Like every other player within the voice industry, mobile operators know that they will eventually need to transition to an all-IP solution to gain the same benefits that other players are seeking, such as cost savings, more efficient architectures, and more flexible networks. However, mobile operators have a different relative priority list that is driving their transition to IP.

Because mobile services still command a premium, particularly for international calling and roaming, cost efficiencies aren’t as urgent a driver as for traditional carriers, who have seen their margins eroded through intense competitive pressures.

However, again because mobile services command a premium, quality is a much higher priority. In an all-IP world, mobile operators will be able to use mobile-dedicated codecs end to end, without intermediary providers transcoding.

Most interesting for mobile operators is the promise of much greater levels of application interoperability, as well as the ability to manage many more services over a single connection. While a wholesale carrier may interconnect with hundreds of other providers, mobile operators generally manage a much more limited supply pool. In an IP architecture, mobile operators can continue to drive up the value of each interconnect, enabling greater service variety without increasing management overhead.

One of the advantages frequently mentioned for IP-based voice networks is reducing timeframes to roll out new and innovative services. Tracing the source of this advantage goes all the way back to the differences in underlying architecture between IP and TDM networks.

IP networks adhere to the OSI Model to separate conceptually similar network functions into layers. Within a network, each layer may be controlled by separate software, hardware, locations, or even organizations.

By contrast, in the TDM world, leading equipment manufactures such as Nortel bundled the various functions involved in managing and controlling voice networks into big switches. To release a new feature, manufacturers had to consider the product cycle of an entire, complex, piece of equipment. Further, high upfront expenses to upgrade and replace switches slowed the pace of adoption on the carrier end.

By moving to IP, service providers can break each component down and situate it in the network, logically and physically. Each piece then scales and innovates on its own. Simpler product roadmaps, lower prices and more competition all lead to shorter timeframes between new releases, and lower barriers to adopt innovative new features.

Most carriers are now delivering multiple types of services and applications for customers, or if not now, have plans to do so shortly, and the vast majority of these services are being delivered over IP. Many of these services, such as IPTV or videoconferencing, have bandwidth needs that are much more intensive than that of voice, so that the IP transport networks are increasingly dwarfing TDM infrastructure.

Size has further advantages for the IP marketplace. The per-port cost for VoIP over TDM is already much lower, but unlike TDM equipment manufacturers, IP equipment providers are continuing to focus on decreasing the per-port costs of their solutions.

As equipment providers continue to innovate, the gap in per-port cost between IP and TDM will only increase, offering further incentives for carriers to hasten the transition to IP.

So far, VoIP-based bilateral interconnects have followed traditional industry billing models of either bilateral agreements, or billing on an A-Z rate sheet. Most interconnections have been between incumbents or wholesale carriers seeking increased flexibility and incremental cost efficiencies in traffic exchange, not new ways to do business.

However, emerging interconnection models, including voice peering and IPX, offer much more potential to change traditional billing arrangements by increasing the number of operators for whom a bilateral connection becomes commercially interesting.

Many of these retail service providers, such as mobile operators or cable companies, are looking at ways that new pricing models could bring additional value to their offerings. Sister companies within a mobile group may consider foregoing settlement on traffic entirely, and providers may evaluate a wider variety of potential peering partners with whom they have roughly equal traffic flow – such as a cable company and mobile operator within the same market.

The result may be a significant evolution in the value proposition of wholesale carriers toward a transit-only model, and one as well where integration expertise, flexibility and the ability to enable smooth interworking between diverse environments becomes comparatively more critical.

The majority of VoIP implementations are currently based on one of two protocols, SIP and H.323. While H.323 was developed by engineers used to working in the TDM world, SIP originated among engineers whose primary experience was Internet-based, and their divergent sources are still reflected in their approach to VoIP.

H.323 is a more stringent protocol, which simplifies the interconnection process (though integrating equipment from multiple vendors generally required some integration work). However, its rigidity limits its extensibility – for instance, call forwarding and conference calling are not addressed within the H.323 protocol.

SIP is significantly less standardized than H.323, with many areas open to interpretation. As a result, plug-and-play integrations in multi-vendor environments remain elusive – a challenge that session controllers have only partially addressed.

However, SIP offers a significant advantage in delivering the integrated services that are an important part of the future business model for retail service providers, and as a result, we’re seeing a strong trend toward SIP.

In a SIP environment, where retail providers are taking advantage of extensibility to roll out unique and value-added integrated services, wholesale providers will need to have the expertise and flexibility to support the evolution of these advanced services.