Are wholesale carriers ready for the impact of virtualization?

Written by on December 18, 2015 in Features with 0 Comments

Cloud computingMost wholesale carriers are aware of the growth of cloud computing and the impact of that on IT operations in particular. However, the impact of those same technologies on their networks and systems has not yet had much consideration. According to the whitepaper “PoP virtualization – From Concept to reality” released by HOT TELECOM and sponsored by Metaswitch, another seismic change is over the horizon: the rise of virtualization.

The wholesale carrier world continues to evolve, but an underlying need is always for a more efficient, flexible and nimble type of network deployment to support the five key strands of the business.


Until recently, much of the focus for international carriers and wholesalers has been on how to achieve the lowest price possible, while offering an acceptable quality. Low price has been a must-have, while quality has been a good-to-have, and traffic routing strategies used by international carriers are therefore geared to achieving this.

On the technical side, voice quality (audio in particular) has been severely restricted by the design of handsets and the limitations of the range of frequencies that the networks can support. But the move to IP across retail service provider networks and the launch of LTE, followed by Voice over LTE, is finally freeing the industry from these old, lower quality standards.

Inherently, a VoLTE-enabled smartphone can provide a much richer audio experience, putting quality back on the center stage. As a result, whereas customers expected international calls just to “work” in the past, they will increasingly expect them to work to the high quality standards they experience at home for local calls.
However, by its nature, much of today’s international wholesale environment makes use of routing strategies that tend to reduce voice quality to the lowest common denominator. To achieve the high-quality, end-to-end, clear IP path needed to support the required quality, carriers will therefore need to evolve their strategy to ultimately be able to route calls using direct, high-quality interconnects with the end destination, all while minimizing network cost.

Global reach

Direct interconnect, taken to its extreme, would require each service provider to be able to reach every other service provider without using international carriers or wholesalers, which is obviously impractical. On the contrary, what we are seeing is that service providers are continuing to use international wholesalers and IPX providers to terminate their international calls – but they are expecting more from them.

They expect their wholesaler of choice to not only be able to support the quality required to terminate VoLTE traffic, but also to be able to do so for most destinations. Everything now is about simplification and efficiency. Consequently, the days of interconnecting with a large number of wholesalers to terminate international traffic is soon to be a thing of the past.

Service providers are now looking to interconnect with only a handful of wholesalers that can terminate their traffic to the world. Having a high-quality network with global reach that is highly scalable will therefore become the prerequisite for any successful wholesaler going forward.


Now, only a small number of international carriers and wholesalers are in a position to meet the new prerequisites of direct connectivity, quality, global reach and scalability. Deploying such a global, highly scalable network is not in just anyone’s reach.

Achieving global reach by deploying a growing number of traditional access PoPs around the globe, which can be scaled and support the complex, high-quality voice services that the industry is on the verge of offering, will require not only significant capital investments and knowledge, but also time. These three things are increasingly scarce in a highly commoditized industry such as international wholesale.

Increased pressure on price

In addition, the pressure on price is continuing, with constant regulatory pressure on termination and roaming rates. As termination fees continue to drop, the selling price of an international minute will be more closely aligned with the internal costs of transport and operation – so companies will be competing far more on their cost efficiency than in the past. As a result, companies that meet the criteria of many direct connections with a very low cost of network and associated operations will be the winners.

The obvious risk is not whether one of your existing competitors will make the cost reductions before you do, but that creating an international voice wholesale business in an IP world (with no TDM interconnects) using virtualized network components is not actually that hard. Hence the “Black Swan” event is more likely to be the rise of a very agile, low-cost competitor that was not really on the radar last year.

Speed of innovation

There is no running away from it: The treadmill of technological innovation is speeding up, and carriers have to find a way to keep up with it if they want to survive and thrive. The introduction of IP from handset to handset has created a paradigm shift, not only in terms of how networks are deployed and operated, but also in the way services are offered and which business models are used.

Service providers and carriers alike therefore need to completely review the way they approach their business to be able to compete on a more equal footing with new nimble and innovative telecom providers. This means becoming more lean and mean and instilling a culture and structure that enables them to rapidly adjust and launch new technologies, services and business models without having to go through a highly rigid process.

We strongly believe that Network Functions Virtualization (NFV) will be a key enabler for wholesalers to meet the new business challenges of quality, global reach, efficiency, nimbleness and cost control, if approached properly and quickly.

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About the Author

About the Author: Steve is CTO at Hot Telecom, a senior telecom executive with 30+ years experience leading companies from small technology start-ups to global service providers. He is a recognized expert in voice services and VoIP, Internet backbones and IP services, optical and submarine networks with significant additional experience in operations. .


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