Discussion Papers

Juan Rendon , Thomas Plückebaum , Iris Böschen

Relevant cost elements of VoIP networks

No. 316 / December 2008 


With the convergence of telecommunications networks, the voice, data and video signals are transmitted over the same physical link. By using only one network for different services it is possible for the network operators to save costs. There can be OPEX savings by using the well-known and standardised IP network, and CAPEX savings by using high speed interfaces (10 GBit/s) instead of many E1 (2 Mbps) links. One of the technologies that has gained more acceptance among the public and that has been or will be implemented by current and prospective telephony operators is Voice over IP (VoIP). There are telephony operators that use VoIP only at the core network layer, whereas for other operators VoIP is the underlying technology (e.g. Skype).

In order to determine the termination rates in VoIP networks the relevant cost elements have to be identified first. For legacy networks such as fixed and mobile telephony networks there is wide experience about the precise cost elements that must be considered for calculating the cost of voice calls. However, VoIP is a disruptive technology and there are still several uncertainties about the precise services and network elements
typical for a VoIP network. As there is a lack of information about this subject on the existing literature, the report describes this topic in detail.
The objective of this report is to determine the relevant cost elements of VoIP networks deployed by voice operators. To carry out the analysis, the report contains a discussion about the importance of several aspects of VoIP networks as cost elements. The report starts with a description of the following characteristics of IP networks: end-user requirements, access networks, aggregation network, IP core network, network and traffic
management, and quality of service in IP networks. Then, the most relevant VoIP techniques are presented: voice codecs, VoIP architectures and protocols (H.323, SIP, and Skype), nodes and systems such as the softswitch and the IMS, and features of voice networks (numbering and addressing, emergency services, and security issues).

This section compares different VoIP architectures in order to determine the most efficient technology for the definition of a reference model. Later the report touches aspects of interconnection of VoIP networks: interconnection between IP networks, interconnection of IP and PSTN networks, and interconnection in an NGN context of fixed, cable, and wireless networks. Finally, the report describes a few particularities of VoIP networks such as quality of service in VoIP networks, and interconnection issues between voice operators.

The main conclusions of the report are the following:

  • Different VoIP techniques: Unlike what occurs in PSTN networks where there are a limited number of standards (e.g., PCM64 and SS7) that are followed by most operators, in IP networks there is a wide range of VoIP systems and protocols. Depending on the business model of the operator a specific VoIP system VIII Diskussionsbeitrag Nr. 316 will be used. The SIP softswitch is the actual state-of-the-art architecture and it can be considered as efficient reference model architecture.
  • The features of VoIP networks require the deployment of appropriate systems and storage space: Cost drivers that should be considered are number portability (ENUM), emergency calls, billing systems, customer care systems, lawful interception, and data retention.
  • Different interconnection points for each type of NGN network: There are three basic types of NGN networks: fixed networks (PSTN or NGN), cable networks, and wireless networks. The location of the possible interconnection points will have an impact on the cost of the termination rate.
  • Quality of Service: The quality of the voice provided by VoIP service providers is in many cases variable. To satisfy the strict time delay requirements required by VoIP connections the VoIP provider could deploy routers or switches that support QoS mechanisms, or it could expand the capacity of the systems and links. The deployment of QoS mechanism has an impact of the cost of VoIP network elements.
  • Interconnection between two operators: Two aspects should be taken into account. First, for the case of NGN networks it is not clear whether the operators will exchange signalling traffic through the IP or the SS7 interface. Second, the type of interconnection agreement between two operators could be Calling Party Pays, Bill & Keep, or a mixture of both procedures.
  • Common use of the access network: If a NGA is deployed, one has to consider the cost of the access network to some extent as well, but also has to determine the appropriate share of voice and the other services in the access network in order to allocate the cost appropriately.

[only a english version available]

Discussion Paper is available for download.

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