Provider Profile: Arbinet-thexchange

Friday Feb 16th 2007 by Ted Stevenson

This behind-the scenes service provider brings efficiency and cost savings to the world of VoIP—and other—phone calls.

There's more than one way to skin a cat, as the old saying goes—and there's more than one way to route a phone call. The art of connecting a caller in California (or Calcutta) to a phone number in Nebraska (or Namibia) involves the ability to play the network of networks that make up our phone system to best advantage—both commercially and in terms of call quality.

How does this happen? One of the possible answers involves the involvement of a peering services provider, and we recently had the opportunity to learn the ins and outs of this art from one of the gurus of the business, Steven Heap, CTO of Arbinet-thexchange—an organization that, indeed, makes "voice peering services" available to more than 50 carrier/partners that, in turn, serve some 85 million end customers (local phone subscribers).

Voice peering appears (no pun intended) to involve quite a number of "moving parts," and has a slightly mystical quality in terms of practices and benefits. We came away from our conversation with Steven with a clearer understanding of what those parts are and how they fit together to create something of benefit to phone customers.

We first encountered the term peering in the context of the Internet connectivity business, where it means a direct interconnect between two IP networks, for the exchange of data traffic that might otherwise traverse multiple intermediary networks, with connection charges and possible service degradations accumulating all along the way.

The idea is much the same for telephony. "What voice over IP peering is trying to achieve is to establish a direct connection from the originating service provider to the terminating service provider—the service provider that's got the end customer," Heap explained to "If you can establish that connection, it's the most efficient connection you can get."

And along the way, you eliminate multiple middlemen and resellers and their associated technology conversions—which may impact call quality—and their bit of margin as well.

But Heap was quick to point out that in the telephony context, peering is a more complex challenge. Whereas with IP addresses (the currency of Internet service peering), the ownership of any address block is fixed and unchanging. By contrast, telephone numbers—at least since the advent of number portability—are an ever-shifting target. In order to know how to route a call efficiently, you must know what network owns the customer you are trying to reach—a piece of information that may change from day to day.

"Bilateral" peering agreements can get around this problem, at least in theory. In this scenario two carriers would exchange number information on a regular basis and thus be able to route calls directly to each other's networks. But multiply the number of bilateral peering relationships by ten, or twenty, or fifty—or however many partners you might want to rout calls to—and you've got a big headache.

In Arbinet's case, the solution to this fundamental problem involved the creation of a community of "trusted partners" and the establishment of a shared repository of phone number data—a non-profit, non-stock company called the SPIDER Registry—that can be updated by each partner in a one-to-one interaction. Partners then download the updated data from others in the community into their own ENUM "transaction" servers, in a separate one-to-one interaction.

(For an abundance of detail on ENUM—electronic numbering—technology, see these VoIPplanet articles: ENUM Standards and Operation and Implementing ENUM.) SPIDER thus makes up-to-date phone number information available to all "registrars" or members of the community.

With the necessary phone number/routing information in place, Arbinet is instantly able to query its transaction server (Arbinet uses the TITAN server from NetNumber) when a call comes in, determining if it can route it directly to the terminating network.

So, does this mean direct VoIP-to-VoIP connections, eliminating handoff fees and technology conversions? Not very much of the time, according to Steven Heap. Arbinet's customers are a mix of TDM (traditional) and voice over IP carriers. "We realized—after trying to keep this as pure voice over IP—that there was actually very little pure voice over IP-to-voice over IP traffic," he told Heap estimates that VoIP today accounts for roughly 5 percent of telephone traffic in North America—possibly a bit higher. When you calculate the pure IP-to-IP portion of the total, it would be in the range of 5 percent of 5 percent, or roughly one-quarter of a percent—a negligible amount at this point.

Still, Heap explained, "We took the view that this idea of peering has a lot of advantages—it's not a silly idea to go directly from originator to terminator in one hop—but why do you have to limit that to voice over IP?"

So, Arbinet's business splits into two vectors. Where direct connection is possible—whether "pure VoIP" or TDM/VoIP—Arbinet effects such connections, including handling any necessary technology conversions (SS7 to SIP or vice versa), and acting as the settlement entity for the revenue flows involved. That's the direct peering mode.

The other business mode Arbinet calls its Minutes Exchange. It's like a more conventional method of routing calls among carriers, and often involves multiple middlemen—but with a difference: intelligent routing choice, based on quality and cost factors. Here's the scenario as Heap laid it out for

"A customer dials an international call. The local service provider hands the call off to a long-distance provider in the U.S., who in turn hands it off to a international provider," Heap explained. "That international provider in turn might use Arbinet as a way of finding a termination for that call," in which case Arbinet would determine an appropriate international provider for the terminating end, and the call would eventually be transported to the local provider of the party being dialed. "So Arbinet is in the middle of finding the right provider for that particular call—based on a combination of price and quality—and we're in the middle of a chain of money flows," he added.

"The benefits are quality and lower cost," Heap reiterated. "It doesn't necessarily mean free; that's a misconception. It's direct, and if people agree that it's free, that's fine; if they decide that there's some settlement or termination rate, that's what it is.

In fact, in most scenarios, every carrier along the chain expects to be compensated, including the terminating local carrier. Arbinet negotiates each fee structure separately, and then passes the money along to the appropriate recipient.

"One terminating company might say 'I'll take any calls to my customers at a quarter of a cent per minute,' " Heap explained. "Then Arbinet collects that money from all the originators and pays the receiver of the calls at a quarter of a cent. In that case, Arbinet is acting as a consolidation point, doing the rating and settling as the calls go through."

In fact, "Our Arbinet's Minutes Exchange and is in the core of the traditional way that calls are routed and traded," Heap acknowledged—albeit benefiting from the company's intelligent assessment of cost, route, and technology conversion factors.

Over time, Heap explained, the distinction between this and voice over IP peering will fade away. "This will happen when the service providers have made enough progress in migrating customers over to voice over IP."

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