IP Interconnection – Why is it so vital?

As we transition to an all IP world, the future of interconnection is by no means certain. It’s vital that the industry is aware of the potential issues that could lie ahead. Tracey Wright, Chair of ITSPAs Industry Developments Group, explains.

In the 2017 Narrowband Market Review (NMR), Ofcom determined that there was insufficient migration to consider looking at IP based interconnects for the purposes of regulation. However, they did indicate that should the situation vary during the review period they would revisit this decision.

It has long since been ITSPA’s opinion that sufficient volumes of traffic are routing via BT’s IP Exchange product to indicate that an IP interconnect would be welcomed by industry and, for reasons listed below, we believe it essential for the IP interconnect to be regulated to maintain the current clarity, security and equal terms that are afforded by the TDM equivalent we have today.

ITSPA finds It is worrying that there is currently no regulated alternative to TDM interconnects with BT, thus encouraging further expansion on the old technology and keeping the industry further behind on migration to an all IP environment. BT’s planned 21CN network, which had intended to reduce the number of Points of Interconnect from over 600 down to 20, has stalled. The result is that the only alternative to TDM expansion currently is to become a customer of BT’s IP Exchange product on negotiated commercial terms.

We believe there is distortion of the interconnect and transit market as a result of the migration of large networks from regulated TDM interconnects to BT’s IP Exchange product.

Previous reviews have stated that the requirement for BT to offer a regulated interconnect circuit is appropriate as without it there would be no incentive to provide interconnect on a reasonable basis which would then reduce the other remedies in place for wholesale call origination and wholesale call termination. Regulated interconnects facilitate competition in downstream markets by allowing other providers to compete.

It would seem logical to ensure the requirement is technology agnostic going forward. TDM was the selected technology for regulated interconnect during the last review period as this is the means by which most customers were connected to the network at that stage. However, with BT announcing its intention to close down their part of the PSTN network by 2025 there is already evidence of volumes migrating at a rapid pace which will increase as we edge closer to the deadline.

As more and more traffic utilises the IP network, many carrier partners are left with only two options. The first is to pay hefty (unregulated) transit charges to deliver or collect traffic to the BT network and the second is to become a customer of the BT IP Exchange product and negotiate commercial terms.

With larger networks being in a position to negotiate more attractive terms, some are choosing to use the commercial product due to the apparent cost advantages, this in turn increases the traffic originating on the IP Exchange platform thus increasing call origination and transit charges even further for the remaining networks not using IP Exchange.

With Ofcom deeming an NGN network with 20 Points of Interconnect ‘efficient’ for the purposes of calculating call costs, we believe that the same calculations should be used to for interconnect. By encouraging IP interconnects at far fewer than the 650 DLEs (that are currently required to gain fixed termination rates) we would see wider uptake of interconnects, which in turn would benefit competition in the transit market.

We propose that a competitive and fair environment that encourages investment in new technologies, as well as ensuring the purpose of wholesale call termination and origination regulated pricing is maintained, requires a simple solution:

  • BT to be required to offer a regulated IP interconnect alongside TDM interconnects (until such a time that TDM becomes unviable).
  • And/or: BT to be required to offer regulated TDM interconnect at fewer points to give access to fixed termination rates with less unnecessary infrastructure investment.
  • Transit market to be reviewed and, should Ofcom agree that BT once again have SMP in this market, regulate the rates.

With the wholesale cost of calls constantly increasing as a result of network infrastructure choices, as an industry we must commit to finding solutions that create an environment where competition is encouraged. As a result, consumers will benefit from savings as well as new technologies and innovation.

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David Dungay

Editor - Comms Business Magazine