve cost efficiency, stay competitive, reduce complexity, improve the customer experience and deploy new services faster. Their total cost of ownership (TCO) is dropping while their NGNs provide more flexibility, innovation power and scalability that helps them manage the expense of growing the business.
Unlike a TDM network, which delivers mostly voice-related services, an IP network makes it easy for a carrier to deliver many services seamlessly over one platform. This multi-service provision helps to enable the creation of sustainable business models with shorter payback times and lower up-front investments.
Figure 1: IP Interoperability simplifies the interaction among networks
This represents a major shift away from traditional, isolated networks with a complex interconnection and service management infrastructure to seamless IP-enabled interoperation. As a result of this shift, it becomes less important to own facilities-based networks than to be able to use them - for example, through sharing of resources. Having access to networks to use them flexibly becomes a strategic factor.
More and more, services will be delivered out of multiple networks via the cloud. Service providers will establish cloud networking and cloud computing to drive underlying offerings, including infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). This will give them new flexibility in the way they provide networked ICT applications.
End customers using multiple converged devices will require seamless access to a service and/or a business process application across those devices. As these end users roam and become even more mobile, and also as enterprises become more flexible in how they provision access to devices for their users, one network and one provider will not be able to reach all of the user's devices, which in themselves form a sort of cloud.
But the new-platform solution comes with its own issues
So some mechanism has to enable connectivity between all those network elements on the services side and on the user side, weave an overlay net across the separate infrastructures. Dumb piping and pure best-effort interconnectivity are not enough to do this. In fact, the inability of best-effort interconnection to assure quality of service, security, data integrity, transaction support and cascading payments is delaying the migration to VoIP.
Cost is also slowing down market penetration of VoIP, which remains low compared to TDM. Operators originating VoIP traffic must convert those calls to traditional TDM networks. To do that, they have to invest in media gateways which require high capital expense and separate interconnection and termination agreements with all of their interconnect partners.
New entrants with disruptive business models put another brake on the move to VoIP. Some of these businesses run, at least in part, by leveraging the investments of the infrastructure providers. Operators may try expansion into markets such as media and IT services to offset declining connectivity revenue, but then they struggle to make money from their IP investments.
Interoperability enables lower cost of connectivity and sustainable business models
That mechanism needed to enable connectivity between all those network elements and to weave the overlay net is interoperability. Wikipedia defines it as, “the capability of a product or system - whose interfaces are fully disclosed - to interact and function with other products or systems, without any access or implementation restrictions.”
Interoperability in telecoms enables communication providers to connect to each other, to connect their end users to other operators’ end users, and to pay and get paid for doing so. All this is independent of the technology, networks or devices used, creating the seamless experience that customers want when they use communications services.
Figure 2: IP Interoperability reduces the TCO of network interconnectivity
While the public internet supports best-effort infrastructure interconnectivity, it does not offer commercially viable, true Interoperability. All current business models that try to bridge the networks in the IP space are either disruptive or limited to a small number of partners.
But true IP Interoperability can provide a framework that allows communication providers and operators to build a sustainable business on their IP-based activities. Moreover, it allows them to create a range of value-added services by using components and service building blocks.
Regional and small operators can take advantage of the Interoperability services being rolled out by global carriers such as BT, as a simple and cost-optimised alternative to investing high amounts of CAPEX and effort in media gateways and new interconnect and termination agreements.
Interoperability services save new entrants the time needed to negotiate interconnect agreements with up to 600 operators (BT estimates that these negotiations take six man weeks per agreement). They also handle for them the technical complexity of making their variant of IP work with all the standards and codecs that exist in the market.
Fixed operators are moving from TDM to IP at different rates. As the volume of IP traffic grows, the number of media gateways required grows, until TDM and IP are 50/50, then the need declines toward zero as the world becomes 100% IP. Interoperability services from a third party such as BT save fixed operators the CAPEX spend on equipment they would otherwise need for only a short period.
Mobile operators use significant latency to connect from the base station to the network at both ends, so they need a low-latency connection between the two. Interoperability services benefit them by reducing the number of inter-network hand- offs and codec conversions, thereby ensuring good quality voice.
Interoperability opens the door to offering new value-added services that combine voice, content, applications and capabilities. Providers can use third-party interoperability services to create new bi-lateral and multi-lateral partnerships without significant up-front costs. They can capture opportunities in changing markets with flexibility and high speed to market.
To keep building sustainable businesses, carriers need to intelligently address their legacy networks to reduce the cost of connectivity, ensure payback and make cash available for investment. They must move to NGN for new scalability, flexibility and innovation power. As a result they will lower their TCO, with emphasis on “Total”.
Interoperability is a key to unlocking the ability to provide services efficiently and cost-effectively across multiple networks and multiple providers
For further information about BT Interoperability, contact your account manager and/or see the other articles in this issue of Global Telecom News.
This article was written at the invitation of Connect-World and first published in Connect-World: Asia-Pacific II, (May 2010) copyrights thereto, exclusively owned by InfoComms Media Ltd, London, UK.
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