VoIP Peering Exchange Platform - how it works?
Once very popular VoIP Exchange platforms may see their comeback in a new format.
VoIP Peering or Exchange platforms were quite popular few years ago, and since then has seen some decline in popularity. However, with the rise of new technologies and market conditions, they might see the comeback in one or another form. Let's see what they are and how they work.
With the growth of popularity of VoIP in early 2000s, there was a large increase of number of independent VoIP carriers around the world. There were (and are) many direct route providers, and also many wholesalers or aggregators and retailers. Direct route providers tried to interconnect with retailers directly to sell their products, but since the number of destinations is too large, in many cases that led to high number of peer-to-peer connections and contracts which became difficult to manage. Therefore many retailers resorted to use few direct route providers for their most important routes, and wholesalers for the rest of the traffic. This solution works in general, but in a very competitive environment does not guarantee to get the best prices and quality. New direct route providers appeared every day, and they were also looking for access to buyers which was hard to get.
One of the answers to this problem was Exchanges. Exchanges made possible for sellers to offer their routes on the open market platform and buyers to search for best offers. The exchanges also took most of the work of testing, verifying and financial clearing off the buyers. Here is an example how Exchange looks for the buyer/seller perspective:
Buyers, with their space capacity contacted Exchange and offered their routes. Exchange would test their routes for validity, either manually or via some automatic process. After tests, the contract between Exchange and Seller was signed, where seller was selling their routes to the Exchange and exchange guarantees the payment. Then the route is posted on the trading platform, without mentioning the seller details. Instead it was assigned some kind of Identification Number.
The buyers, on their part, would sign the contract with the Exchange, and get the access to the Exchange trading platform. They can see the advertised price of the routes, and existing statistics, like ASR and ACD, and capacity. When they decide to buy the route, they place the bids to purchase the route. depending on the contract, they might be asked to pay a deposit before getting full access. Once the access is granted, the buyers can start sending their traffic to the exchange, and the sellers accepting from the exchange. The traffic is routed and billed by exchange with both parties, i.e. there are no direct transactions between seller and buyer, but instead the billing is settled between the exchange and buyer or/and exchange and seller.
The exchanges were quite popular in early 2000s, with no doubt the biggest being Arbinet Thexchange which was acquired by Primus Telecommunications in 2010. There was also a range of smaller ones, which provided access for smaller carriers which could not access Arbinet services due to very high access fees.
Technically exchanges had some specific details, some of which I would like to list below:
- Most of them were anonymous, i.e. traffic was going through equipment which was able to hide IP addresses of the parties from each other, like SBC;
- There were automatic route quality rating mechanisms in place which could measure route quality parameters like ASR and/or ACD;
- Exchanges may offer some kind of way to "rate" the routes for the users (akin to Like buttons in social networks) - so other buyers may elect to use only routes with certain positive ratings;
- Bidding mechanism: for the routes with limited capacity the higher bidder would get higher priority routing.
Today, VoIP peering exchanges have lost their position in the market, but that does not necessarily nean they may not return in one or another form. New technologies may help them return. One of the problem which prevented exchanges from becoming widely used was lack of trust: and we see a blockchain as a possible solution to solve the trust problem. The use of blockchain in the VoIP in general was discussed earlier, especially as a decentralized database: that is what exchanges actually are.