SIP PeeringA Business Model For ISPs

Jim Dalton

16 October 2007

2

Environmental Scan• Years of growth ahead for VoIP market.

– Consolidation with New Niches Emerging

• A lot of competition– Telcos– Cable Company’s– New entrants: Skype, Ooma, Google, Gizmo

• Some disasters: SunRocket, • Plenty of profit opportunities and success

stories: CBeyond, Covad, Packet8

3

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

4

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

5

Selling Proposition

High Speed Internet AccessDomain ServicesIP AddressesNetwork ConfigurationManaged Firewall ServicesVPN

E-mail with Spam and Virus ProtectionFile Backup & SharingFax to E-mailWeb Hosting

Connectivity Applications

Dat

aV

oic

e IP Access to PSTN (outbound calls)Direct Inward Dial Services (DID or inbound calls)

Long Distance Resale800 Number ServicesLocal Service (CLEC License) CALEA, CallerID, Voice Mail E911, LNP, Operator ServicesHosted PBX Services

6

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.

7

IP Access to PSTN• Enterprise with three

branch offices.

• Eight phone lines (DS0s) per office

• $50 per DS0/month

• $1200/month

LECLocal

ExchangeCarrier

PBX

PBX PBX

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IP Access to PSTN

IntergratedAccessDevice

(ISP Equipment)

VoIP - PSTNGateway

(ISP Equipment)

GlobalPSTN

Internet

SIP Trunk

PRITrunk

PRI Trunk = Primary Rate Interface (23 Voice Channels) $300 -$600 per month

PBX

PBXPBX

IAD Cost = $800 - $3600 eachGateway Cost = $40 - $100 per voice port

LocalTelco

Switch

9

IP Access to PSTN

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

PRITrunk

PRI Trunk = Primary Rate Interface (23 Voice Channels) $300 -$600 per month

Gateway Cost = $40 - $100 per voice port

LocalTelco

Switch

10

DID Services

IPPBX

VoIP - PSTNGateway

LocalTelco

Switch

GlobalPSTN

Internet

SIP Trunk

PRITrunk

11

Selling Proposition

High Speed Internet AccessDomain ServicesIP AddressesNetwork ConfigurationManaged Firewall ServicesVPN

E-mail with Spam and Virus ProtectionFile Backup & SharingFax to E-mailWeb Hosting

Connectivity Applications

Dat

aV

oic

e IP Access to PSTN (outbound calls)Direct Inward Dial Services (DID or inbound calls)

Long Distance Resale800 Number ServicesLocal Service (CLEC License) CALEA, CallerID, Voice Mail E911, LNP, Operator ServicesHosted PBX Services

12

Long Distance Resale

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

PRITrunk LD

CarrierSwitch

Internet Telephony Service Provider operates theVoIP to PSTN Gateway to resell Long Distance Services

13

Long Distance Resale

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

LDCarrier

• 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

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

LDCarrier

SIP Trunking to the LD Carrier Eliminates: - Cost of PRI ($200-$600/month, 23 channels) - Gateway Investment ($40-$100 per channel)

15

Long Distance Resale

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

LDCarrier

How does an ISP Control and Profit from VoIP whenCustomer can have SIP Trunks directly to the Carrier?

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Long Distance Resale

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

SIP Trunk

LDCarrier

Open Source VoIP platforms provide the technicallysavvy ISP with a cost advantage for SIP call control

SIPProxy

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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

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

LDCarrier

SIPProxy

Invite

Invite

Audio

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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

IPPBX

VoIP - PSTNGateway

GlobalPSTN

Internet

LDCarrier

SIPB2BUA

Invite

Invite

Audio

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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

IPPBX

VoIP - PSTNGateway

GlobalPSTNSIP Trunk

LDCarrier

OpenSER

CustomerAuthentication

MySQL CallDetail

Records

BillingSystem

OpenSER

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LD Resale Business Case

• 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

Revenue

PSTNTermination

DIDServices

Cost of Sales

1.5 – 2.5 cents/minute $1-$12 per month

0.7 - 1.6+ cents/minute $0.2 - $0.5 per month0.3 - 1.2 cents/minute

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Marketing• Selling to existing customers that already

SIP enabled is no-brainer– Don’t 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

IPPBX Global

PSTNSIP TrunkOpenSER

CustomerAuthentication

MySQL

OpenSER

CallDetail

RecordsBillingSystem

Carrier1

Carrier2

Carrier3

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Increasing your Gross Margin• SIP carriers also provide 800 number services • 800 services are special case SIP DID calls

IPPBX Global

PSTNSIP Trunk

OpenSER

CustomerAuthentication

MySQL

OpenSER

CallDetail

RecordsBillingSystem

Carrier1

Carrier2

Carrier3

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Increasing your Gross Margin• 800 Number Services can be combined with

Least Cost Routing to serve PSTN customers

IPPBX Global

PSTNSIP Trunk

OpenSER

CustomerAuthentication

MySQL

OpenSER

CallDetail

RecordsBillingSystem

Carrier1

Carrier2

Carrier3

PBX

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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

GlobalPSTNOpen

SER

CustomerAuthentication

MySQL

OpenSER

CallDetail

RecordsBillingSystem

Carrier1

Carrier2

Carrier3

PBX

SIP Trunks

VoicePromoServer

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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