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Next Generation IP Wholesale Solutions
BT Global IP Exchange
IP Interoperability –
Opening up new markets
A whitepaper created by Innovation Observatory
Introduction: New Service Opportunities
New services are emerging within operators’ own networks, or in
the Internet domain (i.e. over-the-top services) that have the
potential to generate additional turnover if they can be extended
across network borders to become nationwide or international
services. Examples include:
High-definition (HD) voice calling
Videocalling
These services can deliver much-needed revenues for fixed and
mobile network operators, ISPs, and over-the-top content and
application providers. However, they are currently available only in
limited islands, with little interworking between different providers’
services, and limited interworking between managed networks and
over-the-top Internet applications. If interworking can be enabled,
then as much as £3.5 billion in extra service revenues might be
accessible globally by the end of 2015, and more beyond.
However, there are challenges in delivering international or even
national cross-network interworking. These markets are very young
in terms of their maturity; traffic volumes are currently low; and the
services that are available use a variety of different protocols or
variants of protocols. In order to create interoperable cross-network
services, operators and service providers must make significant
investments to enable each interconnect route. They must enter
legal, commercial and technical negotiations, invest in gateways,
and manage configuration of multiple signalling and routing
systems. They must do this in the context of potentially low
monetary value to be gained from each communication provider
relationship, in the expectation that traffic volumes will grow in the
longer term. In fact it does not make economic sense – in the
current lifecycle of these services – for each operator and service
provider to develop its own global network of interconnect and
interworking agreements to enable service interworking. However,
a specialist wholesale intermediary can aggregate calls between all
communication providers, and more easily cover the costs of the
investments needed to open up new routes for new services. An
intermediary who can provide …
cross-network connectivity (e.g. IP to PSTN or mobile network)
seamless signalling protocol and inter-codec conversion
cross-border connectivity
quality of service (rather than ‘best efforts’)* and
cost competitiveness
… can therefore help network operators and over-the-top
communication providers to open up new geographic and service
markets.
Foreword
The telecoms world is in transition to IP driven by customer
demand, new capabilities and potential cost savings. The
initial step in making the change is primarily to support voice
calls, both nationally and internationally. However, this is
just the start; once communication providers have an IP
capability then more advanced services are possible, enabled
by a secure IP network of connected players. It goes without
saying that this applies to all types of communication
provider, be they small to large, Fixed to Reseller to Mobile,
and Over the Top players.
This paper looks at a number of market opportunities that
can accompany and complement the roll-out of IP voice.
Indeed the choice of the right interoperability partner, will help a
communication provider to develop long-term revenues from the
provision of dynamic intelligently-routed communications. These
communications can include voice, video, SMS, picture and instant
messaging, file transfer, and conferencing. They can be delivered
anywhere in the world, to any suitable device, and interwork with
social networks and other online communities.
This paper discusses the potential for some of the services discussed
above (high-definition voice and video calling), and the revenues
that service providers can find by enabling cross-domain service
interworking. It also considers the qualities a third-party
interoperability provider must exhibit in order to maximise the
revenue opportunity for its customers. The early implementations of
SIP/IP interconnect solutions designed around the use of the public
internet as a transport mechanism failed to deliver on the promise
of higher-quality services, and they are missing many of the
features taken for granted in the TDM world. But this early failure
will not undermine the future of SIP/IP interconnect services.
Higher-quality interconnects will define the leaders in this new
model who will compete based on service differentiators, end-user
experience and price mechanisms.
High-Definition (HD) Voice
High-definition voice services offer an improved experience for end
users, with a clearer sound, than traditional voice services. HD voice
services have been launched recently in a number of networking
environments.
In the enterprise environment, hosted IP PBX providers offer
services that can use HD-capable phones from Polycom and others.
And device manufacturers are targeting their wideband audio
products at SIP-based VoIP services.
Mobile operators started to offer HD services to their customers
during 2010. Orange, for instance, launched HD voice in a number
of its networks. At the time of writing (March 2011), services were
available at no extra cost to residential and business subscribers
with compatible handsets in Armenia, Belgium (via Mobistar), Egypt
(via Mobinil), France (SFR), Luxembourg, Moldova, Spain and the
UK. Other mobile operators to have launched HD voice include
Megafon (Russia), and Tata DOCOMO (India), TIM (Italy), Vipnet
(Croatia) and WIND Mobile (Canada). Services were also being
prepared for launch in Switzerland and the Dominican Republic.
As HD-capable devices become more widespread, awareness is
expected to become the primary driver of HD voice adoption.
Increased awareness and use of HD voice will lead over time to a
general dissatisfaction with standard-definition voice. Early
evidence of this comes from Orange, which conducted a survey
among its early HD users. 86% of respondents to the survey said
that the availability of HD voice would be one of their selection
criteria for future mobile phone purchases, and 76% of them said
they would change mobile devices to obtain HD voice.
Business users will be swift to come to expect HD voice; they will
increasingly want HD voice when they roam, and when they call
internationally. The business market will also drive use of HD voice
conferencing, essentially an extension of the HD calling market,
except that multiple callers are involved. A nascent HD audioconferencing market already exists, with a range of HD
conferencing communication providers. Most dial-in audio
conferencing is expected to evolve to include an HD offer. These
early communication providers route calls over the Internet or over
private IP networks either as part of a web conference or as a
standalone audio conference.
Typically mobile HD services are only available to customers on the
same national network, and only where the end user has an HDcapable device.
In the Internet sphere, a variety of companies have introduced HD
services. Skype offers an HD codec for Skype-to-Skype calls
(though the HD capability is lost for Skype-in and Skype-out
services). Google has bought HD voice codec provider GIPS.
Nimbuzz offers an HD voice application for Apple iOS and Android
devices.
Take-up of mobile HD voice for business and residential users is
likely to be much more speedy than in fixed networks as operators
can handle it end-to-end with no transcoding issues (mobile uses
the ARM-WB codec from end to end), and can roll it out rapidly as
handsets are replaced.
Orange, for instance, offers the service as a free upgrade for
anyone on its network with a compatible device. Skype offers it for
free. However, as national cross-network, international and
roaming HD voice calls emerge, there will be an opportunity for
communication providers to charge a small premium for services.
They will have to cover the cost of ensuring interoperability, and
some segments of customers will be willing to pay a reasonable
charge for high-quality international calls – particularly for business
purposes.
Drivers
Wider availability
of HD capable
devices
Increasing
familiarity with
improved quality
Dissatisfaction
with non-HD voice
quality
Demand for HD
voice
Currently low
device penetration
Barriers
Figure 1: Market enablers and barriers for HD voice services
Market opportunities
The HD voice market is just at the
start of the adoption curve –
ultimately HD services are
expected to be the de facto
standard. In the long run all voice
services will be high-definition
services.
Mobile
network 1
In the short term, however,
islands of service have emerged,
and as Figure 2 demonstrates
calling between those islands is
either problematic or not
possible at all.
X
X
Calls generated by over-the-top
HD voice services can
theoretically be routed to anyone
on the Internet but the software
used to enable the HD calls may
not be present on the called
target device.
Mobile
network 2
X
X
Internet
X
Managed
IP network
Additionally, HD calls generated
by over-the-top services cannot
break out to HD-capable mobile
phones.
Figure 2: HD voice without interworking
Mobile
network 1

Mobile
network 2

Interworking

Internet

Managed
IP network
Services established on private
managed IP networks may be able
to reach services on other private
managed IP networks, or on the
Internet, but will not always use the
same codecs and so may not be
interoperable. Worse, there may be
no mechanism for the different IP
end points to identify and locate
one another and hence to know
that an HD call is even possible. HD
calls originating on one mobile
network cannot yet reach people
with HD capable devices on other
operators’ mobile networks and
certainly cannot reach devices on IP
networks.
There is a significant opportunity for
communication providers to drive
extra revenues by enabling crossnetworking of all these sorts of
national and international HD calls,
and to enable HD voice roaming.
Example scenarios in which service
interworking can expand the
addressable market are shown in
Figure 3.
Figure 3: HD voice with interworking
Over-the-top communication providers
have an opportunity to introduce HD voice-in and voice-out
services for their customers. Calls can break-out to mobile networks
for termination on HD-capable devices without losing their HD
characteristics. They also have the opportunity to offer on-net HD
voice services delivered over managed networks. This enables the
qualities of the HD service to be supported by transmission facilities
capable of ensuring quality of service. Customers in some segments
of the market would be prepared to pay a small premium for this
quality.
GBP Millions
Potential global retail revenues from cross
network HD voice services
Mobile network operators
have the opportunity to deliver and charge for cross-network
national and international and roaming HD calls. They also have the
opportunity to enable HD calls to be made to end users on managed
IP networks, and to people using over-the-top services.
1,600
1,400
1,200
1,000
800
600
400
200
0
2012
Fixed network operators
can enable HD voice calling from IP CPE on managed IP networks to
IP CPE on third-party managed networks. Additionally, they can
provide the service to IP devices on non-hosted IP PBXs, to mobile
end points, and to devices equipped for over-the-top services.
-
2013
2014
2015
Figure 4: Potential global retail revenues from cross-network
HD voice services
Innovation Observatory estimates that globally, these three groups
of communication providers can access extra retail revenues of as
much as £1.5 billion by 2015. At that point penetration and usage
of HD-capable devices will still be growing rapidly each year –
suggesting tremendous room for further growth (see Figure 4).
Videocalling
Videocalling has been available on 3G networks for several years (as
a circuit-switched service) but services are not widely used.
According to research published by UK regulator Ofcom, as few as
3% of all mobile end users in the UK make a video call at least once
per week. This is not atypical in the global context. Mobile users in
the US are amongst the biggest users, with 6% making mobile video
calls at least once per week. It is estimated that less than 1% of all
3G calls are video calls.
A variety of factors lie behind the low usage levels. For a start,
services are expensive. In the UK call prices range from 15p per
minute on-net, to 50p per minute for cross-net national calls and
as much as £1.50 per minute for international calls. Other factors
include penetration of capable devices (a video call only works
when both parties to the call have video-capable phones), lack of
interoperability between all networks, the social awkwardness
people feel when making video calls (much less of an issue for
younger people), services being awkward to set up (although time
delay issues have been solved), and poor video quality.
However, while mobile videocalling has been slow to take off,
videocalling from PCs has been rising steadily. Skype has got people
used to making video calls. It reports that nearly 40% of all call
minutes going over its network are now video calls. The high usage
of videocalling on Skype shows that behavioural barriers and
attitudes can be overcome.
At the same time, a number of other elements are falling into place
that will help spread the use of videocalling:
1.
Over-the-top fixed and mobile videocalling services are widely
available – for instance from Apple, Fring, Oovoo and others.
2.
Mobile smart phones and tablets are increasingly equipped
with videocalling capability.
3.
Mobile operators hope to use videocalling as a driver for
additional traffic on their LTE networks – for instance Verizon
has plans to put Skype and videocalling on selected LTE
devices from mid-2011.
4.
Home-based devices such as Internet-enabled TVs are
becoming more popular. Some of these are equipped for VoIP
calls (for instance, through partnership with Skype), and with
the addition of a webcam, for video calls. Television sets with
integrated cameras are also available now. Meanwhile
Internet-enabled gaming platforms can also be equipped with
camera accessories. TVs and games consoles will bring Internet
services and videocalling capabilities into the living room over
the next few years.
5.
Demographic factors are making video calls more attractive.
Families are spread geographically, and in many cases all
around the world. People are also travelling extensively for
leisure purposes – videocalling is a new way of keeping in
touch.
6.
The use of desktop and mobile devices, as well as Internetenabled TVs, for videoconferencing (essentially a sub-set of
videocalling) is an area that is ripe for growth. These personal
impromptu videoconferencing solutions offer an extension of
the videocalling concept to include multiple participants. The
service is currently positioned as a premium version of
videocalling, and as such is likely to trail person-to-person
videocalling in terms of service usage. But the market is
expected to grow.
The drivers, enablers and barriers to market growth are very
similar to those for videocalling. Key differences are the extra
incentives enterprises face and the need to cut costs in a tight
economic environment (videoconferencing can negate the
need to travel so often). They also need to improve
organisational sustainability (by replacing regular travel with
videoconferencing organisations hope to reduce their carbon
emissions). Remote working may also prove a driver: people in
advanced economies increasingly work from home or other
remote locations.
7.
Finally, familiarity with videocalling will lead to the
development of new applications for the technology. We can
expect to see videocalling emerge in a variety of contexts
where best-efforts service will not do, and where people are
prepared to pay a small premium for high-quality, resilient
videocalling – especially over WiFi or mobile networks.
Examples include use of videocalling for educational purposes
and in the health sector, rescue and security services, and the
petrochemical industries. Videocalling is not just a consumer
market. Enterprise and public-sector organisations have the
potential to be major users of services.
There are still barriers to overcome before videocalling becomes a
mass market habit. However, the combination of enablers and
drivers now apparent in the market gives great cause for optimism
that videocalling is about to emerge as an important means of
communication.
Low-cost service
availability
Rise in “service
capable” device
penetration
Cost of devices
and cost of
services
Increasing
broadband speed
and penetration
Spread of WiFi
(in devices and
networks)
Difficulty of interservice
interoperability
Familiarity with
service
More international
travel by
consumers
Family spread
Increased home
working
Videocalling not
habitual behaviour
Enterprise desire
to cut travel and
carbon footprint
New enterprise
applications
Difficulty of
service use
Demand for
videocalling
services
Drivers
(growing in influence)
Figure 5: Market enablers and barriers for videocalling services
Poor user
experience
Barriers
(declining in influence)
Market Opportunities
As with HD voice, one major
barrier to the growth of the
videocalling market is
widespread service
interoperability. At the moment
communication providers are
looking at the opportunity to
deliver over-the-top services,
which stay within the Internet
domain; or to provide on-net
services which don’t leave their
own managed networks.
Broadband
access
network
X
X
Mobile videocalling can be
delivered between mobile
phones on the same network,
and sometimes between mobile
networks where the same
standards (and implementations)
are being used.
Mobile
network
X
X
Internet
X
Managed video
conferencing
network
Videoconferencing, telepresence
and videocalling services can be
delivered over managed
networks, but ad hoc break-out
to other devices is problematic particularly where quality of
service needs to be supported.
Figure 6: Videocalling without interworking
Over-the-top videocalling services
can typically interwork with other
devices using the same application,
but there are many applications,
and interworking between them is
limited.
Broadband
access
network

Mobile
network

Interworking

Internet

Managed video
conferencing
network
Figure 7: Videocalling with interworking
However, there are wider
opportunities that can be exploited
through the interconnection of the
different service domains, including
mobile networks, managed
videoconferencing networks, and
over-the-top Internet
environments.
As Figure 7 shows, there is also an
opportunity for fixed broadband
providers to enter the market.
Managed videoconferencing providers
can use a third party to provide one-stop access and
interconnection to a variety of networks, to offer employees ad hoc
and roaming access to enterprise videoconferencing calls.
Fixed broadband providers
should look to Internet-enabled TVs and potentially to games
platforms as a means of delivering premium videocalling services to
their customers. They are in the position to offer managed
videocalling and videoconferencing end-to-end between their own
networks and other fixed broadband providers’ networks* or even to
mobile operators’ networks. They can assure a high quality of
experience that customers will appreciate for long calls with friends,
relatives, work colleagues and customers. At the moment the lack
of interoperability between managed networks has given impetus
to over-the-top communication providers – interworking will
enable network operators to regain some of the market.
Meanwhile over-the-top communication providers
(including social network operators as well as OTT VoIP and videocall providers) should look to drive extra money from their
videocalling and videoconferencing services in three ways:
•
•
•
They should enable video call break-out for termination
on mobile video-call-capable devices not carrying their
own client software (the video equivalent of Skype’s
Skype-Out service).
They should also look at the potential of a video break-in
service (for instance, to enable calls originated on mobile
networks to terminate on OTT services – the video
equivalent of Skype-In).
Finally, they should consider introducing person-toperson videocalling services where calls are routed via
managed IP transit, offering a higher quality of service
(with the OTT provider charging a small fee for the service
– and enabling it to start monetising more customer
traffic).
IP Interoperability
opening up new markets
Innovation Observatory estimates that globally, these groups of
communication providers can access extra retail revenues of as
much as £2 billion by 2015. Usage of videocalling services is
forecast to be growing strongly at that time – meaning the revenue
opportunity is even larger if we look further out than that (see
Figure 8).
Potential global retail revenues from cross network videocalling services
2,500
GBP Millions
For mobile operators,
there is the potential to drive videocalling and conferencing
between mobile networks (for instance to enable completion of
international mobile video calls between networks of different
types, and to facilitate video service roaming).
2,000
1,500
1,000
500
2012
2013
2014
2015
Figure 8: Potential global retail revenue from
cross-network videocalling services
Benefits of using a third party
interoperability provider
IP Interoperability from BT
With all of the services discussed in this paper, full cross-network
service provision is critical, but is some way away. Opening up the
market and driving revenues will require the support of a thirdparty interoperability provider – both in the early days when traffic
volumes and interoperability complexities on any given route are
too much for every operator to manage independently, and once
the market matures and economies of scale and price pressures still
work in favour of outsourcing the task of managing them to a
specialist.
A strong multi-service interoperability provider will deliver
numerous critical service elements:
•
•
•
•
•
A neutral access hub, so sensitive data can be shared, and
complex financial relationships established, in an
environment of trust
Management of many relationships through a single
access point and relationship. The hub must give access to
the maximum possible number of interconnect partners
Simplicity of engagement: interworking services must be
delivered in the most efficient and cost-effective fashion
End-to-end quality of service: the key to unlocking the
value of inter-domain HD voice and video services is to
ensure quality of experience superior to that found on the
unmanaged Internet. This is as true for over-the-top
providers and social network providers as it is for mobile
and fixed network operators
Highly automated processes enabling effective
conversion or transcoding for the audience, and
interworking across key service and network types
BT’s Global IP Exchange service provides the seamless
connection between service providers. Any platform,
switch, protocol or application can connect with any other
network via BT* and* of course* with BT’s own networks. The
service uses industry standards set by the i3 forum and
GSMA. BT ensures Interoperability with all other connected
parties so customers do not need to support all the necessary
protocols and codecs themselves.
Global IP Exchange is in effect a hub, where service providers
connect via a Direct Connection, a TeleHouse, over the
Internet, or over a secure IP connection (MPLS). Voice calls
are managed in conjunction with a centralised numbering
database enabling connections to be IP end-to-end where
possible, or if not to break out (or from) the PSTN.
The numbering database is an essential enabler for advanced
services, such as those described in this paper. Whilst BT
provides the interconnection between service providers it
does not provide the advanced service itself. However, it will
take on the burden of ensuring that the permutations of
differing standards, protocols, and codecs are dealt with to
allow connections to be made end-to-end.
This Hub approach enables IP connection between all service
providers and their end users, but simplified through one
commercial relationship and one network connection.
Consumers would like:
• Ease of use
• Service simplicity
• Things that “just work”
Preference for integrated
comms platform with
single address book across
services (e.g. IM, email,
voice and video calls)
Demand for neutral
wholesale
interoperability
provider
Social networking sites
have platforms supporting
IM, email, image and
video sharing, but need to
monetize their user bases
Maintaining interconnect
agreements for multiple
services between
platforms and suppliers –
at both application and
network levels
Challenge of providing a
good quality, reliable
connection, intelligently
across networks
Retail turf wars with
traditional telcos over who
provides the unified
address book and owns
the customer relationship
Over-the-top drivers
Figure 9: Market enablers and barriers for third-party interoperability services
Service provider challenges
Consumer drivers
A successful interoperability service provider will enable service
providers to access the key geographical markets, on the primary
routes, for a range of intelligently routed services, without the need
to make expensive capex investments. It will enable communication
between over-the-top, fixed and mobile networks. It will help
service providers tap into new revenue streams and develop a
stronger relationship with their customers.
© BT and Innovation Observatory Ltd 2011
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