IPX SPECIAL REPORT 2014: Delivering what the market wants
20 June 2014 | Guy Matthews
Are there too many IPX providers, at a time when IPX services customers would like market consolidation around a few true global players? Capacity investigates.
Demand for IPX-based services has notably strengthened over the past 12 months, and the main factor behind this surging popularity is the spread of 4G networks based on LTE.
Migrating from 3G and circuit-switched voice to the all-IP world of LTE necessitates a secure, managed environment where international interconnections can happen without fuss, and that is a job that IPX does well.
Some no doubt see IPX as a longer-term roadmap into completely new service opportunities, such as video-conferencing and HD voice, but swapping data traffic between 4G networks is pushing the buttons right now. This is not exactly what the GMSA envisaged when it was first promoting the attributes of IPX six years ago.
“We saw it as a big stick to knock out TDM,” says Dan Warren, the GSMA’s director of technology. “But it hasn’t worked out that way. It is being driven, unexpectedly, by LTE roaming.”
A number of wholesale operators have been significantly increasing their investment in IPX activities, to match this LTE-inspired demand. Others are elbowing into the market for the first time.
IPX peering agreements now abound, based around the facilitation of roaming. Some of these break new ground, while others span wide geographic areas – Aicent and AMS-IX, Etisalat and iBasis, Tata and PCCW Global, Deutsche Telekom and VimpelCom. French carrier Orange has just launched a Diameter signalling offer that allows wholesale customers to introduce LTE roaming across Europe, the Americas and Asia-Pacific. Telstra Global says it is boosting its IPX capability across Asia-Pacific, based around flexibility for LTE roaming and service-aware traffic management.
Too many choices?
In the headlong dash to offer IPX solutions, the market has become complex and fragmented. There are many choices of IPX provider, if you are a service provider looking for a partner to facilitate interconnection – too many choices, some might argue, when all that is really needed is a handful of world-class players able to meet all interconnection needs.
Some competition, as in any market, is always desirable. Nobody wants to find their IPX choice limited to a monopoly or duopoly. If you rely on just one provider, not only would you be missing out on the ability to bargain satisfactorily, you would also be vulnerable from a resilience point of view. But connecting to a whole crowd of IPX providers is liable to increase costs and detract from what should be the simplicity of the model.
“Most service providers would probably prefer a few IPX providers to deal with,” believes Hiroyuki Sasaki, manager, voice and video at NTT Communications. “The fact is that not all IPX providers are interconnected yet. The peering work is not done, like it is with GRX. IPXs will peer over the next year or two.”
Today’s fragmented market is certain not simply to peer further but to actively consolidate, leaving “maybe five big players”, predicts Mikael Schachne, VP mobile data business with BICS.
“There are a lot of operator customers out there for IPX providers to go for, maybe 1,000 or so. But there’s not enough actual business to sustain 20 IPX providers, all providing the same services. The market’s not that big in revenue terms,” Schachne says.
Customers, he believes, want better reach from fewer providers to give them the best opportunities to develop new services.
“We bring a very large on-net community, which means when operators want to open up their LTE network they can contact each other immediately and perform tests quickly,” adds Schachne. “We’re investing greatly in the advanced reporting side too with a new tool. It keeps a log of all transactions so the customer can see what’s going on all down the line, troubleshooting where necessary.”
The market is bedevilled not by too many providers, but by too little unanimity of vision between them, complains Philippe Millet, chairman of the i3 Forum, one of the standards bodies behind IPX.
“Lots of people talk about IPX but they all mean something different,” he points out. “Not everybody has to agree with our vision of it, but it can be difficult for service providers when there are so many brands and flavours. There should be clear features and characteristics that make something IPX, as opposed to just IP transit or an IP VPN-type product.”
What Millet expects to emerge are a few major hubs with extensive coverage, but additionally a tier of IPX players who offer specialisms that that are perhaps regional or themed around types of service.
“There’s a trade-off,” he says. “It takes time [for IPX users] to source many providers, and that means money. But if there are only a few choices, you save that time but maybe get a less-good deal. It’s a bit of a myth that it would all be better for having only two or three IPXs in total. There’s always room for a specialist. But all players, no matter how many we end up with, have got to work better together.”
It is natural that each IPX provider should have its own distinct strategy, agrees Michael van Veen, business manager for IPX with SAP.
“Some might be as global as possible, but not offer all services,” he argues. “Some are regional, but try to have the full scope of services, right up to Diameter hubbing.”
Van Veen divides the market between two types of IPX player – those that come at it from a voice point of view and those that come from a data roaming background, like SAP.
“I think the voice players are moving to the data space and the data ones to voice, and in two or three years’ time there will be a more balanced portfolio – but fewer of us,” he suggests.
A winning IPX strategy will always centre around distribution, argues Martin Geddes of Martin Geddes Consulting.
“It’s also about an end-to-end service with quality assurance,” he says. “If a small player can do it right, they can compete with global players. They need to base what they do around assured service delivery.”
Christian Michaud, SVP strategy and development for global voice services at Tata Communications wants to see the market, consolidated or not, edge towards a wider range of solutions and services.
“The basics right now are voice and LTE roaming, but there will need to be more over time, such as LTE Advanced and video,” he says. “We’re developing something for those areas right now, and we’re well positioned to be one of the major players in IPX in the future.”
Michaud agrees with Millet that it’s imperative to work towards better industry acknowledgement of what IPX actually means.
“We belong to the i3 Forum, and have been part of defining specs – mainly for voice,” he says. “We’ve watched different types of hub evolve towards IPX. Some are GRX players who don’t yet have voice credentials. Will there be consolidation? I don’t know, but what I am certain of is that the IPX ecosystem will get richer and more complex as it goes on. A greater sophistication of solutions can be expected, and not everyone on the market is geared to support that.”
Even in its diverse and somewhat fragmented state, the IPX market still looks like a better bet for the future than it has ever done. There is just no other option on the market that gives communications service providers the same chance to capitalise on a new opportunity in a blink of an eye, without dealing with time-consuming bilateral agreements.
Having heritage and track record in this scenario might matter more than size or global scope: “We believe that in three years from now, IPX providers will be the only choice for CSPs,” says Leonardo Cerciello, VP Marketing at TI Sparkle.
“Those that have been early movers in the IPX arena will certainly have an advantage over other IPX players that emerge, as they have the most critical mass of customers, and thus, will end up providing new customers with the best value for their money.”