Turnkey VoIP System—Network Included

Within the next few weeks, ISPs will be able to buy into a complete, managed Voice over IP system with proven performance, for $5,000 or so.

by Gerry Blackwell
[August 11, 1999]

ISPs who get interested in the VoIP "opportunity" will quickly discover there is more than one way to skin the IP telephony cat. Picking the right one for your ISP could make the difference between success and failure.

Different business models, network designs, and telephony technologies will make significant differences in the types and quality of service you can offer—and your resulting profitability.

This month, we look at the unique and relatively hassle-free approach proposed by ISPhone Inc., a Traverse City Mich. start-up. (We'll explore others in future columns.) ISPhone is just finishing Beta testing its network and expects to bring commercial ISP customers on stream in the next few weeks.

Churn eliminator
The company is the brainchild of president Victor von Schlegall, who was running an ISP himself when he began developing the idea. Von Schlegall realized the way to reduce customer churn and increase profitablity was to offer value-added services. No big brain wave there.

VoIP was clearly a good candidate, but for a medium-size regional ISP to make it work, he concluded, called for more network resources than he had or could hope to have. Von Schlegall came up with the notion of a managed network linking independent ISPs.

Networking ISPs to reduce costs of routing IP telephone calls is not in itself unique. Clearing houses such as those operated by AT&T and ITXC, among others, do the same thing. And some small regional ISPs are making a series of bilateral agreements with couterparts in other regions to achieve the same end.

Simple concept
When an ISP customer in Los Angeles calls a party in New York, the call goes through the L.A. ISP's IP telephony gateway, out over an IP network—sometimes the public Internet itself—to a gateway owned by a New York ISP.

That gateway routes the call—as a "free" local call—onto the PSTN which delivers it to its final destination. The LA ISP pays the New York ISP for terminating the call.

The clearing house operator manages routing of calls and billing among the participants. ISPs who go it alone have to do their own call routing and financial reconciliations.

"Part of what we do is act as a clearing house," von Schlegall explains, "but the typical clearing house is more an open market approach. They don't care about the backbone network, for instance. Ours is a more managed approach."

Routing calls over the open Internet can mean poor reliability and call quality because of latency and other problems.

Heavy competition
"One thing was clear to us," von Schlegall says. "Long distance in the U.S. is already very competitive. If we were going to provide long distance service as an ISP, it would have to be as close as possible in terms of quality and reliability to what people were used to."

The answer was a managed network that could provide guaranteed service levels. ISPhone, formed last year to pursue von Schlegall's vision, chose Denver-based Qwest Communications International Inc. to provide backbone network services.

Qwest has points of presence virtually everywhere and prices its services aggressively.

With the service Qwest provides ISPhone, latency is reduced to a total of 125 milliseconds end to end to end—well below the 250-millisecond threshold at which callers can notice delays.

In a controlled test call, it was impossible to notice any difference in quality from a PSTN call.

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