IP Challenge: Handing Off Calls

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The fast-growing IP-telephony industry is sorting through a
number of approaches to the business side of interconnecting networks, which could greatly
affect the way that cable entrants structure their own service strategies.

The goal in all instances is to come up with an efficient
means of finding a terminating network connection for calls moving out of the network
"cloud" of an originating carrier. So far, this has largely been accomplished
through one-on-one agreements between carriers, or through affiliations of individual
carriers in international alliances.

With the rapid growth in IP-voice (Internet-protocol)
traffic and a proliferation of carriers, industry players are searching for more universal
means of connecting individual calls over disparate networks. The hope: to eventually
match the global interconnection efficiencies of the public switched telephone network.

The cable industry's PacketCable task force is looking
at technology based on the new Open Settlement Protocol as one way to achieve highly
flexible and efficient interconnectivity, assuming that there is sufficient support for
the concept in the IP-telephony world at large.

Other approaches involving contractual arrangements with
middlemen acting as clearinghouses are springing up to compete with the more automated
systems concept. This has left unclear which approaches will make sense for cable
operators as they begin offering IP-voice and related services in 2000 and beyond.

"The advantage to an OSP-based strategy is the
flexibility that it affords carriers," said Stephan Thomas, chief technical officer
at TransNexus LLC, an Atlanta-based start-up positioning itself as a clearinghouse for IP
calls.

Carriers using the facilities of OSP-based settlement
services will be able to position the data-collection points for their calls wherever they
want to in their networks, colocating them with switches in some cases, or putting them at
centralized service points on managed IP backbones, Thomas said.

Information about each call's destination and
quality-of-service parameters is passed from these collection points to the central
clearinghouse server. The server matches the call with the termination gateway of another
carrier based on pre-established cost and performance parameters, and it then passes along
instructions on how to route the call to the originating carrier's call-control
center.

"We serve as a real-time source of authorization based
on the best available options that meet the criteria set by the originating carrier for a
given call," Thomas explained. "To a large extent, we allow the carriers control
over the price and quality parameters."

For example, the system gives operators the option of
picking ceilings on acceptable delay, while setting price limits, which, if not met, could
result in the choice of a higher-delay route in order to meet the price limits, or vice
versa, Thomas said.

In addition, he noted, the system maintains a
"compatibility matrix," which ensures that there will be interoperability
between the originating and terminating carriers' gateways.

TransNexus, which has not previously publicized its plans,
recently joined the royalty-free pool for intellectual-property rights created by the
cable industry's PacketCable task force as an author of specifications. This means
that the company might contribute proprietary ideas to the group's specifications,
which are slated for distribution starting next month.

"We're not a software vendor, but we might
contribute to enhancements or extensions of OSP for PacketCable," Thomas said.

TransNexus comes to light as the number of other players
using more traditional means to establish themselves as clearinghouses for interconnecting
IP calls continues to expand.

Most recently, pulver.com, an IP-telephony-consulting and
conference-management company, established Min-X.com (The Minutes Exchange), with support
from a wide range of Internet-telephony-service providers, as a means of assisting ITSPs
in marketing their capacity on a global basis.

ITSPs that join Min-X will list their termination
capacities on a Web-based system, allowing other participants to contact them and
negotiate contracts, said Jeff Pulver, the company's founder and CEO. The primary
negotiations will take place in face-to-face "deal meetings," occurring at least
four times a year, Pulver added.

"At this stage of our nascent industry, there is no
such thing as a standard contract, although we anticipate that model contracts will evolve
over time," Pulver said.

As standards evolve, Min-X activity will transition from
real meetings to a more virtual format, he said, adding that the first Min-X meeting is
scheduled for Dec. 10 and 11 in New York.

Pulver stressed that Min-X is meant to facilitate the use
of IP-telephony facilities without competing against vendors that supply settlements or
routing authorization.

Companies that are dependent, in part, on handling these
tasks were quick to praise the Min-X strategy as a neutral zone, offering all players the
opportunity to trade minutes in the interest of maximizing the use of IP
telecommunications.

"IDT has been using this model on the telecom
side," said David Greenblatt, chief operating officer of Net2Phone, a division of IDT
Corp., a leading provider of IP-voice services. The exchange will "drive even more
minutes over our IP network," he added.

Taking a different approach from these players, ITXC Corp.
has gone further than anyone so far in establishing a means for global interconnection of
IP-voice networks, with more than 34 certified affiliate-gateway sites in 15 countries.

Rather than brokering interconnection agreements, ITXC
negotiates its own agreements, and it then pools all of its affiliate networks for use in
terminating calls as they are passed over its backbone.

"Today, IP telephony is in the state that traditional
telephony was in 100 years ago," said Tom Evslin, chairman and CEO of ITXC.
"With 1,000 service providers now in the marketplace, it would take something like a
half-million contracts for them all to establish interconnection relationships with each
other."

Calls placed on standard phones by callers served by ITXC
affiliates are routed by prepaid calling-card companies, call-back companies and other
resellers to gateways, which convert the calls from circuit-switched format to IP. From
there, the calls are handed off to ITXC, Evslin explained. ITXC uses the public Internet,
as well as its private data network, to transport the calls.

ITXC recently broke through Baby Bell resistance to
terminating IP calls by signing on Bell Atlantic Corp. as an affiliate. Traffic originated
by ITXC affiliates worldwide will gain carrier-class termination from Bell Atlantic within
that carrier's operating territories, Evslin said.

AT&T Corp. has also thrown its hat into the
IP-settlement ring, anticipating that its status as a leading clearinghouse for PSTN calls
internationally will put it in a leading position to provide similar services for IP
carriers.

But the approaches taken by AT&T and ITXC might not
survive for long in the fast-moving IP-telephony world, suggested Mark Winther, an analyst
who follows IP telephony for International Data Corp.

"You're going to see even more clustering of
individual carriers into big alliances, which will provide fewer points of interaction for
achieving interconnection and settlement agreements," Winther said.

"Clearinghouses like ITXC are providing a very
valuable role in the near term, but it's unclear where they'll fit in the
future," he added.

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