SIP Peering A Business Model For ISPs

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SIP PeeringA Business Model For ISPs

• Jim Dalton
• 16 October 2007

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Environmental Scan

• Years of growth ahead for VoIP market.
• Consolidation with New Niches Emerging
• A lot of competition
• Telcos
• Cable Companys
• New entrants Skype, Ooma, Google, Gizmo
• Some disasters SunRocket,
• Plenty of profit opportunities and success
  stories CBeyond, Covad, Packet8

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Target Markets

• Individuals
• Anyone with broadband access
• Tough to compete with Cable triple play
• Small Businesses (up to 250 employees)
• Unserved by Cable companies
• Underserved by Telcos
• Large Businesses
• ISPs cannot compete against Telcos

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General Strategy

• VoIP services must be a complement to existing
  services
• Deploy services incrementally to limit risk
• Use technical skills as a competitive advantage
• Use Open Source platforms offer major cost
  advantage
• Leverage existing sales and marketing channels
• Be relentless about conserving cash

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Selling Proposition
Applications
Connectivity
High Speed Internet Access Domain Services IP
Addresses Network Configuration Managed Firewall
Services VPN
E-mail with Spam and Virus Protection File
Backup Sharing Fax to E-mail Web Hosting
Data
IP Access to PSTN (outbound calls) Direct
Inward Dial Services (DID or inbound calls)
Long Distance Resale 800 Number Services Local
Service (CLEC License) CALEA, CallerID,
Voice Mail E911, LNP, Operator
Services Hosted PBX Services
Voice
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IP Access to PSTN

• Target Market
• Special situations where IP access to PSTN has a
  major cost advantage.
• ISP provides the network plumbing to access
  traditional telco services.

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IP Access to PSTN

• Enterprise with three branch offices.
• Eight phone lines (DS0s) per office
• 50 per DS0/month
• 1200/month

PBX
PBX
LEC Local Exchange Carrier
PBX
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IP Access to PSTN
PRI Trunk
PBX
PBX
Local Telco Switch
Global PSTN
SIP Trunk
PBX
Internet
VoIP - PSTN Gateway (ISP Equipment)
Intergrated Access Device (ISP Equipment)
PRI Trunk Primary Rate Interface
(23 Voice Channels)
300 -600 per month
IAD Cost 800 - 3600 each
Gateway Cost 40 - 100 per voice port
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IP Access to PSTN
PRI Trunk
Local Telco Switch
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX
PRI Trunk Primary Rate Interface
(23 Voice Channels)
300 -600 per month
Gateway Cost 40 - 100 per voice port
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DID Services
PRI Trunk
Local Telco Switch
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX
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Selling Proposition
Applications
Connectivity
High Speed Internet Access Domain Services IP
Addresses Network Configuration Managed Firewall
Services VPN
E-mail with Spam and Virus Protection File
Backup Sharing Fax to E-mail Web Hosting
Data
IP Access to PSTN (outbound calls) Direct
Inward Dial Services (DID or inbound calls)
Long Distance Resale 800 Number Services Local
Service (CLEC License) CALEA, CallerID,
Voice Mail E911, LNP, Operator
Services Hosted PBX Services
Voice
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Long Distance Resale
PRI Trunk
LD Carrier Switch
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX
Internet Telephony Service Provider operates
the VoIP to PSTN Gateway to resell Long Distance
Services
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Long Distance Resale
LD Carrier
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX

• Long Distance Service Provider operates the VoIP
  to PSTN Gateway
• Similar to traditional switchless resale of LD
  Services

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Long Distance Resale
LD Carrier
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX
SIP Trunking to the LD Carrier Eliminates -
Cost of PRI (200-600/month, 23 channels) -
Gateway Investment (40-100 per channel)
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Long Distance Resale
LD Carrier
Global PSTN
SIP Trunk
Internet
VoIP - PSTN Gateway
IP PBX
How does an ISP Control and Profit from VoIP
when Customer can have SIP Trunks directly to the
Carrier?
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Long Distance Resale
LD Carrier
Global PSTN
SIP Trunk
VoIP - PSTN Gateway
IP PBX
Internet
Open Source VoIP platforms provide the
technically savvy ISP with a cost advantage for
SIP call control
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Open Source VoIP Platforms

• Two types of SIP call control platforms
• SIP Proxy
• High scale, Hundreds of calls per second
• Back to Back User Agent (B2BUA)
• Less scale, more control

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SIP Proxy

• Forwards SIP messages from Source to Destination
• Audio packets stream directly from the source to
  the destination
• No IP masking between the Source and Destination

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B2BUA

• Forwards SIP messages from Source to Destination
• Audio packets stream through the B2BUA
• IP addresses are masked between the Source and
  Destination

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Open Source VoIP Platforms

• SIP Proxies
• SIP Express Router (SER)
• OpenSER
• Back to Back User Agents (B2BUA)
• Asterisk Popular PBX
• FreeSwitch Softswitch for Carriers
• YATE VoIP Softswitch

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Example Deployment
LD Carrier
IP PBX
Global PSTN
SIP Trunk
VoIP - PSTN Gateway
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LD Resale Business Case
PSTN Termination
DID Services
Revenue
1.5 2.5 cents/minute
1-12 per month
Cost of Sales
0.7 - 1.6 cents/minute

• Investment and S, G A
• Server Hardware 3k to 10k
• Billing, taxes Outsourced services limit risk
• Systems Integration 0.5 2 Man Years
• Sales Marketing Can be low to existing
  customer base

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Marketing

• Selling to existing customers that already SIP
  enabled is no-brainer
• Dont let other ITSP poach your customers
• Partner with IP-PBX resellers
• They need you!
• You need them to provide fulfillment of products
  that enable SIP Peering
• Growing number of Asterisk Resellers

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Increasing your Gross Margin

• Least Cost Routing inter intra-state calls will
  reduce your Cost of Sales by 50
• Use LERG analysis to optimize routing

Carrier1
IP PBX
Global PSTN
SIP Trunk
Carrier2
Carrier3
Call Detail Records
Billing System
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Increasing your Gross Margin

• SIP carriers also provide 800 number services
• 800 services are special case SIP DID calls

Carrier1
IP PBX
Global PSTN
Carrier2
SIP Trunk
Carrier3
Call Detail Records
Billing System
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Increasing your Gross Margin

• 800 Number Services can be combined with Least
  Cost Routing to serve PSTN customers

PBX
Carrier1
IP PBX
Global PSTN
Carrier2
SIP Trunk
Carrier3
Call Detail Records
Billing System
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Increasing your Gross Margin

• SIP infrastructure has the flexibility to provide
  innovative, high margin niche services
• High volume calling for short promotion campaigns

PBX
Carrier1
Global PSTN
Voice Promo Server
Carrier2
Carrier3
Call Detail Records
Billing System
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What About Local Services?

• Local Telephone Services offer the highest
  margins
• It can be done using Open Source.
• But, Local Telephone Service is difficult
• CLEC Regulatory Requirements
• CALEA, E-911, Local Number Portability

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What About Hosted PBX Services?

• Hosting a VoIP PBX is a lot like hosting a Web
  Server.
• A good fit for ISPs when reselling Local
  Telephone Service
• Hosting a VoIP PBX and providing Local Services
  with carrier requirements is an expensive
  challenge.

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Conclusion

• SIP trunking enables ISP to offer their customers
  new applications with low risk and low
  investment.
• In-house technical skills and open source
  software offer an important cost advantage
• Start small and grow incrementally
• Partner with Sales Channels selling VoIP Apps
• VoIP PBXs
• VXML and IVR applications