Arbinet Enables Paid VoIP Peering

New service gives VoIP providers a piece of the termination-fee pie.

By Jeff Goldman | Posted Jun 20, 2005
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Earlier this month, Arbinet announced plans to introduce a new service giving voice over IP (VoIP) companies a way to collect local termination charges for telephone calls to their customers. Arbinet currently runs a fully automated platform for trading, routing, and settling voice calls and Internet capacity between communication service providers worldwide.

Instead of paying a local telco to route calls through their network, Arbinet new offering will allow VoIP providers both to match a traditional phone number to the IP address of a VoIP customer, and to charge for routing calls to that customer over the Internet. The service will be built around a settlement system tied to a database that matches telephone numbers to IP addresses.

Steven Heap, Arbinet Chief Technology Officer and Vice President of Business Development, explains that the current system for an international call involves a flow of money from the end user to their local telephone company, to a long distance company, to an international company, and finally to a domestic company in the call recipient's country.

The CLEC or local telco that terminates the call gets money from the VoIP provider to pay for the circuits, as well as from the end user. According to the FCC, in 2002 local telcos collected $14 billion in revenues from access fees alone.

The aim of Arbinet offering, Heap says, is to give some of that revenue to the VoIP providers instead. "Why shouldn't [the VoIP provider] get some payment, a termination fee, for receiving that call for their customer?" he asks. "They've spent the money on getting the customer and supporting the customer, so what's wrong with being paid a termination fee for connecting a call to that customer?"

For VoIP peering—connecting the call and providing the number lookup—Heap says Arbinet previously established business was enormously helpful. "Arbinet core business is matching and trading telephone calls," he says. "We already have about 15 million call attempts per day that we're matching and routing around the world."

Leveraging that system for paid VoIP peering, Heap says, was a relatively straightforward step for the company to take. "We have an immense settlement system which can very easily get applied to this new problem of VoIP peering," he says.

The system works by checking an inbound call from a "buying" Arbinet member against a telephone-number-to-IP-address mapping database, then sending the call directly to the "selling" member's VoIP equipment. The seller can then charge a termination fee for receiving the call. Arbinet will collect and settle the transactions every 15 days.

The most significant challenge in setting up the service, Heap says, lay in routing calls based on a unique phone number. "Normally, routing is done at a country code level or a city level or something like that, whereas this is basically determining, down to the full set of digits in the telephone number, whether this is a Vonage customer or a Cablevision customer or a Primus customer," he says.

While there are other companies out there offering VoIP peering, Heap says Arbinet payment system is unique. "We are both willing and proposing to pay settlements to VoIP service providers as well, whereas many of the other people are saying this will happen for free—mainly because they've got no mechanism to settle for it anyway," he says.

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