IP phone number directory could change economics of telephone service business

A plan to map all IP telephone numbers into a single database and allow IP calling to bypass the PSTN altogether could dramatically alter the way revenue is distributed in Canada’s traditional telephone business. ENUM, a numbering standard under development by the Internet Engineering Task Force (IETF), aims to link the telephone number of every IP-enabled device with its web address. This, say experts, could result in lower revenue for local access players such as the incumbent telephone companies, and higher revenue from reduced access charges for Voice over IP providers such as Vonage Canada and Primus Telecommunications Canada Inc. End to reciprocal compensation? Call completion in a traditional circuit-switched environment is based on reciprocal compensation, which means when a call initiated on one carrier is terminated on another the terminating carrier receives a payment. Incumbent telephone service providers have a lot to lose as a result because the Internet works on peering and the service provider terminating the transmission doesn’t receive any money in termination charges. To combat this, the incumbents will try to control how ENUM works. The impact of ENUM introduction in Canada will be felt, but it won’t be as great as it will be in the United States. This is because the U.S. telecom services market is largely divided into two groups of carriers: local carriers and inter-exchange or long distance carriers. In Canada, there isn’t a clear division as local carriers also offer long-distance services. According to U.S. industry figures, termination charges average about one cent per minute and total approximately US$20 billion a year for the American phone system. There are some small independent telcos that can receive as much as 40% of their revenue from access charges while VoIP providers such as Vonage and Primus can pay out 20% to 25% of their revenue in termination charges. Two flavours of ENUM There are two types of ENUM under consideration. The telcos, cable companies and others are looking at carrier or private ENUM, which would link carriers together. Movement on this front is already taking place as Yak Communications Inc. has become a member of XConnect, a global plug and peer network for VoIP calling (greater details regarding this private ENUM group will be in an upcoming issue of Network Letter). Richard Shockey, co-chair of the IEFT ENUM project and senior manager for Neustar, the company that operates North America’s phone number database, says cable companies are ideal candidates for the carrier ENUM model because they have a common interest in banding together to provide continent-wide calling. This form of network peering "is far more economical than reciprocal compensation" employed in the public telephone network. There is some interest in public ENUM, which would be available to individuals and organizations regardless of their carrier. It is worth noting that a public ENUM is not a sure thing and it may never come into existence. "Public and private ENUM are not rivals: they do different things. Public ENUM is oriented to consumers and enterprises; private ENUM concerns how service providers optimize their networks and operations," he says. ENUM trials in North America are scheduled to begin later this under an agreement between the Canadian Internet Registration Authority and US ENUM LLC, the American ENUM authority.

IP phone number directory could change economics of telephone service business

News | March 31, 2005

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