Peering: Interconnecting the VoIP Industry

As the VoIP industry continues to evolve and mature we are starting to see a great deal of providers peering with each other. In this post we will talk a little bit about what peering is and why we are seeing a movement towards peering. Let’s start by providing a little back ground on what peering is all about.

Peering is an agreement between two or more networks (VoIP providers) to peer or physically interconnect for the purpose of exchanging traffic between the users of each network. Peering involves two networks coming together for a mutual benefit, which is typically the reduction or elimination of costs of services. There are two physical interconnections for peering; public peering and private peering. A public peering interconnection utilizing a multi-party shared network such as an Ethernet switch. Whereas a private peering interconnection utilizing a point-to-point or direct link between two parties.

So why is the VoIP industry, more specifically Wholesale VoIP providers and larger retail service provider’s, peering more often? There are a couple reasons why; better quality and cost savings. Let’s analyze how calls are handled. A wholesale VoIP provider purchases services from an ULC (under lying carrier) or third party network so it can be resold. These ULCs register the numbers with NPAC, provide a link to the PSTN (public switch telephone network) and bill for these services. The main purpose of the ULC to the VoIP provider, is to transition IP calls to and from the PSTN (Public switching telephone network) as well as pass IP to IP calls.

Well what about the calls that don’t need to be sent to the PSTN; do they have to be sent to the ULC? The answer is no, not with a peering structure in place. These calls can be passed directly between VoIP provider’s, eliminating the need to pass calls to the ULC. Without peering, VoIP providers rely on ULCs to act as the central hub to pass traffic from one provider to another provider. As peering increases, we are seeing more and more direct interconnections between VoIP providers, and ultimately, less need for the middle man.


Peering Diagram

This means that VoIP providers with large networks of users who peer with other large networks can pass calls directly to each other; reducing costs and increasing quality for the end user. This can be a tremendous competitive advantage to providers who choose to interconnect!

The benefits of peering stretch far beyond simple cost reductions. End users will benefit from the interconnections that are formed during the peering process. As a result of peering, end users will see a noticeable change in the quality of their services. Since the middle man is cut out, there are less switch hops, reduced PDD (post dial delay), reduced service degradation, and less chance of equipment failure. It’s no wonder that peering is growing in popularity; the customers are getting a better quality of service and that’s all any good VoIP provider strives to do.

As more providers interconnect their infrastructures through peering partnerships and more user adopt VoIP phone service, the need to depend on ULCs will decline. This will leave an interconnected VoIP network owned and operated by a large amount of smaller VoIP providers rather than a few government and large enterprise entities.

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